VA loans

VA Extends Relocation Assistance For Short Sale, Deed-In-Lieu

May 28, 2014

VA Extends Relocation Assistance For Short Sale, Deed-In-Lieu

002-logoBack 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.

Do you have questions about VA home loans? Ask us in the comments section.

  1. Ann Roy

    We are looking to purchase a property, possibly a foreclosure, but before we go any further... can you explain the meaning of the term "Special Warranty Deed" and whether it makes a difference in a VA loan?

    • Joe Wallace

      "Makes a difference" in what way? Are you asking whether the loan would be approved or denied on the basis of the deed?

  2. carrie

    i filed bk 25 months ago, and then short saled by home which was included in my bk 13 months ago. I now have a mortgage for 13 months under a second chance mortgage with an interest rate of 8.9 is there any way i can use my va loan to refinance now or do i still have to wait another 11 months for two years after a short sale. Are there any programs or can the VA overridde anything

    • Joe Wallace

      It may depend on the lender--you would need to find a participating VA lender who could work with your circumstances. The VA can't force the lender to give you credit, but if you were current on your payments at the time of the short sale a lender might be able to work with your circumstances, depending on a variety of other factors. VA loans do permit refinancing from conventional to VA under the VA cash-out refinancing program.

Leave a comment

Your email address will not be published. Required fields are marked *