By Mike Frueh
In these unstable economic times, it is worth reviewing some of the protections afforded to Veterans and Servicemembers with monthly housing payments.
For Veterans and Servicemembers with home loans who are experiencing difficulties paying their mortgage, we cannot stress enough the importance of contacting your loan servicer, the company that collects your monthly mortgage payments, as soon as possible. Your loan servicer can help you explore different options to avoid foreclosure. Contrary to popular opinion, servicers really do not want to foreclose because foreclosure costs a lot of money. Be sure to have your most recent financial information handy when contacting your servicer so that appropriate home retention options can be pursued.
Although the servicer has the primary responsibility of servicing a loan to resolve default, VA stands ready to assist should the servicer be unable to help. For Veterans and Servicemembers with VA home loans, VA is authorized to provide direct and more in-depth assistance to help arrange a suitable home retention option. These may include foreclosure alternatives such as a loan modification or repayment plan. Besides the no-downpayment feature of VA home loans, this assistance is one of the primary benefits of the program. For informational videos on how the different foreclosure avoidance options work go to http://www.benefits.va.gov/homeloans/target_video.asp.
Even if you are a Veteran or Servicemember with a conventional or Federal Housing Administration (FHA) mortgage, VA can still provide financial counseling and guidance on how to approach your loan servicer to explore home retention options.
Veterans/Servicemembers with either loan type can speak to a VA loan technician by calling toll-free at 1-877-827-3702. You can also learn about assistance options by reviewing our Veteran Borrowers in Delinquency Quick Reference Sheet at http://www.benefits.va.gov/homeloans/docs/foreclosure_avoidance_fact_sheet.pdf.
Another protection of which you might not be aware is designed specifically for Servicemembers called to active duty. Under the Servicemembers Civil Relief Act (SCRA), active duty Servicemembers can suspend or postpone certain financial obligations so they can devote their full attention to their military duties. While a range of obligations, from car payments to student loans, may be covered under SCRA, I’d like to specifically address housing payments.
If your military service significantly affects your ability to meet your monthly payments on a mortgage you acquired before entering active duty, your interest rate may be capped at 6 percent during the active duty period. Some mortgage servicers are even capping the rates on SCRA-eligible loans at rates as low as 4 percent. If you believe you may qualify for SCRA protection, contact your mortgage servicer and be prepared to provide a copy of your orders. VA is always available to provide guidance as well; once again, our number is 1-877-827-3702.
If you are a Servicemember called to active duty and have a residential lease, you also have rights and protections under SCRA. For example, active duty Servicemembers and their families cannot be evicted from a house they own or rent. If certain conditions are met, you may be able to terminate leases without penalty as well. For full details on this and other SCRA protections, please visit www.servicemembers.gov.
Part of the pride in working for the VA Home Loan program is being able to help Veterans and Servicemembers use their VA benefits to purchase homes. However, we put just as much effort into helping Veterans retain those homes. One of the performance statistics we track in our program is our foreclosure rate compared to other loan types. The Mortgage Bankers Association has reported VA loans to have the lowest foreclosure rate among all loan types (prime, subprime, FHA, VA) for the last 12 quarters.
This is a solid achievement, but we know this is not solely due to the home retention assistance that VA provides. We understand VA’s low foreclosure rate also speaks to the sense of responsibility and duty that members of our military possess. Based on these characteristics and the protections discussed here, we hope to keep even more Veterans and Servicemembers in their homes despite the economic challenges that may lie ahead.
Mike Frueh is the Acting Director of the VA Home Loan program. This program is responsible for helping Veterans obtain mortgages to purchase homes, retain homes when financial difficulties are encountered, and adapt homes to accommodate certain service-connected disabilities. Mike has 20 years of experience in the mortgage industry.