real estate VA loans

VA Compromise Claims

January 19, 2011


VA Compromise Claims

In recent posts, we’ve discussed a few ways to avoid foreclosure on a VA home loan. One of the ways mentioned is to simply sell the home to a qualified buyer. VA borrowers can sell their home to veterans and civilians alike–anyone with the right financing can make an offer and close the deal.

But in today’s housing market, the seller isn’t always guaranteed to get a sale price that covers the entire amount of the VA home loan. What does a seller do if they get a legitimate offer they need to accept but won’t pay off the VA mortgage loan in full?

Borrowers who are in serious financial trouble may wish to ask the VA about an option called the VA Compromise Claim. According to the Department of Veterans Affairs,  when “…the veteran has no other source of funds to complete the transaction, a VA compromise claim pays the difference.”

As that quote indicates, not all sellers are eligible to get a VA Compromise Claim. The homeowner must show financial hardship and demonstrate a legitimate need to apply for the claim.

In cases where the VA does approve a compromise claim, the seller’s ability to apply for a new VA home loan is affected–the VA has taken a loss on the mortgage, and according to VA guidelines, “the veteran usually remains liable to VA for the amount of the claim payment.”

This means that until the claim has been repaid, the VA may not restore VA loan eligibility. But since a VA compromise claim debt is often less than if the home had gone into foreclosure.

For those trying to sell a home to avoid foreclosure, the VA Compromise Claim is a much better route to take–less time and money is required to pay off the debt and the buyer can their eligibility restored much sooner under the right circumstances.

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