VA Announces Foreclosure Avoidance Program
The Department of Veterans Affairs has launched a foreclosure-avoidance option to help veterans, service members, and surviving spouses keep homes purchased with a VA Loan during a temporary financial hardship. The VA Partial Claim Program allows borrowers with VA-backed mortgages to bring delinquent loans current without changing their monthly payments or interest rates.
VA Announces Foreclosure Avoidance Program
Under the program, the federal government covers the past-due amount on the VA mortgage as a zero-interest second loan against the property. Borrowers make no monthly payments on this secondary lien, which becomes due when the primary mortgage is paid off, the home is refinanced, or the property is sold.
This is all authorized by the VA Home Loan Reform Act, which provides VA home loan relief for families recovering from short-term setbacks such as job loss or other temporary problems.
VA Partial Claim Program
How does the VA Partial Claim program work? The participating VA lender must identify the eligible veteran in default and place them into a three-month trial payment plan. The veteran must complete the trial by making three consecutive, on-time monthly payments. The Department of Veterans Affairs reimburses the servicer for that amount, establishing the subordinate lien on the home.
Borrowers cannot apply directly to the government for the Partial Claim Program. They must contact their VA loan officer to discuss their eligibility for a foreclosure avoidance program. Homeowners who have difficulty communicating with their VA lender can contact the VA for assistance.
Other Options?
This VA program is unlike traditional home retention options, which also remain available depending on circumstances. One alternative is to divide the missed payments and add them to the monthly mortgage to clear the debt. This also increases the household’s monthly financial burden.
Loan modification is an option that rolls the overdue balance back into the loan’s total principal to establish a new payment schedule. This also causes an increase in monthly payments.
Other options include private sales, short sales, or a deed in lieu of foreclosure. In a short sale, the lender accepts the sale as full payment even if it falls short of the remaining debt. These options carry long-term consequences for military benefits. You may have a VA debt to the federal government under these circumstances, one that must be paid before VA loan benefits can be used again.
Related: VA Home Loans for Mobile Homes and Manufactured Housing
About the author
Editor-in-Chief Joe Wallace is a 13-year veteran of the United States Air Force and a former reporter/editor for Air Force Television News and the Pentagon Channel. His freelance work includes contract work for Motorola, VALoans.com, and Credit Karma. He is co-founder of Dim Art House in Springfield, Illinois, and spends his non-writing time as an abstract painter, independent publisher, and occasional filmmaker.
