Foreclosure Alternatives
Saint Paul Regional Office
Regional Loan Center
Foreclosure Alternatives/Home Retention Options
Loan Administration monitors and evaluates the servicing of guaranteed loans by holders and servicers utilizing output from the Loan Service and Claims System to assure timely efforts are made to service and, as applicable, terminate loans determined insoluble.
The section also performs supplemental servicing to help mortgagors in default retain their homes or to provide them with alternatives to foreclosure. Once the servicer notifies VA that the loan is 60-105 days delinquent (VA Regulation 38 CFR 36.4315), VA will attempt to contact the mortgagor to discuss the account. VA encourages the mortgagor to work with the servicer first to bring the loan current. If the mortgagor is unable to work with the servicer, VA will assist the mortgagor with alternatives to foreclosure an home retention options. Here is a list of options and alternatives available:
Pay The Delinquency:
Under most circumstances, loan holders are required to accept payment of the full delinquency and reinstate the loan. The delinquency may include certain legal fees and costs if the mortgage company has started the foreclosure process. Many loan holders require certified funds for reinstatement.
Repayment Agreement:
The most common way of bringing the loan current is to repay part of the delinquency each month, in addition to the regular payment. Should the mortgagor need VA assistance proposing a repayment plan to the mortgage company, a financial statement is required.
Forbearance:
If the mortgagor is temporarily unable to meet their monthly mortgage obligation, the mortgage company may extend forbearance by agreeing to suspend payments or accept partial payments for a limited period of time until the mortgagor will be able to begin a repayment schedule. VA cannot require a mortgage company to give forbearance or to agree to a specific repayment schedule.
Payment Assistance:
VA does not have a program which would enable us to give mortgagors direct payment assistance. However, VA will provide information on programs which will make all or part of the mortgage payment for a fixed period of time. These organizations/programs include some state and local governments, as well as private charitable organizations.
Reamortization / Loan Modification:
If VA guaranteed loan is reamortized, the delinquency is added to the loan balance in order to bring the payments up to date. This increases the loan amount and will also increase the monthly payments. The amount of the payment increase will not be as great if the life of the loan is extended at the same time. The loan holder is allowed to extend and/or reamortize the loan by VA regulations; however, we cannot require the holder to do so.
Refunding:
VA has discretionary authority to buy a loan from the mortgage company. This is called "refunding." We consider this alternative for every loan before foreclosure is completed. The mortgage company must have already decided not to modify your loan, extend additional forbearance, or approve another repayment plan. If the mortgagor occupies the property and has the ability to make the mortgage payments, or will have the ability in the near future, they may qualify for refunding.
Private Sale:
If the mortgagor is not able to bring the loan current, a private sale of the property will enable them to meet their obligations and keep any equity they may have in the property. Most private sales are for more than the amount owing on the loan. The mortgagor may sell the property to a buyer who gets his or her own financing and pays off their VA loan or a qualified buyer who will assume your responsibility for the loan. If the buyer is assuming the loan, the mortgagor should contact VA and obtain a release of liability before the sale is closed.
Compromise / Short Sale:
If the property cannot be sold for an amount which is greater than or equal to what the mortgagor owes on the loan, VA may pay a "compromise claim" for the difference to help complete the sale. Some servicers are authorized by VA to approve a sale with a compromise claim. If the servicer is not authorized by VA to approve a compromise claim, they must contact VA to discuss the situation and get prior approval for a sale with a compromise claim payment.
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, the mortgagor will have to sign legal papers transferring ownership to the mortgage company. Normally, VA will have to pay the mortgage company a claim for the difference between the value of the property and the amount the mortgagor owes on the loan. If a deed is accepted, they may be released from all further liability or they may be asked to agree to repay the government all or part of the amount paid to the mortgage company.
Servicers and others may use our Loan Administration Contacts Page to get the most recent Loan Administration employee phone listings. That page also has usable e-mail links and case assignment designations for VA St. Paul Loan Administration employees.
