Foreclosure freeze and loan adjustments to help struggling veterans
The US Department of Veterans Affairs (VA) has paused foreclosures for VA-backed home loans to support veterans facing mortgage challenges.
The VA has announced two key measures to assist financially struggling veterans. First, it has requested mortgage servicers to halt foreclosures on VA-guaranteed loans until May 31, 2024. This temporary suspension is intended to buy time to develop viable solutions for home retention.
Alongside this, the VA is extending its COVID-19 refund modification program to the same date. The extension allows veterans to access zero-interest, deferred-payment loans from the VA to cover missed payments and adjust their existing VA-guaranteed loans to more manageable monthly payments.
In addition to these steps, the VA has rolled out the VA Servicing Purchase (VASP) program. This new home retention program will enable the VA to buy defaulted VA loans from servicers, modify them, and then handle them directly.
"This will empower us to work with Veterans experiencing severe financial hardship to adjust their loans – and their monthly payments – so they can keep their homes," the agency said in its news release.
Commenting on the initiatives, Bob Broeksmit, president and CEO of the Mortgage Bankers Association (MBA), suggested bringing back a discontinued VA loan program.
"We also believe that restoring the VA's standalone partial claim program – which worked successfully for Veterans and servicers until it was sunset in October 2022 – needs to be part of the VA's long-term plans to assist borrowers facing hardships," Broeksmit said in a statement.
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Broeksmit also raised concerns about implementing the voluntary foreclosure moratorium, especially regarding how mortgage servicers will be reimbursed for advancing payments on behalf of borrowers.
"Servicers provided relief to struggling borrowers during the pandemic by advancing the payments owed on their mortgages and are willing to do so again," Broeksmit said. "However, the VA needs to provide a detailed plan on how servicers will be reimbursed for advancing payments on behalf of borrowers."
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