What can I do if I
have trouble making my payments?
When Payments Cannot Be Made on Due Date
When Financial Troubles Arise
Beware of the "Dotted Line"
When Payments
Cannot Be Made on Due Date
Even the most reliable borrowers sometimes fail to
meet every payment on its due date, and it is
possible that there is good reason for the failure,
such as a reduction of earnings or illness in the
family.
If you find that you
will be unable to make your payment when it is due,
by all means let your lender know and try to work
out a satisfactory plan to make up the payments
missed.
The lender's friendly
advice may be most helpful when you are in a tight
spot. Try to call the lender before it is
necessary that the lender write to you, but never
fail to answer notices or letters you may receive.
In emergencies, the
first impulse sometimes is to borrow money in order
to keep the mortgage payments current.
However, any new loan must be paid off in a short
time through burdensome installments, and the extra
strain often leads to more serious financial
trouble.
It is far better to
call the holder of your mortgage and frankly explain
your trouble. Put "all your cards on the
table." If you can, offer some plan for
catching up on your payments and request advice and
guidance not to ask for sympathy but to let the
lender know that you are anxious to keep your home,
and sincere in your desire to find a way out of your
trouble. If you are willing to cooperate, your
sincerity will be appreciated. If possible,
the lender will help you develop a plan that will
enable you to keep your home.
Failure to cooperate
with your lender may result in the loss of your home
by foreclosure of the mortgage. Besides
causing the loss of your home, this would naturally
have a very bad effect on your credit standing, and
may even leave you with a debt. You can, and
should, avoid this.
When Financial
Troubles Arise
When serious financial
troubles arise, it is obvious that living expenses
must be cut to the bone. Most of the luxuries
previously enjoyed, and even some things which may
have been thought of as necessary, may have to be
dropped for a time.
In order to help
veterans in serious financial trouble, VA Regional
Loan Centers have technicians available to conduct
financial counseling. This counseling is
designed to help you avoid foreclosure. If you
want this assistance, call 1-877-827-3702 to reach a
Loan Service Representative that can assist you.
Every homeowner
dislikes the idea of losing a home. It is far
better to sell it of your own free will and perhaps
save your equity (amount by which value of property
exceeds loan balance) than to have it taken away by
foreclosure. This could cause you to lose all
you have paid in, spoil your credit standing, and
possibly increase your present debts. Later,
when your financial position has improved, you may
again be able to buy a home of your own.
There's also another
very good reason for doing everything you can to
avoid having your mortgage foreclosed. If your
loan closed before January 1, 1990, and if, as a
result of the foreclosure, VA has to pay a claim to
the lender under the guaranty, the amount of such
claim will be a debt you will owe to the Government.
If your loan closed on or after January 1, 1990, you
will owe the Government in the event of a default if
there was fraud, misrepresentation, or bad faith on
your part.
Beware of the
"Dotted Line"
Veterans who are
behind in the payments due on their VA loans are
warned to be very careful before agreeing to any
offers by strangers to make up their back payments
if the veterans will "sign on the dotted line."
If such a proposition
is made to you, ask the holder of your mortgage or
the Loan Guaranty Division of the nearest VA
regional office about it before you sign any paper.
They will be glad to advise you whether or not the
offer is good and sound. VA cannot give you
legal advice or service, but it can advise as o
dangerous practices or as to the advisability of
consulting an attorney.
In some parts of the
country, veterans who are not familiar with real
estate transactions have been "taken in" by shady
deals usually called "milking" or "equity skimming."
In one form of this
racket, the veteran, who is behind in VA loan
payments, is approached by unknown persons who offer
to pay the delinquent installments if the veteran
will "sign on the dotted line." The veteran
later learns that he or she has signed a deed and
can get the property back only by signing another
contract at a much higher price. When the
veteran finds the stiff terms of the new contract
cannot be met, legal action is started to take
possession of the veteran's home.
In other cases, a
housing development will be visited to learn whether
veterans are having trouble meeting their VA loan
payments. If the veterans are having trouble,
these individuals offer each veteran a small amount
of cash for the equity in the property, plus the
privilege of buying another home in a lower cost
neighborhood on a land sales contract. The
veteran agrees to give possession in 60 days and
"signs on the dotted line," not knowing that he or
she is signing a deed to the property. When
the 60 days are up, the veteran is told that no
houses are available in the lower cost development.
The veteran is then put out of the home.
A third method is used
in States where there is a long foreclosure or
mortgage redemption period. A veteran, falling
behind in home loan payments, is offered a small sum
of cash for a "quit claim" deed to the property with
a promise that all back payments will be made up.
The veteran moves out believing that the loan will
be brought up to date. Instead, the individual
holding the quit claim deed rents the house without
making up back payments. Most of the money
received as rent is profit until foreclosure is
final, and the veteran, not knowing what has
happened, may still owe the lender, and quite
possibly, the U.S. Government if VA pays a claim on
the loan.
Many types of these
shady deals are used in different parts of the
country, depending on how these individuals can
misuse State and local laws. Although these
practices may be legal, they are considered
unethical by most mortgage lenders and real estate
brokers.
You will be protecting
your own interests and doing other veterans a
service if you report any such propositions to the
holder of your mortgage and to the nearest VA
Regional Office.
If you decide to sell
your home and the VA loan is not paid in full as
part of the sale, you should protect yourself by
obtaining a release of liability from VA prior to
completing the sale. You should also be aware
that if your VA loan closed on or after March 1,
1988, it is unlawful to allow someone to take over
your loan without the prior approval of VA or your
lender. Contact VA or your lender to find out
how to apply for approval of your sale and/or a
release of liability.
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