If you are considering applying for a VA home loan or if you’ve already purchased a home with a VA mortgage and are concerned that your home may be affected by a natural disaster, it’s good to know VA policy on this important issue.
On the VA official site, there’s a general statement of concern for veterans and currently serving military members with VA loans who might be affected by a natural disaster. “VA encourages holders of guaranteed loans to extend forbearance to borrowers in distress as a result of a natural disaster. Careful counseling with borrowers should help determine whether their difficulties are related to a natural disaster, or whether they stem from other sources that must be addressed.”
As you can see from the above, the Department of Veterans Affairs encourages borrowers and lenders to work closely to determine what remedies might be available to a borrower who needs help after a disaster. According to VA Circular 26-16-22, VA encourages lenders to extend loan forbearance to those who might need it in the wake of a flood, wildfire, or other natural disasters. You may find it necessary to get this forbearance to avoid default or even foreclosure depending on the severity of the situation.
“Although the loan holder is ultimately responsible for determining when to initiate foreclosure, and for completing termination action, VA has requested that holders establish a 90-day moratorium from the date of a natural disaster on initiating new foreclosures on affected loans. VA regulation 38 CFR 36.4324(a)(3)(ii) allows additional interest on a guaranty claim when termination has been delayed due to circumstances beyond the control of the holder, such as VA-requested forbearance.”
Furthermore, “Because of the widespread impact of a natural disaster, holders should review all foreclosure referrals to ensure that borrowers have not been affected significantly enough to justify delay in referral. Any questions about impact should be discussed with the VA Regional Loan Center (RLC) of jurisdiction.”
Borrowers should not assume that a VA loan payment is not due when their property is damaged or even destroyed by a natural disaster. Instead, it’s crucial to contact the lender as soon as possible to see what help and assistance is available. You may find that assistance from FEMA, your lender, even state or local agencies may apply in your circumstances, but the first step will be getting in touch with your loan officer.
VA loan policy in these cases also extends to credit reporting on VA loans. The Department of Veterans Affairs is interested in making sure borrowers and lenders alike can work through a disaster-related issue without lasting negative effects to a financial bottom line. “In order to avoid damaging credit records of Veteran borrowers”, VA Circular 26-16-22 says, “servicers are encouraged to suspend credit bureau reporting on affected loans. VA will not penalize affected servicers for any late default reporting to VA as a result.”