VA guidelines

What Is VA Loan Refunding?

July 29, 2011

What Is VA Loan Refunding?

If a borrower gets into trouble with his or her VA home loan, there are a number of foreclosure avoidance options available.

The VA and personal finance experts all agree that it’s best to act as soon as possible when having trouble with a home loan–the longer you wait to explore your options, the more in danger of loan default and/or foreclosure you become.

Some VA borrowers ask about something called VA refunding, which is where the Department of Veterans Affairs purchases a VA mortgage from the private lender.

This option is very rare and only used in cases, according to the VA official site, “when the veteran has had problems making the payments due to circumstances beyond his or her control, the problems have improved so that payments can now be made or will be in the near future, but the loan holder is not willing to wait before taking action to terminate the loan.”

Naturally this activity is not common, due in part to the fact that many lenders would prefer to work out such issues and continue getting loan payments on the home. But in the rare cases where it is needed, VA refunding could be an option for some home owners. Again, it is not available when the lender is willing to work out terms, forbearance or other foreclosure avoidance options.

VA refunding should not be confused with the VA compromise claim system, which is when a veteran wants to sell the property but the sale price of the home is not enough to cover the remaining loan amount. According to the VA, compromise claims are only possible when “the veteran has no other source of funds to complete the transaction, a VA compromise claim pays the difference.”

For compromise claims, the borrower becomes indebted to the government as a result of the claim and must pay off that debt before VA loan eligibility could be restored for another loan.

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2 Comments
  1. wayne taylor

    Good afternoon Sir, I am a veteran with a va mortgage loan with a private lender and I have became seriously disable and not able to work.The bank has informed me of a foreclosure sale on my house and I been trying very hard to get assist from the bank,but hasn"t been able to get good result and I really want and need to remaind in my home,that I have hard very hard for by serving my country and coummunity,If you could be in any assist to me please,please help me...

    • Joe Wallace

      Contact the Department of Veterans Affairs directly for assistance by calling 1-800 827-1000.

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