VA homeowners who are struggling to keep up with their mortgage payments should contact their lender or loan servicer immediately.
The sooner you make that phone call, the faster you can hopefully work toward some manner of resolution. Proactively reach out to your loan servicer before you get behind on your mortgage payments.
It’s important for homeowners to understand the process and their potential options.
Behind on Your Mortgage
Loan servicers are required to make a good faith effort to contact borrowers within 36 days of a missed mortgage payment.
Before homeowners get 45 days behind, loan servicers have to send documentation that provides:
- Notice encouraging the borrower to contact the servicer and up-to-date contact information
- Examples of possible loss mitigation tools the borrower may be able to utilize
- Information about how the borrower can locate a housing counselor
Lenders and servicers can’t file for foreclosure until a homeowner is more than 120 days late on their mortgage. That four-month span is designed to give homeowners time to evaluate their options and file a formal request for help from their servicer. Active duty military members may have additional foreclosure protections under the Servicemembers Civil Relief Act.
Completing a loss mitigation application in a timely fashion is a key step for distressed homeowners.
Loss Mitigation Options
Multiple factors impact the types of loss mitigation options available to you, including your income and current fiscal obligations, equity, interest rate, credit and payment history, and more. Depending on your circumstances, you may be able to stay in your home and get back on track with your monthly payments.
Some common foreclosure avoidance options include:
- Repayment plan: The servicer creates a new monthly payment plan that includes both the regular mortgage payment and a portion of the missed payment(s).
- Forbearance: The servicer may reduce or eliminate the mortgage payment for a set time period or otherwise give borrowers time to repay what they owe.
- Loan modification: The servicer could permanently alter your loan terms by adding what you owe in late payments to your principal balance and creating a new monthly mortgage payment.
- Short sale: The servicer allows the homeowner to sell the home for less than what they owe.
- Deed-in-lieu of foreclosure: The servicer allows the homeowner to formally return the property rather than following through with the foreclosure process
It’s important to understand that some loss mitigation measures may negatively impact your credit and your ability to purchase a home in the near term. Some, like a short sale, may also have income tax implications.
Remember, every loan servicer and homeowner situation is different. The earlier you reach out to your loan servicer, the sooner you can better evaluate your options.
Loss Mitigation Applications
When it comes to asking for mortgage relief, the earlier you do so the better. Remember, you’ve got a 120-day window after that first missed payment before a servicer can move to foreclose. Additional timelines can come into play once a foreclosure sale is scheduled.
Lenders have 30 days to review a homeowner’s loss mitigation application.
Homeowners who submit a completed loss mitigation application at least 90 days before a scheduled foreclosure sale are entitled to a few protections. One, the servicer must give them at least 14 days to accept or reject any offers for foreclosure avoidance. Two, if the servicer denies a loss mitigation request, borrowers have 14 days to lodge an appeal.
Servicers who receive a completed application at least 45 days before a foreclosure sale are required to tell homeowners they’ve received the application.
Servicers who receive incomplete applications have to explain to homeowners what information is missing. They’re required to evaluate your application and consider alternatives to foreclosure, provided you submit a complete application before it’s too late. Servicers aren’t required to offer you an alternative, but they do have to explain their denial in writing.
Homeowners who submit a completed loss mitigation application 37 days or less before a foreclosure sale may not have the same protections when it comes to foreclosure avoidance options.
How VA Can Help
For homeowners with VA loans, their first call should always be to the loan servicer. But the second call can go straight to the VA loan program.
The loan program has a team of foreclosure avoidance specialists who help to advocate with servicers on behalf of VA borrowers. Those specialists encourage lenders to offer foreclosure avoidance options and help veterans stay in their homes.
Those efforts have helped hundreds of thousands of veterans stave off foreclosure over the last few years alone.
VA homeowners in need can contact the VA loan program directly at 877-827-3702.
Foreclosure Avoidance Scams
Loan servicers and HUD-approved housing counselors won’t charge fees to provide assistance or loss mitigation options. But foreclosure prevention has become a ripe target for scammers.
Be wary of companies or individuals offering to help you for a fee, and never send a mortgage payment to any company other than the one listed on your monthly mortgage statement or one designated to receive your payments under a state assistance program.
Beware of a company or person who:
- Asks for a fee in advance to work with your lender to modify, refinance or reinstate your mortgage.
- Guarantees they can stop a foreclosure or get your loan modified.
- Advises you to stop paying your mortgage company and pay them instead.
- Pressures you to sign over the deed to your home or sign any paperwork that you haven't had a chance to read, or that you don't fully understand.
- Claims to offer "government-approved" or "official government" loan modifications.
- Asks you to release personal financial information online or over the phone and you have not been working with this person and/or do not know them.
If you suspect a scam, you can report it at www.preventloanscams.org or call 888-995-4673.