VA Rolls Out New Options to Help Veterans Avoid Foreclosure
WASHINGTON — The Department of Veterans Affairs is offering a new COVID-19 Refund Modification option to assist Veterans who require a significant reduction in their monthly mortgage payments because of the COVID-19 pandemic.
In some cases, veterans can receive a 20% payment reduction — in others, the reduction may be even larger, the department said.
This new option is part of the administration’s government-wide effort to help homeowners retain their homes as they weather the economic challenges resulting from the ongoing pandemic.
Under the COVID-19 Refund Modification, VA can purchase a veteran’s past due payments and amounts of unpaid principal, depending on how much assistance is necessary, subject to certain limits. Loan servicers also modify the loan. These efforts help ensure that the veteran can afford future mortgage payments.
“The COVID-19 Refund Modification provides veterans a lasting and affordable solution to keeping their homes and avoiding foreclosure,” said VA Secretary Denis McDonough in a written statement.
“As our country recovers and rebuilds from the economic devastation brought on by the pandemic, VA and the Biden-Harris administration continue to make every effort to help veterans keep a roof over their head as they get back on their feet,” McDonough said.
According to a fact sheet distributed by the White House, the VA’s new COVID-19 Refund Modification provides multiple tools to assist borrowers.
One such tool is the new COVID-19 Refund option, where VA can purchase from the servicer a borrower’s COVID-19 arrearages and, if needed, additional amounts of loan principal (subject to an overall cap corresponding to 30% of the borrower’s unpaid principal balance as of the first day of the borrower’s COVID-19 forbearance).
Similar to VA’s COVID-19 partial claim option, the COVID-19 Refund will be established as a junior lien, payable to VA at 0% interest.
In addition, servicers can now achieve significant reductions in the dollar amount for monthly payments by modifying the loan and adding up to 120 months to the original maturity date (meaning the total repayment term can be up to 480 months).
Among those applauding the announcement Friday was Jeremy Butler, chief executive officer of the Iraq and Afghanistan Veterans of America, who said while one can only speculate on the level of benefit the new program will provide, it’s creation “is a very good step.”
“One consistent theme we hear from veterans reaching out to our Quick Reaction Force for support is that they need help financially,” Butler said.
In fact, the top three issues confronting veterans in need, according the IAVA, are:
1) Emergency Financial Assistance
2) Housing & Homelessness
The fourth issue is assistance with mental health care, and the fifth is needing help navigating the VA.
“The latter obviously could include help with a VA home loan,” Butler said.
“The VA home loan program is incredibly popular so this will have a positive effect but I also think it’s safe to assume that this won’t be enough to address the foreclosure issue,” he continued. “There are many veterans who either don’t qualify for the program or chose to finance via other means and they are also dealing with foreclosure issues.”
Veterans can get a COVID-related forbearance through Sept. 30, 2021.
To learn more about this new option visit VA’s Home Loan Program or call 877-827-3702.