Methods to Avoid Foreclosure
Most foreclosures result in losses to everyone involved; the veteran, the mortgage company, and VA. Many foreclosures can be avoided, particularly when all parties work together. The following are methods of avoiding foreclosure, however they will still result in the loss of your home:
Compromise / Short Sale:
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 to help you complete the sale. You must contact your mortgage company to discuss this option.
Deed in Lieu of Foreclosure:
If a private sale does not appear realistic, the mortgage company will consider accepting a deed in lieu of foreclosure. If there are no liens on the property, and the mortgage company agrees to accept a deed, you will have to sign legal papers transferring ownership to the mortgage company. Normally, VA will have to pay your mortgage company 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 all or part of the amount paid to the mortgage company. Please note that your mortgage company will usually report "voluntary foreclosure" on your credit report instead of "foreclosure." We cannot guarantee how future creditors will view this information. You may discuss this program with your mortgage company's "Loss Mitigation" division.