When Payments Cannot Be Made on Due Date
Even the most reliable borrowers sometimes fail to meet every payment on its due date, and it is possible that there is good reason for the failure, such as a reduction of earnings or illness in the family.
If you find that you will be unable to make your payment when it is due, by all means let your lender know and try to work out a satisfactory plan to make up the payments missed.
The lender's friendly advice may be most helpful when you are in a tight spot. Try to call the lender before it is necessary that the lender write to you, but never fail to answer notices or letters you may receive.
In emergencies, the first impulse sometimes is to borrow money in order to keep the mortgage payments current. However, any new loan must be paid off in a short time through burdensome installments, and the extra strain often leads to more serious financial trouble.
It is far better to call the holder of your mortgage and frankly explain your trouble. Put "all your cards on the table." If you can, offer some plan for catching up on your payments and request advice and guidance not to ask for sympathy but to let the lender know that you are anxious to keep your home, and sincere in your desire to find a way out of your trouble. If you are willing to cooperate, your sincerity will be appreciated. If possible, the lender will help you develop a plan that will enable you to keep your home.
Failure to cooperate with your lender may result in the loss of your home by foreclosure of the mortgage. Besides causing the loss of your home, this would naturally have a very bad effect on your credit standing, and may even leave you with a debt. You can, and should, avoid this.
When Financial Troubles Arise
When serious financial troubles arise, it is obvious that living expenses must be cut to the bone. Most of the luxuries previously enjoyed, and even some things which may have been thought of as necessary, may have to be dropped for a time.
In order to help veterans in serious financial trouble, VA Regional Loan Centers have technicians available to conduct financial counseling. This counseling is designed to help you avoid foreclosure. If you want this assistance, call 1-877-827-3702 to reach a Loan Service Representative that can assist you.
Every homeowner dislikes the idea of losing a home. It is far better to sell it of your own free will and perhaps save your equity (amount by which value of property exceeds loan balance) than to have it taken away by foreclosure. This could cause you to lose all you have paid in, spoil your credit standing, and possibly increase your present debts. Later, when your financial position has improved, you may again be able to buy a home of your own.
There's also another very good reason for doing everything you can to avoid having your mortgage foreclosed. If your loan closed before January 1, 1990, and if, as a result of the foreclosure, VA has to pay a claim to the lender under the guaranty, the amount of such claim will be a debt you will owe to the Government. If your loan closed on or after January 1, 1990, you will owe the Government in the event of a default if there was fraud, misrepresentation, or bad faith on your part.
Delinquency Assistance information is available in regard to Veterans encountering problems making mortgage payments.
Beware of the "Dotted Line"
Veterans who are behind in the payments due on their VA loans are warned to be very careful before agreeing to any offers by strangers to make up their back payments if the veterans will "sign on the dotted line."
If such a proposition is made to you, ask the holder of your mortgage or the Loan Guaranty Division of the nearest VA regional office about it before you sign any paper. They will be glad to advise you whether or not the offer is good and sound. VA cannot give you legal advice or service, but it can advise as o dangerous practices or as to the advisability of consulting an attorney.
In some parts of the country, veterans who are not familiar with real estate transactions have been "taken in" by shady deals usually called "milking" or "equity skimming."
In one form of this racket, the veteran, who is behind in VA loan payments, is approached by unknown persons who offer to pay the delinquent installments if the veteran will "sign on the dotted line." The veteran later learns that he or she has signed a deed and can get the property back only by signing another contract at a much higher price. When the veteran finds the stiff terms of the new contract cannot be met, legal action is started to take possession of the veteran's home.
In other cases, a housing development will be visited to learn whether veterans are having trouble meeting their VA loan payments. If the veterans are having trouble, these individuals offer each veteran a small amount of cash for the equity in the property, plus the privilege of buying another home in a lower cost neighborhood on a land sales contract. The veteran agrees to give possession in 60 days and "signs on the dotted line," not knowing that he or she is signing a deed to the property. When the 60 days are up, the veteran is told that no houses are available in the lower cost development. The veteran is then put out of the home.
A third method is used in States where there is a long foreclosure or mortgage redemption period. A veteran, falling behind in home loan payments, is offered a small sum of cash for a "quit claim" deed to the property with a promise that all back payments will be made up. The veteran moves out believing that the loan will be brought up to date. Instead, the individual holding the quit claim deed rents the house without making up back payments. Most of the money received as rent is profit until foreclosure is final, and the veteran, not knowing what has happened, may still owe the lender, and quite possibly, the U.S. Government if VA pays a claim on the loan.
Many types of these shady deals are used in different parts of the country, depending on how these individuals can misuse State and local laws. Although these practices may be legal, they are considered unethical by most mortgage lenders and real estate brokers.
You will be protecting your own interests and doing other veterans a service if you report any such propositions to the holder of your mortgage and to the nearest VA Regional Office.
If you decide to sell your home and the VA loan is not paid in full as part of the sale, you should protect yourself by obtaining a release of liability from VA prior to completing the sale. You should also be aware that if your VA loan closed on or after March 1, 1988, it is unlawful to allow someone to take over your loan without the prior approval of VA or your lender. Contact VA or your lender to find out how to apply for approval of your sale and/or a release of liability.