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From the Veterans Administration
Veterans who lose their homes to a short sale (i.e. a sale of real estate in which the sale proceeds fall short of the balance owed on the property's loan) or a deed-in-lieu of foreclosure can receive up to $1,500 in relocation assistance.
A deed-in-lieu of foreclosure is a deed instrument in which a mortgagor (i.e. the borrower) conveys all interest in a real property to the mortgagee (i.e. the lender) to satisfy a loan that is in default and avoid foreclosure proceedings.
The VA encourages mortgage servicers to work with veterans and has informed its approved servicers to provide that cash advance to borrowers who use a deed-in-lieu of foreclosure or who complete a VA compromise claim to unload their short sale. The directive went into effect on Jan. 6.
Borrowers can use the money to cover moving expenses or to simply pay for lodging while they deal with the pending loss of their home.
Under the VA's Compromise Sale Program, the agency can pay a compromise claim – for the difference between the sale price and the borrower's loan balance. That allows the veteran to complete a private sale to a borrower who either assumes the loan or who has secured separate financing. These aren't exactly everyday transactions. The Compromise Sale Program is another of the VA's tools that can help keep service members out of credit and fiscal calamity. Given the unique nature of this program, there are a host of requirements and criteria for all stakeholders. Several factors must be met in terms of basic eligibility, including:
n The sale price must reflect fair market value
n Reasonable closing costs
n The sale must represent a better financial outcome for the government than foreclosure
n The seller must be able to document financial hardship
n There can be no second liens
n Sellers must have a sales contract in place before applying
A host of VA-approved lenders are authorized to conduct compromise sales. But the agency itself can do them in-house if necessary. A current VA appraisal is required before a compromise sale can proceed. The mortgage lender must also agree to have the amount of its VA guarantee reduced by that gap between sale price and loan balance — in other words, the value of the compromise.
One issue veterans need to consider is losing, at least temporarily, some of their future buying power. The part of their VA entitlement tied up in the original mortgage guaranty will remain in limbo until the VA gets fully reimbursed.
To learn more about this program, please call 1-800-933-5499.