If You Have Trouble Making Your Payments 
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When Payments Cannot Be Made on Due Date
Even the most reliable borrowers sometimes fail to meet every
payment on its due date, and it is possible that there is good
reason for the failure, such as a reduction of earnings or illness
in the family.
If you find that you will be unable to make your payment when
it is due, by all means let your lender know and try to work out
a satisfactory plan to make up the payments missed.
The lender's friendly advice may be most helpful when you are
in a tight spot. Try to call the lender before it is necessary
that the lender write to you, but never fail to answer notices
or letters you may receive.
In emergencies, the first impulse sometimes is to borrow money
in order to keep the mortgage payments current. However, any new
loan must be paid off in a short time through burdensome installments,
and the extra strain often leads to more serious financial trouble.
It is far better to call the holder of your mortgage and frankly
explain your trouble. Put "all your cards on the table."
If you can, offer some plan for catching up on your payments and
request advice and guidancenot to ask for sympathybut to let the
lender know that you are anxious to keep your home, and sincere
in your desire to find a way out of your trouble. If you are willing
to cooperate, your sincerity will be appreciated. If possible,
the lender will help you develop a plan that will enable you to
keep your home.
Failure to cooperate with your lender may result in the loss of
your home by foreclosure of the mortgage. Besides causing the
loss of your home, this would naturally have a very bad effect
on your credit standing, and may even leave you with a debt. You
can, and should, avoid this.
When serious financial troubles arise, it is obvious that living
expenses must be cut to the bone. Most of the luxuries previously
enjoyed, and even some things which may have been thought of as
necessary, may have to be dropped for a time.
In order to help veterans in serious financial trouble, VA regional
offices have technicians available to conduct financial counseling.
This counseling is designed to help you avoid foreclosure. If
you want this assistance, contact your local regional office at
1-800-827-1000 and ask for the number to reach a Loan Service
Representative that can assist you.
Every homeowner dislikes the idea of losing a home. It is far
better to sell it of your own free will and perhaps save your
equity (amount by which value of property exceeds loan balance)
than to have it taken away by foreclosure. This could cause you
to lose all you have paid in, spoil your credit standing, and
possibly increase your present debts. Later, when your financial
position has improved, you may again be able to buy a home of
your own.
There's also another very good reason for doing everything you
can to avoid having your mortgage foreclosed. If your loan closed
before January 1, 1990, and if, as a result of foreclosure, VA
has to pay a claim to the lender under the guaranty, the amount
of such claim will be a debt you will owe to the Government. If
your loan closed on or after January 1, 1990, you will owe the
Government in the event of a default if there was fraud, misrepresentation,
or bad faith on your part.
Veterans who are behind in the payments due on their VA loans
are warned to be very careful before agreeing to any offers
by strangers to make up their back payments if the veterans will
"sign on the dotted line."
If such a proposition is made to you, ask the holder of your mortgage
or the Loan Guaranty Division of the nearest VA regional office
about it before you sign any paper. They will be glad to advise
you whether or not the offer is good and sound. VA cannot give
you legal advice or service, but it can advise as to dangerous
practices or as to the advisability of consulting an attorney.
In some parts of the country, veterans who are not familiar with
real estate transactions have been "taken in" by shady
deals usually called "milking" or "equity skimming."
In one form of this racket, the veteran, who is behind in VA loan
payments, is approached by unknown persons who offer to pay the
delinquent installments if the veteran will "sign on the
dotted line." The veteran later learns that he or she has
signed a deed and can get the property back only by signing another
contract at a much higher price. When the veteran finds the
stiff terms of the new contract cannot be met, legal action is
started to take possession of the veteran's home.
In other cases, a housing development will be visited to learn
whether veterans are having trouble meeting their VA loan payments.
If the veterans are having trouble, these individuals offer each
veteran a small amount of cash for the equity in the property,
plus the privilege of buying another home in a lower cost neighborhood
on a land sales contract. The veteran agrees to give possession
in 60 days and "signs on the dotted line," not knowing
that he or she is signing a deed to the property. When the 60
days are up, the veteran is told that no houses are available
in the lower cost development. The veteran is then put out of
the home.
A third method is used in States where there is a long foreclosure
or mortgage redemption period. A veteran, falling behind in home
loan payments, is offered a small sum of cash for a "quit
claim" deed to the property with a promise that all back
payments will be made up. The veteran moves out believing that
the loan will be brought up to date. Instead, the individual holding
the quit claim deed rents the house without making up back payments.
Most of the money received as rent is profit until foreclosure
is final, and the veteran, not knowing what has happened, may
still owe the lender, and quite possibly, the U.S. Government
if VA pays a claim on the loan.
Many types of these shady deals are used in different parts of
the country, depending on how these individuals can misuse State
and local laws. Although these practices may be legal, they are
considered unethical by most mortgage lenders and real estate
brokers.
You will be protecting your own interests and doing other veterans
a service if you report any such propositions to the holder of
your mortgage and to the nearest VA regional office.
If you decide to sell your home and the VA loan is not paid in
full as part of the sale, you should protect yourself by
obtaining a release of liability from VA prior to completing
the sale. You should also be aware that if your VA loan closed
on or after March 1, 1988, it is unlawful to allow someone to
take over your loan without the prior approval of VA or your lender.
Contact VA or your lender to find out how to apply for approval
of your sale and/or a release of liability.
Please send your comments on this page to VA Loan Guaranty Service.
Last updated March 15, 1996. LJK
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