Veterans who are behind on their mortgages due to COVID-19 hardship may soon see their overdue payments covered by the Department of Veterans Affairs as part of a low-interest loan program.
Proposal, described in the Federal Register, could help about 60,000 veterans who hold VA home loans avoid eviction. The VA is seeking public comments on the plan until Jan. 7.
A major provision of the Coronavirus Aid, Relief and Economic Security Act (CARES Act) provides eviction protection and a mortgage forbearance option for all borrowers facing financial hardship in due to the national COVID-19 emergency. By law, borrowers who cannot make their mortgage payments on time are temporarily prevented from being evicted from their homes. Another provision of the CARES Act gave borrowers the option to delay or stop their mortgage payments for up to 360 days if they faced financial hardship related to COVID.
But eviction protection and late payment compensation are expected to end on December 31. And with the end of the moratorium on foreclosures fast approaching, the VA’s plan allows the government to pay off all outstanding mortgage payments for eligible veterans.
Under the proposal, any past due mortgage payments that the VA-back mortgage holder has accumulated over the past nine months will be paid to the lender by the VA. The veteran will then have to repay this money to the VA while they continue to make their regular mortgage payments.
These loans will have up to 10 years to repay the VA funds used for this program, with a delay of up to five years before payments begin. VA plans to charge 1% interest on loans.
Those who receive this VA help will still need to work with their lender to find a mutually acceptable (forbearance) payment plan for future payments, and they will need to stick to that payment plan if they wish to stay home.
To be eligible for the proposed program:
- The borrower must have been up to date (or less than 30 days late) with their loan payments as of March 1, 2020.
- The borrower must have received the forbearance of the CARES law from his lender and have missed at least one monthly payment scheduled since his qualification.
- The veteran must have sufficient income to resume making monthly mortgage payments to his lender and have a debt-to-income ratio within acceptable levels.
It is estimated that 33,000 and 60,000 veterans could benefit from the relief, according to the VA.
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