VA Loan Workouts

I can not afford to pay my mortgage an retire in 6 year on my pension.  I have an V A loan, with Citimortgage of Citigroup. 

If I stop paying and notify them that I can afford the payment.  What could happen, credit wise can I repair it. Or could judgement against me or wage bank account or ect. 

What the least and most that could happen and how to deal with it. 

John

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Hello John,

If you “notify them that I can afford the payment” then they won’t be inclined to do anything for you.  The Department of Veterans Affairs (VA) offers the following workouts for borrowers who can not afford to make their payments:

Forbearance – a period of up to twelve-months where payments may remain delinquent.  If over sixty-days then it must be in writing.  This is typically combined with a repayment plan which has no limit as to the number of months for repayment.

Modification – If the loan is delinquent or in imminent danger of default, then the lender may extend the loan term and capitalize delinquent payments, taxes, and insurance.

Assumption – Loans made prior to March 1, 1988 pay be assumed by another party without the prior approval of the VA.  Loans originated after that date must have approval from the VA and the new buyer must pay a funding fee of ½ of 1% of the loan amount to the VA and a $300 processing fee (or the maximum fee permitted by state law)

Compromise Sale – This I the VA short sale program.  The lender allows the property to sell for less than the mortgage balance and claims the remaining payment from the VA.

Refinance – The VA does not require an appraisal to refinance under the Interest Rate Reduction Loan (IRRL) and closing costs may be included in the loan amount.  Since rate as of the date of this post are around 5.0% that may be a benefit.

Refunding – On rare occasion the VA buys the loan back from the lender and makes special arrangements for a workout with the veteran.

Deed in Lieu – If there are no junior liens on the property and the veteran has explored all other options above then the lender may accept a deed in lieu of foreclosure.

The worst that could happen might be that in the event of foreclosure the Dept of VA seeks a deficiency judgment and is able to garnish non-exempt funds from a bank account.  The best that could happen would be that the Dept of VA accepts one of the above workouts and in that event, everybody wins.

Thanks for the questions and hope this helps.

Paul