Frequently Asked Questions about VA home loans during COVID-19
Answers to Frequently Asked Questions (FAQs) regarding help with VA home loans during COVID-19
The VA released answers to some common questions about VA home loans during the COVID-19 pandemic. Those questions and answers are below. If you have any questions regarding the information provided here or you would like help moving forward, you can reach out to your local legal aid provider or the VA directly.
We want to highlight that there are some protections for you and your home related to the COVID-19 pandemic, including potential forbearance (pause in payments), BUT YOU MUST APPLY BEFORE JUNE 30, 2021.
- What if I’m having troubles making payments or have missed payments on my VA-guaranteed loan because I am experiencing financial hardships while the COVID-19 pandemic continues?
- What protections do I have for my VA loan while the COVID-19 pandemic continues?
- What is a forbearance?
- Should I request a COVID-19 forbearance?
- Does a forbearance mean the missed payments are forgiven or waived?
- How long is the forbearance period for COVID-19 affected loans?
- How do I apply for the COVID-19 forbearance?
- Do I have to make up all those payments in a lump sum at the end of the forbearance?
- Do my missed payments automatically move to the end of the loan?
- Will those missed mortgage payments hurt my credit score?
- What is loan deferment? Would deferring the missed payments prevent me from selling my home in the future?
- How do I make up missed payments and retain homeownership if I don’t get a COVID-19 forbearance? What about after my COVID-19 forbearance ends? What if I had missed payments unrelated to the COVID-19 situation?
- What if I can’t financially recover enough from the COVID-19 forbearance period to resume regular monthly mortgage payments afterwards?
- What can I do if I’m at risk of my loan being foreclosed or of being evicted right now?
- What if I am at-risk of becoming homeless?
- What other resources are available for homeowners?
1. What if I’m having troubles making payments or have missed payments on my VA-guaranteed loan because I am experiencing financial hardships while the COVID-19 pandemic continues?
The number one priority for anyone financially affected by COVID-19 is to ensure the health and safety of you and your family. Next, call your mortgage company right away. Your mortgage company offers free, expert assistance. While you might be worried about letting your mortgage company know about your financial hardships, your mortgage company is there to help you, and it is to your advantage not to wait, but to call them as soon as possible.
You can also contact a VA loan technician to help at (877) 827-3702.
There are multiple protections on your VA-guaranteed loan if you are experiencing financial hardship due to the COVID-19 emergency. The hardship can be direct or indirect. For example, you may be directly affected because you have lost your job, or you may be indirectly affected because of childcare situations that have decreased your monthly income or increased your costs.
Through June 30 of this year, you can make an initial request for COVID-19 forbearance. VA expects your mortgage company to approve your request, for up to six months. VA also expects that, if you need additional forbearance after that, your mortgage company will approve, at your request, an additional COVID-19 forbearance for up to six months.
If you requested COVID-19 forbearance on or before June 30, 2020, you may be concerned that your COVID-19 forbearance option is ending soon. But VA expects mortgage companies to approve, at your request, an additional three-month period of COVID-19 forbearance. If needed, another three-month period should be approved by the mortgage servicer. Although the total forbearance under this paragraph would equal an additional six months, each three-month extension should be requested individually.
VA has also extended its moratorium on foreclosures and evictions. The extension lasts through June 30, 2021. This means that a mortgage company should not attempt to begin a foreclosure during the moratorium. If a foreclosure began before the moratorium, it should be put on hold until the moratorium ends. Similarly, if a foreclosure is already complete, there will not be an eviction while the moratorium is in effect. (Note, though, these protections do not apply if you aren’t living in the property to be foreclosed.)
During the COVID-19 national emergency, taking advantage of forbearance options should not be considered delinquent for the purposes of credit report. You should also not have to worry about being charged additional costs for the COVID-19 forbearance. For example, a mortgage company cannot charge you a late fee as a result of granting you a COVID-19 forbearance.
Even if you do not want a COVID-19 forbearance, you may be able to take advantage of some other options that would work for your financial situation. VA provides for several alternatives, ranging from refinance to loan modification. Please contact your mortgage company or VA to learn more.
