VA Extends Relocation Assistance For Short Sale, Deed-In-LieuBack in 2011, the Department of Veterans Affairs issued VA Circular 26-11-1, which announced the availability of relocation assistance funds to VA borrowers who were involved with short sales or deed-in-lieu of foreclosure transactions.
According to the VA circular, “VA is authorizing servicers to advance $1,500 in relocation assistance to borrower occupants who complete a short sale with a VA compromise claim or who execute a DIL. VA will treat this as a reimbursable expense that may be included as a part of the eligible indebtedness on the basic claim event in VALERI; it will not be considered as proceeds to the owner from a short sale of the property, which is prohibited.”
Additionally, “The amount of the indebtedness reimbursable on a claim after crediting it with the net value of the property (or the short sale proceeds, if larger) is limited to the maximum guaranty on the loan plus the cost of liquidation appraisal(s). The servicer must waive any amount on the loan not covered by the sum of the VA guaranty claim amount and the greater of the net value or sale proceeds.”
The rationale for this assistance is simple. “Relocation assistance can provide necessary funds to conduct a move or pay for lodging for borrowers who are faced with the imminent loss of their home. For servicers, the transfer of ownership via DIL or short sale is typically shorter than a foreclosure time period, and the property is left in better condition via DIL, which preserves the condition and value of the property by minimizing the time it is vacant and subject to vandalism and deterioration. In addition, these options generally provide a substantially better outcome than a foreclosure sale for borrowers, investors, and communities.”
The VA circular that announced this relocation assistance was set to expire this year, but the Department of Veterans Affairs has announced the new “rescission date” of the original circular won’t be until January 2016. If you are interested in learning more about this relocation assistance option, speak to your loan officer for more information.
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