Loan Administration - Alternatives to Foreclosure

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. Usually, your loan holder will require financial information to justify the acceptance of amounts that are less than full reinstatement. VA cannot require the holder to extend forbearance or to agree to a specific repayment schedule; however, holders will usually cooperate so long as you can show that you will be able to resume payments on a specific date in the near future. Your first step should be to contact your lender and try to work out such an agreement.  If that fails, proceed to contact VA for assistance.  Always keep in mind that the possibility of forbearance agreements usually hinge on past payments history as well as the history of any prior arrangements made with your lender.

Refunding
Along with considering the best interests of the Government, one of our primary missions is to keep veterans in their homes. 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 are the Veteran Homeowner and occupy the property, 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 refunding is appropriate, VA will notify you.

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 receive any equity you may have built up. Most private sales are for more than the amount owing on the loan. You may sell the property to a buyer who gets 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 should contact VA and obtain a release of liability before the sale is closed. If your property cannot be sold for an amount which is greater than or equal to what you owe on the loan, VA may pay a "compromise claim" for the difference in order to help you go through with the sale. You must contact VA to discuss the situation and get prior approval for a sale with a compromise claim payment.

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.

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.