Private Sale Compromise/Short Sale Deed in Lieu of Foreclosure

If you do not believe you will be able to bring your loan current, a private sale of the property will enable you to meet your obligations and receive any equity you may have. 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 VA loan or to a qualified 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.

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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 VA to discuss the situation and get prior approval for a sale with a compromise claim payment. Some mortgage companies are authorized by VA to approve a sale with a compromise claim.

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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 companies "Loss Mitigation" division or a VA loan servicing representative.

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