The VA asked mortgage servicers to pause foreclosures to help veterans at risk of losing their homes, but mortgage bankers have concerns.
WASHINGTON – The Department of Veterans Affairs (VA) called on mortgage servicers to pause foreclosures on VA-backed loans for six months and extended a pandemic-era loan modification program that covers missed payments and allows for affordable monthly payments.
The pause on the COVID-19 Veterans Assistance Partial Claim Payment program, until May 31, is to give borrowers a chance to access the newly enacted VA Servicing Purchase program, which allows the VA to purchase and modify qualifying loans in default. At the same time, extending the COVID-19 Refund Modification program means veterans can apply for VA-backed zero-interest, deferred-payment loans to cover missed payments and modify their existing VA loans for affordable monthly payments.
“This will empower us to work with veterans experiencing severe financial hardship to adjust their loans – and their monthly payments – so they can keep their homes,” VA officials said.
Mortgage Bankers Association President and CEO Bob Broeksmit says the organization has “significant concerns” about the foreclosure moratorium. Specifically, he said servicers need more information about reimbursements.
“Servicers provided relief to struggling borrowers during the pandemic by advancing the payments owed on their mortgages and are willing to do so again. However, the VA needs to provide a detailed plan on how servicers will be reimbursed for advancing payments on behalf of borrowers,” he says.
He also called for an extension to the partial claim payment program.
“We also believe that restoring the VA’s standalone partial claim program – which worked successfully for veterans and servicers until it was sunset in October 2022 – needs to be part of the VA’s long-term plans to assist borrowers facing hardships,” he said.
The VA’s announcement comes after thousands of veteran homeowners were told to pay a lump sum to rectify their forbearance or refinance at higher interest rates. An NPR investigation found upwards of 6,000 borrowers with VA loans in the program are in foreclosure and 34,000 others are delinquent.
After the VA made the announcement, Sen. Jon Tester, Senate Veterans Affairs Committee chair, praised the department for its action.
“This pause will help ensure our veterans, service members and their families can remain in their homes and get their payments back on track while VA works on a long-term solution,” he said.
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