In the home loan context, a forbearance usually means a time period (one month or longer) during which your mortgage company agrees to accept reduced payments or no payments on your loan. Your loan will continue to accumulate interest, but not late fees or other penalties. Here is a video on how a forbearance works under the CARES Act. While it is specific to the CARES Act, all COVID-19 forbearance mentioned in these FAQs is similar.
Only you can make this decision, but here are some things to consider. If you can continue making payments despite the financial impact of COVID-19, you may not want to request forbearance. While not making monthly mortgage payments for six months may seem to have immediate benefits, the payments missed during the COVID-19 forbearance period will become due when the COVID-19 forbearance ends. Please see the questions and answers above to understand how this may affect you later.
No. The payments will still be due on your loan, just not during the forbearance period. A forbearance allows you time to resolve the reason that you can’t pay the regular monthly installment and get back on a regular monthly repayment schedule again.
COVID-19 forbearance is broken down into two pieces;
- an initial period and
- an additional period.
To receive the initial period, you may notify your mortgage company that you are experiencing financial hardship due to the COVID-19 pandemic. As mentioned above, the hardship can be direct or indirect. When you notify the mortgage company, you may request up to 180 days of forbearance. You don’t have to use the entire forbearance period if you can resume payments sooner, but the deadline to request COVID-19 forbearance is June 30, 2021.
If you need the additional period, you may notify your mortgage company that you are still experiencing hardship due to the COVID-19 pandemic and request up to 180 additional days of forbearance. As with the initial period of forbearance, you don’t have to use the entire period of forbearance if you can resume payments sooner.
Please note, though, that if you requested COVID-19 forbearance on or before June 30, 2020, the length of continued forbearance is a bit different. VA expects mortgage servicers to approve, at your request, an additional three-month period of COVID-19 forbearance. If needed, another three-month period should be approved by the mortgage servicer. Although the total forbearance under this paragraph would equal an additional six months, each three-month extension should be requested individually.
Neither an initial COVID-19 forbearance nor an additional period of COVID-19 forbearance can extend past June 30, 2022.
You simply need to contact your mortgage servicer and request a COVID-19 forbearance because of financial difficulties due to the COVID-19 national emergency. The deadline to request this forbearance is June 30, 2021.
No. VA has notified mortgage companies that the missed payments due at the end of a COVID-19 forbearance period do not have to be made up in a single payment. However, if you can make up the all the payments in a lump sum and resume making regular monthly mortgage payments, then you may do so if you want.
No. Your mortgage servicer can’t automatically move those payments to the end of the loan because that would alter the recorded terms of your mortgage note. However, if it benefits you to handle repayment this way, you and your mortgage servicer can explore a loan modification to extend the term beyond the original maturity (paid-in-full) date of the mortgage loan. VA allows modified loans to be extended up to 360 months (30 years), as long as the extension is 120 months (10 years) or less from the original maturity date on your mortgage note.
It depends. Under normal circumstances, missed or delayed payments have an impact on your credit score. During the COVID-19 national emergency, however, if you were current on your mortgage when the COVID-19 forbearance was granted, your mortgage company should report your account as current. This may not apply if you were already behind on your mortgage when the COVID-19 forbearance was requested. It may be that your mortgage company has to maintain the delinquent status. If you bring your mortgage current, your mortgage company should report the credit obligation or account as current.
11. What is loan deferment? Would deferring the missed payments prevent me from selling my home in the future?
Loan deferment is when your lender defers payments to the loan maturity date or until you refinance your loan or sell the home. The missed payments are still a part of the overall amount owed, but not part of the principal balance. Hence, the deferred amount will not gain interest.
A deferred amount would not prevent you from selling your home. However, the deferred amount would be connected to your loan until the deferred amount is repaid. If you do not repay it by the time you are ready to sell your home, it would come due as a part of the sale.
The deferred amount must be paid by the existing loan maturity date, when the property is sold, or anytime the loan is paid in full. But a deferment does not extend the maturity date of your loan.
Generally, you and your lender could agree to "roll the payments in" to the end of the loan by extending the maturity date by the number of missed payments. However, that would require a loan modification. It would not be a deferment.
