VA requirements

VA Loan Reader Question: Foreclosed Properties

August 15, 2012

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VA Loan Reader Question: Foreclosed Properties

A reader asks, “My buyer has been told by his credit union that VA does not finance foreclosed properties in Alabama until the one year right of redemption is removed. Is this true? I can find nothing on the subject.”

This is a situation where a look at the VA loan rules won’t help–the VA Lender’s Handbook is written to establish guidelines and regulations for the VA mortgage loan guaranty program in general, but does not address all specific state laws or other legislation that might apply in one area but not another.

That’s one reason why the VA loan program is set up the way it is–VA loans must conform to local, state, and federal laws including areas such as appraisals or in this case, foreclosure guidelines. If there’s a state law prohibiting the financing of foreclosed properties in one state until a one-year right of redemption has passed, that law would apply directly to the VA home loan.

VA loan policies don’t override state laws–they work under their jurisdiction. A home that might pass a VA appraisal in one state might well fail in another due to the laws governing certain conditions such as septic, cisterns, flood zone determination or any other factor covered under the law.

The best advice a borrower or real estate agent can get in these circumstances is to check with the VA Regional Loan Center with jurisdiction in that area for advice on how to proceed; the VA RLC will have greater experience with local or regional issues that might affect a VA home loan application in that state.

You can find your VA Regional Loan Center here.

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