VA loans

VA Relocation Assistance for Short Sale and Deed-In-Lieu of Foreclosure

November 13, 2018


VA Relocation Assistance for Short Sale and Deed-In-Lieu of Foreclosure

No VA borrower wants to think losing their home is a possibility, but in some cases it’s unavoidable due to personal financial issues, job loss, medical issues or related problems. Foreclosure is a difficult process–it changes credit ratings, requires a waiting period before the VA borrower is eligible to try to buy a home again, and can lower the property value of the home being foreclosed upon.

But there are alternatives to foreclosure–even though some of those alternatives still mean the buyer must give up the home purchased with a VA guaranteed loan, they are preferable to foreclosure.

The Department of Veterans Affairs prefers to offer help to homeowners and financial incentives to lenders to encourage all possible alternatives to entering foreclosure procedures. According to the VA official site, “For over 15 years, VA has paid incentives to servicers successfully completing alternatives to foreclosure, and beginning in 2008, VA started paying incentives to servicers for successful repayment plans, forbearance agreements, and loan modifications.”

Recent developments have given homeowners and loan officers more options when it comes to processing a VA short sale or deed-in-lieu of foreclosure. Homeowners can now take advantage of relocation assistance when involved in a VA short sale or deed-in-lieu.

Recent changes to VA regulations state, “Effective immediately, 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 Deed-In-Lieu”.

The VA rules also point out that this relocation assistance is to be listed as a reimbursable expense on the bank’s claim. Regulations prohibit the buyer from getting cash proceeds from a short sale, but the VA does not consider the relocation assistance money to be part of the cash proceeds of the sale.

Relocation assistance is helpful in many ways, and not just to the homeowner. Deed-in-lieu and short sale agreements require the home to be presented in good condition (“broom clean” is the term used in the VA lender’s handbook) and under these arrangements the home doesn’t sit vacant for extended periods of time, subject to vandalism and other issues that can lower property values. The former owner gets some financial help in the process and avoids having a foreclosure listed in his or her credit history.

  1. Trina Thomas

    My comment is I did not use VA we have a conventional loan. We purchased the home in 2007 and now my husband has orders to relocate to Maryland. We do not qualify for HAP because the time we purchased it. The house has been on the market for 80 days some traffic but no offers. What is out there to help the military families that are under water but can't afford to pay mortgage. We are current on our mortgage and never been late. Is there any help for us? Thank you Trina Thomas

    • Joe Wallace

      Hi Trina...have you considered applying for VA refinancing? There are VA refi programs for conventional mortgages that could help if you qualify.

    • Timothy M. White

      HI Trina Thomas, Your husband can use the Civil Servicemember Act to relief you guys from your mortage obligation. This Act requires the lender to relief you of your obligation by law. Please google it.

      • Joe Wallace

        Actually, it's not quite that simple. According to the act, the SCRA provides protection for debts and obligation incurred prior to active duty. That is the operative part of the SCRA for real estate and installment contract issues.

  2. Jeff

    I have been unemployed for a year and just found new employment. The new job requires us to move to another state and will need to vacate the property - I have spoken to the bank and inquired about the "Deed of Lieu". They are sending out an appraiser. Do I need to request the $1500 assistance? Also what are my options post the "Deed of Lieu"? Can I get another loan at my new location? What is the hit on credit? Any advice/information is greatly appreciated! Thanks Jeff

    • Joe Wallace

      Hi Jeff, thanks for your question. Yes, if you qualify for relocation assistance you will need to apply for it--the benefit is not automatic. On the deed-in-lieu question, the VA official site FAQ ( says: "Q: My prior loan was foreclosed on, or I gave a deed in lieu of foreclosure, or the VA paid a compromise (partial) claim. Although I was released from liability on the loan and/or the debt was waived, I am told that I cannot have my used eligibility restored. Why? A: In either case, although the veteran’s debt was waived by VA, the Government still suffered a loss on the loan. The law does not permit the used portion of the veteran’s eligibility to be restored until the loss has been repaid in full."

      • Jeff

        Joe Thank you for the response. I will utilize the information to request the assistance. Can you share any other information regarding the "Deed in Lieu"? How much it can affect my credit going forward? How is it viewed by creditors? Is it different in our current National situation? Lastly, what is the difference between "Deed in Lieu" and Foreclosure? Thank you Jeff

        • Joe Wallace

          In some ways deed-in-lieu has the same effects on the borrower as foreclosure in that the VA requires the borrower to wait two years before applying for a new VA loan (assuming the borrower has paid any indebtedness to the VA for the deed-in-lieu). Some lenders require a three-year waiting period before a new loan, but others, like, are willing to work with borrowers who have shown good credit habits since the deed-in-lieu and have an improved credit score.

  3. Timothy M. White

    Joe, How will the bank determine which process is convienent (short sale or deed in lieu? Should I mention to the bank that I have been talking to a realtor in regard to a short sale?

