PAY THE DELINQUENCY. Under most circumstances, GI loan holders are required to accept payment of the full delinquency and reinstate the loan. The delinquency may include certain legal costs if you are already in foreclosure. Many holders require certified funds for reinstatement.

FORBEARANCE/REPAYMENT SCHEDULE. The most common way of resolving a loan default is to work out a plan which will let you repay part of the delinquency each month, along with your regular monthly installment. If you are temporarily unable to meet your monthly mortgage obligation, your holder may extend forbearance by agreeing to suspend payments or accept partial payments for a limited period of time until you will be able to begin a repayment schedule. VA cannot require the holder to extend forbearance or to agree to a specific repayment schedule; however, holders will usually cooperate if you can show the ability to resume payments on a specific date in the near future. VA Form 20-5655 is available should you need VA assistance regarding a repayment plan.

PAYMENT ASSISTANCE. Many State and local governments, as well as private charitable organizations, have programs which will pay all or part of your mortgage obligation for a fixed period of time. VA can provide information on these programs; we do not, however, have a program which would enable VA to give you direct payment assistance.

REAMORTIZATION.  If your loan is reamortized, the delinquency is added to the loan balance in order to bring your payments up to date. This increases your loan amount and will also increase your monthly payments. The amount of the payment increase will not be as great if the life of your loan is extended at the same time. Your loan holder is allowed to extend and/or reamortize your loan by VA regulations; however, we cannot require the holder to do so.

PRIVATE SALE. If you do not believe you will be able to reinstate your loan and cure the default, a private sale of the property will enable you to meet your obligations and realize any equity you may have accumulated. Most private sales would enable you to pay your loan in full. You may sell the property to a buyer who obtains his or her own financing and pays off your GI loan or to a buyer who will assume your responsibility for the loan. If the buyer is assuming your loan, you must contact VA if your loan closed after 12/31/89, and obtain a release of liability before the sale is closed.

If your property cannot be sold for an amount which is equal to or greater than the amount owed, VA may pay a "compromise claim" for the difference in order to help you go through with the sale. Compromise sales are approved if the sales contract meets several criteria and results in a savings to the agency, over the costs of foreclosure. An additional advantage is that the property is not acquired by the VA and the owner avoids a foreclosure and resultant damage to their credit rating. If a compromise contract is accepted, you may be released from all further liability or you may, in some instances, be asked to repay the Government for the loss.

In order to be considered for our compromise sale program you must submit a signed contract equal to fair market value. Any contract should state the words "pending VA approval of a compromise sale." All closing costs should be reasonable and customary. You should submit this contract along with the the appropriate forms to VA, if your lender is not already pre-qualified to review these contracts on our behalf. To obtain a list of lenders that are approved to review the compromise sale contracts, please follow this link. You may also contact your lenders Loss Mitigation Department or the VA, regarding this program (See the Downloads Page).

DEED IN LIEU OF FORECLOSURE. If you are unable to cure the default, and a private sale does not appear realistic, VA will consider accepting a deed in lieu of foreclosure. If there are no liens on the property, and VA agrees to accept a deed, you will have to sign legal papers transferring ownership to the VA. Normally, VA will have to pay your loan holder a claim for the difference between the value of the property and the amount you owe on the loan. If a deed is accepted, you may be released from all further liability or you may be asked to agree to repay the Government for all or part of the claim we paid. Please note that your lender will usually report "voluntary foreclosure" on your credit report versus "foreclosure." We cannot guarantee how future creditors will view this information. VA representatives can discuss this with you in detail. You may also discuss this program with your lender’s "Loss Mitigation" division to make this determination (See the Downloads Page).

REFUNDING. VA has the discretionary authority to buy a loan from the holder and take over the servicing. This is called "refunding". We consider this alternative for every loan before foreclosure is completed. If you have the ability to make mortgage payments, or will have the ability in the near future, but your loan holder has decided it cannot extend further forbearance or a repayment plan, you may qualify for refunding. If your loan is in default and you are not able to repay the loan according to the lender’s terms, you should download the following forms: VA Form 20-5655, 26-6807a, and Refunding Information List (See the Downloads Page). You should submit these forms along with a letter of request (stating the reason for default and that you would like to be considered for VA refunding) to VA. If refunding is appropriate, VA will notify you.

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