The Department of Veterans Affairs is reaching out to VA-approved lenders in the wake of a high number of tornado outbreaks in the U.S. According to the VA official site at VA.gov, “VA encourages holders of guaranteed loans to extend every possible forbearance to borrowers in distress as a result of the recent tornado outbreaks.”

The VA also has some guidance for lenders about using such forbearance, stating “Careful counseling with borrowers should help determine whether their difficulties are directly or indirectly related to these storms, or whether they stem from other sources that must be addressed.”

Federal law allows lenders to prevent default in appropriate cases by applying pre-payments. According to VA Circular 26-11-6, “This means that if a borrower has been making additional principal payments over a period of years, the principal balance may be increased up to the scheduled balance and the increase applied toward regular installments.” This is similar to what the VA recommends for those affected by floods in federally-declared disaster areas.

The VA also encourages lenders to put a moratorium on foreclosures in the areas hit by a tornado in 2011. The VA has requested a 90-day hold on foreclosures on loans affected by the disaster. According to the VA, “VA regulation 38 CFR 36.4324(a)(3)(ii) allows additional interest on a guaranty claim when eventual termination has been delayed due to circumstances beyond the control of the holder, such as for VA-requested forbearance.

The VA’s initial request for this forbearance applies to those with loans in federally declared disaster areas, but according to the Department of Veterans Affairs, “VA believes should include areas declared by FEMA as eligible for public assistance as well as those areas eligible for individual assistance. Because of the widespread impact of the tornadoes, holders should ensure that all foreclosure referrals nationwide during the moratorium are reviewed prior to initiation to ensure that borrowers have not been affected significantly enough to justify delay.”

VA borrowers who are affected by a tornado or other natural disaster should immediately contact the lender and the VA Regional Loan Center with jurisdiction in that area for help, advice and information on insurance claims and other vital details.

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