    • Joe Wallace

      Hi Tim--I couldn't make a prediction on what the lender might do, there are too many variables which are situational to make that call. Every lender is different and may make the call based on details specific to your situation.

  4. Karl

    My home purchased in 1999 was a V A loan. It was awarded to my ex wife in divorce in 2008. She passed away in 2011. The home is still in my name. Try to sell it for the past 7 months and cant get close to break even There's 96000 left on the loan. Im paying the morgage on this home and my new home. Cant afford it to pay on the old home any more. Is this a a deed in liu situation.

    • Joe Wallace

      These types of decisions are major ones--it's best to discuss your situation directly with a VA counselor first before settling on a course of action. There may be state or local programs that could help or a short sale might be an option, but you should contact the VA directly at 1-800-827-l000 before making any decisions.

  5. walter

    I have a house in Florida and it is a VA loan, I am stationed in Virginia, my renters trashed my house and it is currently on the market and has been for 3 months. We have had no offer and not really any traffic, we owe $242,000 and have the house listed for $109,000. We have been borrowing money from family to make it every month since the renters quit paying and were kicked out. We have drained our savings and live payday to payday, I want to give the house to the bank. I am not concerned with my credit as credit does not feed my children or pay our rent. Should I stop making the payments? The bank will not even talk to me because we are current.....

    • Joe Wallace

      Absolutely not. You should not stop making your payments--instead, call the VA directly and request assistance in your situation. If you walk away from the loan you lose any chance you might have to get forbearance, refinancing, loan modification or other help. Also, you don't need to feel limited in your refinancing options to just asking your current lender--any participating VA lender can agree to refinance your loan with a VA Interest Rate Reduction Refinancing Loan or other VA refinancing options. Call the VA directly at 1-800-827-1000 for help.

  6. Cher

    Hi there. We are a relocating military family under contract to sell our home with a VA Compromise Sale through GMAC. The bank negotiator accepted the offer that we obtained on the property but has firmly rejected any relocation assistance. Our agent tried for the $3000 HAFA and/or the $1500 VA Relocation Bonus on the Hud-1. Can they do this and do we have any options? Thank you

    • Joe Wallace

      I would advise you to contact the VA directly for advice on this situation by calling 1-800-827-1000.

  7. James Whitman

    I am facing foreclosure with my VA loan and heard about the relocation assistance. I called the regional office as well as the local office and both said that it is not offered. I also spoke with my mortgage broker and they echo the same answer. Both of them suggested we contact any charity organization to help move. Believe when I say this that I laid it on the line expressing my situation and having just adopted two grand children, we really don't want to go homeless. Still, no help from either source. Has something changed recently we all don't know about concerning this relocation allowance?

    • Joe Wallace

      Hi James, thanks for your question. According to the information from VA, the relocation assistance is available to those facing a short sale or Deed-In-Lieu. Foreclosure is not specifically mentioned. VA Circular 26-11-1 states, "Effective immediately, 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 (deed-in-lieu)."

      • James Whitman

        Thank you; as of this writing I am(will) considering a deed in lieu.

  8. Theresa

    I was permanetly disabled 3 years ago and i am unable to work. My husband is currently going through the med board and will be medically retired due to injuries he received over seas. We have a VA loan and our current but once he is retired we will no longer be able to afford the house. We are upside down in this home because of the current market as it is and even if we sell we wont be able to get enough to pay off what we owe. We are looking at trying to due a Deed in Lieu and move back home near family. My question is can we still purchase another home if we do a Deed in Lieu? Not with a mortgage, We can purchase my grandma's home for a small amount in cash are we allowed to do this or do we have to wait a certian amount of time? If we are allowed to buy with cash can they put a lein on the new house?

    • Joe Wallace

      Couldn't speak to what another bank might or might not do, but if you are not applying for credit for a new home purchase but paying cash instead, the arrangements would be between you and the seller. It might be best to speak with a VA rep or lawyer regarding the other concerns you have re: the deed-in-lieu and what might happen as a result.

  9. Janice Mohler

    We are in the proces of a va deed-in-lieu, which is to close around Feb.18,2013. My question we started it befor we moved but moved before it closed because of my health,but couldn't afford to move all of our furniture until closing, would we still qualified for the 1500 moving expense?

    • Joe Wallace

      Contact the VA directly to see if your circumstances qualify. You can contact them at 1-800 827-1000.

  10. Christine Johnson

    We are approved for a short sale and are about to close in a week. My question is we have sent the lender the VA Circular 26-11-1 dated 1/6/11 stating the $1500 in relocation assistance. The lender has responded and said "The borrower does not qualify for any relocation assistance as they are greater than 45 days past due on their mortgage payments." Does this have anything to do with the relocation assistance, the VA Circular does not state anything on being current on morgage payments or 45 days late. I have called the lender as to where they came up with this and to show me documentation on where that says you can't be 45 days late for relocation assistance. They said they sent the information to the liquidation processor and they received it and they forwarded it to the negotiator, and the negotiator sent it back stating the above statment on the 45 days. So we are waiting on information back on where they received the information, but have you seen this before, and what are your thoughts. Thank You

    • Joe Wallace

      You should contact the VA directly and ask for assistance in this matter--call them at 1-800 827-1000.

