VA-HAMP: Another Loan Modification Option for Veterans
Good news for veterans who have financed their home loans through the Department of Veteran Affairs: the department has extended the federal HAMP program to apply to Veteran’s Affairs (VA)-insured mortgages through implementing a modification program under HAMP terms. Released on January 8, 2010, the document “Circular 26-10-02” introduces the instructions for modifying VA-guaranteed home loans in accordance with the Making Homes Affordable program. Servicers who wish to use HAMP-VA must still go through the traditional programs first, which include repayment plans, special forbearances and other loan modification programs. VA-HAMP therefore is designed to be a last-resort option for VA mortgage borrowers.
The program, which went into effect February 1, 2010, requires that VA servicers use VA-HAMP before taking other drastic measures to remove the owner from the house, like short sales, deeds-in-lieu or foreclosures. VA-HAMP can be used as long as the borrower meets certain qualifications, like being ineligible for traditional home retention loss mitigation, having the property be the borrower’s primary residence, and agreeing upon the modification by the current HAMP expiration date, December 31, 2012. The VA is limiting interest payments on any claim under guaranty on an unsuccessful case to 210 days from the due date of the last paid installment in order to make sure that the cases of veterans are inspected promptly.
Another one of the program’s requirements is that servicers must calculate a two-step Net Present Value (NPV), which verifies that debt is unavoidable for the borrower and that he or she does not qualify for a workout plan. This step ensures that veterans are appropriately considered for loan modifications, even when the VA guaranty makes foreclosure a more attractive option to servicers. The NPV will be calculated twice by the servicers, once taking the VA guaranty of the loan into account, and once without. Both models will require that all other parameters be identical, and based on the outcome of the model calculations, the servicer will act according to VA guidelines.
Current loans may not be considered for VA-HAMP modification, unless the borrower is in “imminent danger of default” in which case he or she may contact the servicer to have their loan evaluated under VA-HAMP guidelines. Otherwise, the VA recommends that current loans be considered for refinancing under programs like their Interest Rate Reduction Refinancing Loan (IRRRL).
The circular itself can be found here: http://www.homeloans.va.gov/circulars/26_10_2.pdf
(This article is for informational purposes and does not contain or convey legal advice. The information herein should not be used or relied upon in regard to any particular facts or circumstances without first consulting a lawyer. If you have any questions about this Article, please call or e-mail Stephen Vokshori, Esq. (213.785.5366 / stephen@voklaw.com) or any other member of Vokshori Law Group.)
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[…] for a modification program to totally restructure your home loan to something you can afford (i.e. HAMP). Unfortunately, the ultimate decision lies with the mortgage company. There is no judge or […]
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