April 27, 2022
Do you have a VA mortgage? Are you worried about your ability to make mortgage payments on your VA loan during the coronavirus emergency?
Shelter-in-place requirements and other restrictions due to Covid-19 make it more difficult for borrowers to pay their mortgages, including those with VA loans.
What should a homeowner do to avoid loan default and foreclosure on a VA mortgage or refinance loan? These are the steps those with VA mortgages can take to save homes at risk of default and foreclosure.
Update
The VA extended the existing moratorium on foreclosures until July 31, 2021, and evictions until Sept. 30, 2021. See VA guidance for borrowers or call 877-827-3702 for additional information.
VA Guidelines for Lenders During the Covid-19 Emergency
The Department of Veterans Affairs directed all participating lenders to provide relief to VA borrowers in VA Circular 26-20-12, “Extended Relief Under the CARES Act for Those Affected by COVID-19.”
The VA advised lenders that not offering such relief to borrowers “could impact a future claim payment and could lead to other legal or administrative action(s) against the servicer.” In context, the mention of a “future claim payment” refers to the lender trying to file a claim for reimbursement from the VA for a VA mortgage that has defaulted.
Borrowers Must Act to Claim VA Mortgage Relief
The VA guidelines also explain how borrowers can claim VA mortgage relief. Borrowers must contact their loan servicers. Mortgage relief is not automatic.
Eligible borrowers include those with VA-guaranteed or VA-held loans who are experiencing financial hardship caused by the Covid-19 pandemic.
This loan relief, or forbearance, applies “regardless of delinquency status,” according to the VA guidelines.
Contact Your Lender to Get Home Loan Relief
Here’s the key thing you need to know: there is no automatic mortgage bailout. You must contact your loan servicer to get protection against VA mortgage default and foreclosure. You only get that by contacting the lender and making the arrangements.
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VA Mortgage Loan Relief: What You Get
VA borrowers can ask for an initial 180-day (six months) loan forbearance period, regardless of how delinquent the mortgage is.
Keep in mind that a loan forbearance only delays the required payments – they are not required now but will be added back to the loan later.
When you request Covid-19 mortgage relief, your lender must grant it, with no additional documentation, according to the VA guidelines.
An Extra Six Months of VA Loan Forbearance Is Possible
In addition, the borrower may request an additional six-month (180-day) extension of the loan forbearance.
As with the original mortgage relief, the borrower must contact the lender for the additional six months of relief.
Neither the original forbearance nor the extension is automatic.
What the VA Lender Must Do When You Ask for Covid-19 Mortgage Relief
When you contact the loan servicer to request mortgage relief, “VA expects the servicer to inform the borrower of the borrower’s forbearance rights,” according to the VA guidelines.
As the borrower, you can decide how long you would like the relief to last, up to the limit of 360 days (the original forbearance period and the extension).
What Your Lender Cannot Do During VA Mortgage Relief During COVID-19
VA rules are clear: your loan servicer cannot require you to make a lump-sum payment on your mortgage to cover the deferred payments once the forbearance period ends.
Interest Rates, Fees and Penalties During a VA Mortgage-Relief Period
The VA prohibits lenders from charging additional fees, penalties or interest during the mortgage-relief period. Borrowers should keep careful track of charged fees and interest to make sure they are not being penalized.
How to Ask Your VA Lender for VA Mortgage Relief During the Pandemic
The VA offers guidelines for those needing to claim mortgage relief on a VA mortgage. Contact your loan servicer and submit:
- A formal request for VA mortgage loan relief
- A formal certification that you are experiencing financial hardship due to the pandemic
While you must certify that you are experiencing a hardship, your lender should not require further documentation. However, VA guidelines may change.
The Nature of Your Mortgage Relief Depends on Your Mortgage
The federal government has announced homeowner bailout measures, including the ability to delay mortgage payments for up to one full year by adding those payments to the end of the mortgage. Those measures are generally for government-backed mortgages like FHA, USDA and VA mortgages.
The federal mortgage relief programs for government-backed loans do not include conventional mortgages. However, some financial institutions have initiated their own types of relief. Check with your lender.
What the Federal Government Says to Do If You Are Falling Behind on Mortgage Payments
No matter what type of mortgage loan you have, the federal government’s consumer protection website, the Consumer Financial Protection Bureau, advises the following steps:
- If you can pay, do so.
- If you have fallen behind on payments, call your lender immediately.
- If you expect to fall behind on payments, call your lender immediately.
- If you can’t keep up with your VA mortgage or can only make a partial payment, call your lender.
- If you do not need immediate help with your loan, find general information on your lender’s website.
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