Avoid VA Loan Foreclosure

If you are in danger of a VA loan foreclosure, there are a few things that you should know. The Department of Veteran Affairs has an outlined a loss mitigation policy that requires lenders to explore alternatives prior to VA loan foreclosure.

Be sure to communicate with your lender as soon as you are aware that you will miss payments. Most lenders are willing to work with borrowers through financial hardship. Some of the options that should be explored by the lender prior to VA loan foreclosure include forbearance, loan modification, sale of the property, and deed-in-lieu of foreclosure, or refunding.

Forbearance, which is a payment arrangement for all delinquent payments, is an option if you are already late.

Loan modification may be possible before you miss payments. You can work with your lender to amend the terms by creating a lower interest rate, extending the loan term, or spreading out the rest of the payments on the loan differently (re-amortizing).

Deed-in-lieu of foreclosure simply means that the bank will officially own the property instead of the veteran.

Refunding is a process in which the Veteran Affairs pays off the default loan and collects payments from the borrower. This option is only if the account has not been in default for more than six months.

Sale of the home is also an option lender may offer.