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VA Offers Vets New Options to Avoid Foreclosure

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DISCLAIMER: As the COVID-19 public health situation evolves, new regulations are being continually issued. This page/story/information may not include the most recent information.

By Eric Peck: July 26 2021

The U.S. Department of Veterans Affairs has announced its new COVID-19 Refund Modification option to assist veterans who require a significant reduction in their monthly mortgage payments due to COVID-19- and pandemic-related circumstances. In some cases, veterans can receive a 20% payment reduction—in others, the reduction can be even larger.

This new option offered by the VA is part of the of Biden-Harris administration’s expanded, government-wide effort to help homeowners retain their homes as they weather the economic challenges resulting from the ongoing pandemic.

Under the COVID-19 Refund Modification, the VA can purchase a veteran’s past due payments and amounts of unpaid principal, depending on how much assistance is necessary, subject to certain limits. Loan servicers also modify the loan.

“The COVID-19 Refund Modification provides veterans a lasting and affordable solution to keeping their homes and avoiding foreclosure,” said VA Secretary Denis McDonough. Denis McDonough “As our country recovers and rebuilds from the economic devastation brought on by the pandemic, VA and the Biden-Harris administration continue to make every effort to help Veterans keep a roof over their head as they get back on their feet.”

Like with VA’s COVID-19 partial claim option, the Veteran’s deferred indebtedness from a COVID-19 Refund Modification will be established as a junior lien. The junior lien will not accrue interest; will not require monthly payments; and will only become due when the property is sold, the guaranteed loan is paid off, or the guaranteed loan is refinanced. Veterans can get a COVID-related forbearance through Sept. 30, 2021.

The VA’s relief program comes after the Federal Housing Administration (FHA) issued updated options for homeowners with FHA-backed mortgages who have suffered financially as a result of the coronavirus pandemic. The FHA’s streamlined recovery options will help bring homeowners’ mortgages up-to-date and keep people in their homes by allowing mortgage servicers to offer eligible homeowners who cannot resume making their mortgage payments a reduction in the principal and interest portion of their monthly payments.

“Immediately upon taking office, President Biden prioritized the nation’s public health and economic crises by passing the American Rescue Plan,” HUD Secretary Marcia Fudge said. “As Americans get back to work and our economy continues to recover, we are taking targeted steps to make sure homeowners impacted financially by COVID-19 have the support they need to remain in their homes. Housing affordability is at its worst and losing your home now would devastate households. These options for FHA borrowers will ensure equitable relief and recovery to people who need it most.”

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*We are not a loan company

Participation in Debt Management Plan may affect your credit rating or credit score. Non-payment of debts may lead creditor to increase finance and other charges or proceed with further collection activity, including litigation.

Here at Credit Advisors our certified debt counselors can help you with credit card debt relief, credit card consolidation, consumer credit counseling, bankruptcy certification, bankruptcy questions and all other kinds of help with debt. If you want to get out of debt and have been considering debt settlement, credit management, debt management, credit repair, bankruptcy or consolidation, we provide the best debt counseling and steer you toward a plan that is in your best interest. We are not a loan company, debt settlement company or credit repair organization. We provide credit counseling and plans that work to get you on the road to debt free living.

Michigan Disclosure

For information regarding the principal officers for Credit Advisors, Inc., please visit the
Nebraska Secretary of State

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Michigan license number:   DM-0016282 Available to the public and licensed in Michigan.

Section 13(1)  When a licensee establishes a debt management plan for a debtor, the licensee may charge and receive an initial fee of $50.00

Section 13(2)  A licensee shall attempt to obtain consent to participate in a debt management plan from at least 51%, in number or dollar amount, of the debtor’s creditors within 90 days after establishing the debt management plan. If the required consent is not actually received by the licensee, the licensee shall provide notice to the debtor of the lack of required consent and the debtor may, at its option, close the account. If the debtor decides to close the account, any unexpended funds shall be returned to the debtor or disbursed as directed by the debtor.

Sec. 14. (1) A contract between a licensee and debtor shall include all of the following:

(a) Each creditor to which payments will be made and the amount owed each creditor. A licensee may rely on records of the debtor and other information available to it to determine the amount owed to a creditor.

(b) The total amount of the licensee’s charges.

(c) The beginning and termination dates of the contract.

(d) The principal amount and approximate interest charges of the debtor’s obligations to be paid under the debt management plan.

(e) The name and address of the licensee and of the debtor.

(f) Any other provisions or disclosures that the director determines are necessary for the protection of the debtor and the proper conduct of business by a licensee.

Sec. 18. (1) In addition to the fee described in section 13(1), a licensee may charge a reasonable fee for providing debt management services under a debt management plan. The fee under this subsection shall not exceed 15% of the amount of the debt to be liquidated during the express term of the plan.

(2) A licensee may offer a debtor the option to purchase credit reports or educational materials and products, and charge a fee to the debtor if the debtor elects to purchase any of those items from the licensee.  Fees charged under this subsection are not subject to the 15% limitation on fees described in subsection (1).

(3) Except for a cancellation described in subsection (4), in the event of cancellation of or default in the performance of the contract by the debtor before its successful completion, a licensee may collect $25.00 in addition to any fees and charges of the licensee previously received by the licensee. This $25.00 fee is not subject to the 15% limitation on fees and charges under subsection (1).

(4) A contract is in effect when it is signed by the licensee and the debtor and the debtor has made a payment of any amount to the licensee. The debtor has the right to cancel the contract until 12 midnight of the third business day after the first day the contract is in effect by delivering written notice of cancellation to the licensee. A cancellation described in this section is not subject to, and a licensee shall not collect, the fee described in subsection (3).

(5) If a debtor fails to make a payment of any amount to a licensee within 60 days after the date a payment is due under a contract, the licensee may, in its discretion, cancel the debt management contract if it determines that the plan is no longer suitable for the debtor, the debtor fails to affirmatively communicate to the licensee the debtor’s desire to continue the plan, or the creditors of the debtor refuse to continue accepting payments under the plan.

(6) A licensee shall not contract for, receive, or charge a debtor an amount greater than authorized by this act. A person that violates this subsection, except as the result of an inadvertent clerical or computer error, shall return to the debtor the amount of the payments received from or on behalf of the debtor and not distributed to creditors, and, as a penalty, an amount equal to the amount overcharged.

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