The move is meant to address the spike in foreclosure actions
The US is set to purchase missed mortgage payments from lenders by former members of the military, according to the Department of Veterans Affairs (VA), as reported in an article by Bloomberg.
The changes are meant to address the increasing number of foreclosure actions that were made against former members of the military who had used a federal COVID-19 mortgage-forbearance program.
In an investigation by Bloomberg, it was found that delays in paperwork by mortgage servicers had caused borrowers to move towards delinquency and foreclosure even if they had attempted to make plans to repay their loans.
The government acknowledged the failure of companies to follow the VA’s words, with the agency finding that lenders may have started foreclosures before it could review the circumstances of the borrowers. However, it considered the possibility that lenders may not have fully understood the rules set.
Because of the situation, by the middle of October, about 4,000 veterans all over the country had been foreclosed on, while 6,000 were in danger of foreclosure, according to the data found by ICE Mortgage Technology Inc.
“I congratulate the VA on doing what it should have been doing all along, creating a realistic path for veterans who were impacted by the pandemic to resume their mortgage payments and keep their homes,” said Marc Dann, a lawyer who represented homeowners who were engaging in legal disputes with mortgage servicers.
With the plan, the VA will buy the missed mortgage payments from the servicers and it will create a new loan without interest due when the mortgage is paid off, which will allow the borrower to stay in their house.
Lenders will have until May 31 to submit their requests for loan modifications.
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