Noteboom The Law Firm

VA Helping Soldiers with Short Sale Relocation

January 21, 2011 - Much has been written about Department of Veterans Affairs (VA) mortgages. Some swear by the benefits of these loans, and some studies have produced numbers to support just how successful VA-backed mortgage loans have become. Others, however, claim just the opposite and take issue with VA-backed loans for such reasons as not being inclusive enough. Either way, the VA has taken further steps to help borrowers.

As of January 6, 2011, the VA requires all the mortgage servicers for which it backs loans to issue $1,500 to borrowers to help them move out of their home because of:

• A short sale; or
• A deed-in-lieu of foreclosure.

Once the loan is made, the VA will pay back the mortgage servicer. The $1500, however, cannot be counted toward the borrower's proceeds and the VA will only reimburse up to their maximum guaranty in addition to how much it costs to resell the house as REO or short sale. Servicers, then, are made responsible for any amount of money they loan above the VA guaranty and either the house's net value, or the proceeds from the short sale, whichever is larger.

This is not a new tactic for the VA. For the last 15 years the VA has been giving servicers money so they will alter loans on the edge of foreclosure. This has certainly helped its statistics showing how few VA-backed loans are foreclosed upon.

The VA has also made some strong suggestions to its servicers in how they should treat borrowers using VA-backed loans. Overall, its suggestions and regulations serve to put every party in the best possible position following a possible foreclosure.