12. How do I make up missed payments and retain homeownership if I don’t get a COVID-19 forbearance? What about after my COVID-19 forbearance ends? What if I had missed payments unrelated to the COVID-19 situation?
Contact your mortgage company to explore three basic options to make up missed payments and retain your home:
- Special Forbearance: Special forbearance is a longstanding loss mitigation option to help Veterans who have run into temporary financial difficulties. It is different from a COVID-19 forbearance and is not specific to financial hardships due to the COVID-19 pandemic. As discussed above, a forbearance is a time period that the mortgage servicer agrees to accept reduced payments or no payments. If you missed payments before the declaration of the COVID-19 national emergency, a special forbearance could be an option. It may also be an option if your COVID-19 forbearance ends and you need additional time to make up the missed monthly payments.
- Repayment plan: You and your mortgage company can agree to terms where you pay a specified amount paid above the regular monthly mortgage payment to bring your loan current over time.
- Loan Modification: As mentioned above, a modification may be appropriate, if you resolved or plan to resolve the reason for default and can resume making regular monthly mortgage payments, but you can’t afford to pay the additional amount to make up the missed payments over time. Your mortgage company may offer an option to modify your existing mortgage note to extend the term (time to repay) of your loan. Missed payments are included in the loan amount and your new principal balance is amortized (paid off) over the new remaining term of your loan to reduce the burden of repayment. Keep in mind that a loan modification may change your interest rate.
You may have heard that VA has proposed a plan to provide a financial alternative to help those who have received COVID-19 forbearance. The plan, which is called the COVID-19 Partial Payment Claim Program, includes VA “buying” your missed payments from your mortgage company so that VA can offer you favorable repayment terms. The program has not yet gone into effect. For now, VA is considering the public comments on how to make the terms more helpful to Veterans. [The VA] expects to finalize the details in upcoming weeks.
13. What if I can’t financially recover enough from the COVID-19 forbearance period to resume regular monthly mortgage payments afterwards?
If you are unable to resume regular monthly mortgage payments, you have options to better protect your credit rating and still qualify for a new home loan later. These basic options to avoid foreclosure are:
- Private Sale: This is the standard home sale transaction. It is when you sell the property at a price that will repay the loan in full.
- Short Sale: If you cannot sell the property for an amount that would fully pay off the loan, you might be able to work with your mortgage company to arrange for a short sale. This allows you time to sell the property, perhaps for less than you owe. A mortgage company may be willing to do this because the mortgage company can submit a claim against the VA-guaranty to help offset the mortgage company’s losses. This may affect the size of loan VA can guarantee on your behalf in the future, but you can simply call us to help guide you through that process when you are ready to purchase a home.
- Deed in Lieu: You may be able to choose to deed the property to your mortgage servicer instead of going through a foreclosure action. As with a short sale, A mortgage company may be willing to agree to this because the mortgage company can submit a claim against the VA-guaranty to help offset the mortgage company’s losses. This may affect the potential size of loan VA can guarantee on your behalf in the future, but you can simply call us to help guide you through that when you are ready to purchase a home.
The established foreclosure and eviction moratorium on federally-backed loans (including VA home loans) is currently in effect until June 30, 2021.
The Consumer Financial Protection Bureau (CFPB) has a “Find a Counselor” tool to find counseling agencies approved by the Department of Housing and Urban Development (HUD) in your area. You can also call the HOPE™ Hotline open 24 hours a day, 7 days a week, at (888) 995-HOPE (4673) for personalized advice. Other mortgage and financial resources are available at: https://www.consumerfinance.gov/coronavirus/.
These FAQs were taken directly from the VA's website at https://benefits.va.gov/homeloans/cares-act-frequently-asked-questions.asp. For more information on the VA Home Loan program, you may call (877) 827-3702 to contact the nearest VA Regional Loan Center, or visit VA's website directly at www.benefits.va.gov/homeloans/
If you don't feel you don't feel comfortable contacting the VA or your Loan Servicer directly, or if they are not being helpful to your situation, please go to StatesideLegal's Find Legal Help Map to find the nearest legal aid provider near you.
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Posted: May 2021