The mortgage servicer has the primary responsibility for servicing the VA-guaranteed loan to resolve the default. When VA decides additional information or action is needed, VA initiates contact with the Veteran to offer financial counseling, discuss loss mitigation options that have been considered, and sometimes serve as an intermediary between the Veteran and mortgage servicer to negotiate a resolution to the default. VA then helps the servicer and the borrower to arrange an appropriate loss mitigation option, such as:
- Repayment Plan: The Veteran may pay a regular payment plus part of the delinquency each month over a period of time until the loan is brought current;
- Special Forbearance: Temporarily suspend payments to allow the Veteran time to sell the property or reinstate the loan;
- Loan Modification: Provide the Veteran a fresh start by adding the delinquency to the loan balance and establishing a new payment schedule;
- Refunding: VA can consider refunding (purchasing) the loan and modifying it to make the payments more affordable to the Veteran;
- Compromise Sale / Short Sale: The Veteran sells their home for an amount less than what is owed at current market value with VA paying the difference, up to the maximum guaranty on the loan; or
- Deed-in-Lieu of Foreclosure: The Veteran voluntarily deeds the property to the servicer to avoid the foreclosure process, with VA paying the difference between the payoff and the net property value.
For more information on this program, visit the Home Loans Information page.