Cleveland Regional Loan Center
Avoiding Foreclosure
Click here for reference material regarding assistance with delinquent VA and non-VA mortgages.
If you anticipate getting behind on your mortgage payments, or
are behind, VA may be able to help. The information below addresses
options you may have to bring your loan current and save your home
from foreclosure.
When your loan goes into default, your servicer/holder is
responsible for contacting you, the mortgagor, to determine the
reason for the default and attempt to make arrangements to cure the
delinquency. If the problem can not be resolved by the time you are
two payments past due, the servicer/holder is required to notify
VA that your loan is in default. For detailed information on how to
reach one of our Loan Technicians, please go to our
Contacts
Page. You should be prepared to discuss:
- The reason you are, or will soon be, in
default
- Your current financial/employment situation
- Whether you or someone else occupies the
property
- Whether or not you wish to keep the property
Most foreclosures result in losses to everyone involved, the
veteran, the servicer/holder, and VA. Many foreclosures can be
avoided, particularly when all parties work together.
The following are methods of avoiding
foreclosure: |
Pay the
Delinquency
- Under most circumstances, lenders are required to
accept payment of the full delinquency and reinstate the loan. The
delinquency may include certain legal costs if you are already in
foreclosure.Many lenders require certified funds for
reinstatement.
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Forbearance and
Repayment
- The most common way of resolving a loan default is
to work out a plan which will let you repay part of the delinquency each
month, along with you regular monthly installment. If you are
temporarily unable to meet your monthly mortgage obligation, your holder
may extend forbearance by agreeing to suspend payments for a limited
period of time until you will be able to begin a repayment
schedule. VA cannot require the holder to extend forbearance or to
agree to a specific repayment schedule; however, holders will usually
cooperate so long as you can show that you will be able to resume
payments on a specific date in the near future.
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Payment
Assistance
- Many state and local governments, as well as
private charitable organizations have programs which will pay all or
part of your mortgage obligation for a fixed period of time. VA
can provide information on these programs; we do not, however, have a
program which would enable VA to give you direct payment
assistance.
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Reamortization
- If your loan is reamortized, the delinquency is
added to the loan balance in order to bring your payments up to
date. This increases your loan amount and will also increase your
monthly payments. The amount of the payment increase will not be
as great if the life of your loan is extended at the same time.
Your loan holder is allowed to extend and/or reamortize your loan by VA
regulations; however, we cannot require the holder to do so.
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Private
Sale
- If you do not believe you will be able to reinstate
your loan and cure the default, a private sale of the property will
enable you to meet your obligations and receive any equity you may have
built up. 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 GI loan or to a 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.
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 in order to help you go through with the sale.
You must contact VA to discuss the situation and get prior approval for
a sale with a compromise claim payment.
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Deed in Lieu of
Foreclosure
- If you will be unable to cure the default, and a
private sale does not appear realistic, VA will consider accepting a
deed in lieu of foreclosure. If there are no liens on the property, and
VA agrees to accept a deed, you will have to sign legal papers making VA
the owner of the property. Normally, VA will have to pay your loan
holder 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 for all or part of the claim we paid. VA
representatives can discuss this with you in detail.
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Refunding
- VA has the discretionary authority to buy a loan
from the holder and take over the service. This is called “refunding”.
We consider this alternative for every loan before foreclosure is
completed. If you have the ability to make mortgage payments, or will
have the ability to in the future, but your loan holder has decided it
cannot extend further forbearance or a repayment plan, you may qualify
for refunding. If refunding is appropriate, VA will notify you.
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