      • Christine Johnson

        I have contacted the VA and they said: Mr. blank also said that he had requested for Wells Fargo to consider him for a relocation allowance but was advised by the Wells Fargo Representative that they could not grant hit the allowance money, that VA had to approve the relocation allowance. I am not aware that VA has to approve the allowance but it is up to Wells Fargo to review and pay the allowance to Mr blank, if you find him entitled. I am requesting you to review Mr. blank for the relocation allowance and to advise Mr. blank of your findings. Please refer to VA Circular 26-11-1 dated 1/6/11 for more information on paying this allowance From the Va loan officer. It is not up to the VA it is up to the lender and negotiator, but we are refrencing the Circular 26-11-1.

  11. Melodie Ostman

    I also had the same experience with Wells Fargo. They refused to pay the relocation assistance. They said I did not qualify because I was 45 days past my mortgage payments. I contacted the VA and they confirmed that there are no such requirements. After contacting WF again, they then told me that their legal department was advised by the VA that the relocation assistance was to be paid early on in the process. The VA representative tried to contact Wells Fargo but WF never responded. In my last communication with Wells Fargo, they told me that if I didn't finalize the sale according to the agreement, which did not include any relocation assistance, that they would proceed with foreclosure. I guess if you have the kind of money that Wells Fargo does, then you have enough power to do what you want. It seems they are even above the government!!!

  12. Bruce Stotts

    My home is in short sale with wells fargo and I am told by them that I do not qualify for any relocation assistance. Part of the loan was through the VA $30,000 they are telling me it was a VA Loan but the total on the loan was 164,000. I have become behind on the mortgage payments due to losing my job in 2011 and then letting my son in law take over the mortgage and live in the home. My wife and I moved out and went to a different state in search of work. my son in law lost his job with the government and got way behind on the mortgage forcing me to come back an put up for sale to avoid forclosure. I am working but living day to day and trying to relocate before the short sale goes through but my finances are not enough for the relocation do I qualification? It is past 60 days

    • Joe Wallace

      You will need to contact the VA directly for assistance by calling 1-800 827-1000.

  13. Justin Urrutia

    I was forced to do a Deed in lieu of forclusure which I thought was completed back in 2011. I recieved PCS orders to a location that nearly cut my pay by 1/4 and I could not afford rent and house payments together. After almost exhausting my savings trying to find renters I chose to contact a law firm to help me with a short sale. Again the market did not work in my favor and after a year of attempting to short sale the property my law firm explained that a deed in lieu would be my best option. After completing the deed in lieu i was told the remainder of my balance would be taken from my VA benefit. After thinking the whole process was over for close to 3 years I recieved a late payment yesterday (didnt recieve anything until April, with late fees since September!) for roughly 60K!! Not really sure what to do and Ive contacted the law firm but they have not yet returned my call. Any advice or insight would be appriciated.

    • Joe Wallace

      Unfortunately we can't offer legal advice but you can contact the VA directly at 1-800 827-1000 for assistance with your specific situation.

  14. tyrone m johnson

    I been trying to get my loan approved, since 2007. I was transferred from Florida to Virginia, could not handle both house payment, so Bank allowed to do a short sale, but they never would take any of the Offers. So I finally to off market in 2010. Bank then decided to do a Foreclosure, I was able to stop it with a attorney help as it on the Court house step ready for sale. Finally the Bank allowed to do another short sale, 2 offer received, one walk due to long wait; 2 one good offer, but was not enough to pay HOA back fees $16,000 they just keep adding on interest. Put in for Deed In Lieu in 16 Oct 13; after sending all form and bank statement; Well Fargo Bank finally came back 10 May 14 only to Disapproved. Do not know when to turn any way to give house back to VA and walk away. Thanks

  15. Anthony Bassett

    I have a VA loan and a lein on the property (Home Equity loan). The house appraised for 199.9 but the house will not sell for more than 170. VA disapproved a short sale because it must meet 85.5 percent of the total owed which is 206K due to the equity loan on top of the mortgage loan. I decided to do a deed in lieu however was told I must pay off the lien before a deed in lieu can happen (71K). I cannot keep paying 2400 a month in morgages when I can rent for 700 just a block around the corner for a bigger house. Is there any other way to get away from this bad situation without forclosure?

    • Joe Wallace

      Contact the VA for advice at 1-800 827 1000 to explore your options--you and the VA can work with your lender in some cases to arrive at a solution to avoid foreclosure, or at least get you some advice on your options.

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