Houston Regional Loan Center
VA Compromise Sale Program for Real Estate Professionals
|Why VA Compromise?
How Does A Compromise Sale Work?
- Assist financially distressed borrowers
- Reduce foreclosure sales
- Sell more homes
When a homeowner receives an offer based on current market value that is lower than the total amount of the loan payoff, the homeowner can ask VA to approve a compromise sale. VA will review the situation with the mortgage company and if approved, pay the difference between the mortgage balance and the proceeds of sale.
Sometimes the mortgage company can approve the sale on behalf of VA through our Servicer Loss Mitigation Program. In fact, a majority of the mortgage companies now have a Loss Mitigation Department authorized by VA to process VA compromise sales.
For loans originated on or before December 31, 1989, the seller may be required to sign a promissory note. A promissory note obligates the seller to pay part of the difference back to VA. The amount is always less than the amount the homeowner would owe VA if a foreclosure sale takes place, and monthly payments are arranged based on the homeowner’s financial ability.
Items Needed To Consider A Compromise Sale
If The Loan Is To Be Assumed
- Copy of the earnest money contract
- Proposed settlement statement with closing costs calculated through projected closing date
- A VA appraisal
- Payoff or assumption statement from the mortgage company calculated to the projected closing date
- Statement from the seller: Why is the property being sold? How much money can the seller pay at closing? How much relocation assistance is employer providing, if any?
- Seller’s financial statement showing all income, assets, debts, other obligations, marital status and ages of dependents
What Happens When A Compromise Sale Is Approved?
- A complete release of liability package is required. Call 1-888-232-2571 extension 3130 to request a release of liability package
- A compromise assumption will not be processed without first receiving a statement from the holder that they are willing to have their guaranty amount reduced by the amount of the claim payment
- If it appears a compromise assumption is feasible, the buyer must qualify
- A copy of the approval letter from the mortgage company or VA is submitted to the closing attorney prior to closing.
- The closing attorney and/or his staff will review the approval letter which will include the shortage amount that VA will pay upon completion of the compromise sale.
- Approval of any additional amount needs to be submitted to VA or to the mortgage company well in advance of the closing date.
- At the closing table, net proceeds are paid directly to the mortgage company who then files a claim with VA for the difference between the proceeds and the payoff amount.
|Reviewed/Updated Date: March 28, 2008