Life happens. Whether it’s an unexpected expense, a job transition or another financial hardship, missing a mortgage payment can be stressful.  og:image

If you’re a servicemember, Veteran, or the surviving spouse of a Veteran, the good news is that the Department of Veterans Affairs (VA) has resources in place to help you avoid foreclosure and keep your home. Here’s what you need to know if you’re struggling to make your mortgage payments.

Don’t Ignore the Problem

If you’ll be late paying your mortgage, the first thing you should do is contact your loan servicer, which is the company that collects your mortgage payments, using the contact info on your monthly mortgage statement. Many struggling homeowners hesitate to make this call, but mortgage servicers often have programs in place to help borrowers through financial hardship.

If you’re nervous about reaching out to your loan servicer, or if you want additional guidance, you can contact a VA Home Loan technician at 877-827-3702 for assistance. These experts are available to help you understand your options and navigate the process. If you have a VA-backed loan and you’re 61 days past due, the VA will automatically assign a loan technician to review your situation and assist you in finding a way to keep your home.

The worst thing you can do is ignore the issue. Foreclosure — when the lien holder takes ownership of your property — doesn’t happen overnight, but acting early can give you more options.

How to Avoid Foreclosure

The VA offers several options to help servicemembers and Veterans avoid foreclosure.

• Repayment Plan — If you’ve only missed a few payments, your servicer may allow you to enter a repayment plan. This allows you to resume making your normal mortgage payment while also paying an extra amount each month to cover the payments you’ve missed.
• Special Forbearance — If you’re experiencing temporary financial difficulty, your servicer may grant a special forbearance. This means they temporarily pause or reduce your mortgage payments, giving you extra time to get back on track. However, you’ll need to work out a plan to catch up on missed payments once the forbearance period ends.
• Loan Modification — A loan modification restructures your mortgage to make it more affordable. It may involve adding missed payments to your total loan balance and adjusting the terms of your loan. Keep in mind that, due to rising interest rates, your modified monthly payment could be higher than your current payment.
• Veterans Affairs Servicing Purchase (VASP) Program — Beginning May 31, 2024, eligible Veterans with VA-backed loans may be able to participate in the VASP program. Under this program, the VA buys your modified loan from your loan servicer if all other options have been exhausted. This can help some homeowners stay in their homes when other alternatives don’t work.
• Short Sale — If your home is worth less than the amount you owe on your mortgage, your servicer may allow you to conduct a short sale. This means selling your home for less than what you owe, with the servicer agreeing to accept the proceeds as full payment. However, choosing this option could reduce your future VA Home Loan benefits.
• Deed in Lieu of Foreclosure — As a last resort, you may be able to transfer ownership of your home to your servicer through a deed in lieu of foreclosure. This avoids the formal foreclosure process but, like a short sale, could impact your future VA Home Loan benefits.

Related: Your Top 5 Refi Questions Answered

What Happens If You Can’t Avoid Foreclosure?

If foreclosure becomes unavoidable, you may still have financial obligations depending on when your loan was closed:

• For loans closed before January 1, 1990: If the VA has to pay your servicer to cover your loan, you may be required to reimburse the government. If repaying the debt isn’t possible, you may qualify for a waiver to forgive part or all of the amount owed.
• For loans closed on or after January 1, 1990: You will only be required to repay the VA if there is evidence of fraud, misrepresentation, or bad faith on your part.

Related: COVID-19 and Mortgage Forbearance

Beware of Scams

Unfortunately, homeowners who fall behind on their payments are often targeted by scams. Fraudulent companies may offer foreclosure relief, promising to negotiate with your lender for a fee. Never pay upfront fees to companies claiming they can save your home. Always work with trusted sources, such as your loan servicer, a VA Home Loan technician, or a HUD-approved housing counselor.

Impact on Future VA Home Loan Benefits

Losing a home to foreclosure, short sale, or deed in lieu of foreclosure doesn’t permanently prevent you from using your VA Home Loan benefits again, but it does come at a cost. If the VA suffers a financial loss on your loan, you will need to pay back the amount lost before your VA Home Loan benefits can be restored. This process is known as the restoration of entitlement.

Your home is one of your most valuable assets — don’t wait until it’s too late to protect it. Whether it’s finding a repayment plan, exploring VA-backed programs, or getting extra time to sell, there’s a path forward. 

(Note: if you have a conventional, FHA or USDA loan, many of the same foreclosure-avoidance options are available. The first step is to contact your mortgage servicer.)

We’re Here to Help

Whether you’re thinking about buying, ready to start home-shopping in earnest, or considering a refinance, an AAFMAA Mortgage Services LLC (AMS) Military Mortgage Advisor, a licensed mortgage loan originator, will be happy to provide you with an honest and fair comparison of your mortgage options, including a wide range of affordable mortgages designed to meet your needs.

Ensuring AAFMAA Members obtain the best mortgage possible is our mission. Get your free mortgage assessment today or give us a call at 844-422-3622!