Is your VA loan protected in the wake of a natural disaster? Read on to find out more if you are affected.
Following Sandy’s devastation, military members victimized by the storm in the Eastern United States may be wondering what could happen to their VA loans following this natural disaster. Common questions may include:
- What if I can’t make my payments and default for storm-related reasons?
- Do I have to pay late fees if I can’t pay my mortgage on time due to the storm?
- Am I facing foreclosure if the storm has caused me financial distress?
In fact, in certain circumstances, VA loans are protected should a borrower’s financial situation worsen in the path of a tornado, hurricane, fire, earthquake or other declared disaster.
The VA Urges Lenders to Modify Veterans’ Loans or Offer Forbearance for Sandy Victims
Generally, following natural disasters, the VA encourages servicers to help individuals who have loans and who are affected by a disaster. The VA wants to keep veterans in their homes, and minimize defaults. Natural disasters can strain family finances, or make it difficult for borrowers to make their mortgage payments. For instance, if the home becomes uninhabitable due to a disaster, and the borrower is forced to pay to live elsewhere, this can put a financial strain on the housing budget.
Because of these strains, the VA has asked mortgage servicers to offer forbearance whenever possible, and even modify veterans’ loans. Title 38 CFR 36.4315, which states, “The terms of any guaranteed loan may be modified by written agreement between the holder and the borrower, without prior approval of the Secretary” allows for veterans and their lender to agree to modify loans according to VA guidelines, without prior approval by the VA. Certain conditions and circumstances apply. A declared disaster that is unlikely to happen in the same place twice is a good example of a circumstance that may merit VA loan modification. It’s up to the homeowner to contact the loan servicer to discuss forbearance or modification. If you’re having problems making your mortgage payments due to Hurricane Sandy, contact your servicer to see what options they offer.
The VA Asks Mortgage Servicers to Waive Late Fees for Veterans Hit by Hurricane Sandy
The VA has encouraged all servicers to waive late charges on loans in the Sandy disaster area, and believes that many servicers plan to do so. What’s more, according to the Code of Federal Regulations (CFR) Title 38 Section 36.4311 any prepayments that a borrower has applied toward principal prior to the disaster can be used to cure or prevent default. Prepayments are made in addition to regularly scheduled mortgage payments and can be used to reduce the principal balance of a loan. VA borrowers can make prepayments as often as they want without penalty. VA borrowers who’ve made prepayments, and can’t pay their home loans because of the storm, may ask their loan servicers whether their prepayments can be used toward mortgage payments due. When a lender and borrower agree to use prepayments in this way, the borrower’s principal balance will increase accordingly.
90-day Moratorium May Prevent VA Loan Foreclosure
Finally, the VA’s policy is to urge holders and servicers to establish a 90-day moratorium on new VA loan foreclosures in the Sandy disaster area. Due to the VA’s request, some lenders may choose not to initiate foreclosures within 90 days after the date of the disaster.
Valery Behr, veterans advocate for iFreedom Direct®, says, “Our hearts go out to all victims of Hurricane Sandy.” Behr goes on to say, “It is our wish that veterans who have taken a financial hit due to Hurricane Sandy will find the help they need to get back on their feet.”
For more information about VA loans, contact
an experienced mortgage professional.