On July 23, 2021, the Office of Veterans Affairs (VA) released Circular 26-21-13, which announced a new temporary modification called COVID-19 Refund Modification. The COVID-19 Refund Modification and the COVID-19 Veteran Partial Payment Option are now designed to help borrowers struggling financially with COVID-19 to upgrade their mortgages and avoid foreclosures.
COVID-19 return modification
Under the new COVID-19 refund modification, veterans can get a 20% discount or more depending on their circumstances. Under this new modification option, VA will purchase late payments and outstanding principal (up to 30% of the outstanding principal), which will then be secured by the junior property bond. This junior lien does not charge interest and does not require any payments prior to maturity or early redemption.
The remaining balance of the loan will also be changed and the support staff can capitalize any debt in excess of 30% of the outstanding principal balance into a modified loan if necessary. The loan term can also be extended up to 10 years and it must have a fixed interest rate. No trial payment plan is required to change. The COVID-19 refund modification will be available from July 27, 2021 to October 28, 2022.
VA Partial Benefit Program
IN VA Partial Benefit Program (VAPCP) was announced at the end of May and shares several similarities with the new COVID-19 return modification. Both programs are available from July 27, 2021 to October 28, 2022. Under this stand-alone temporary program, Virginia will pay off the abstinence debt and create a second interest-free property mortgage for up to 30% of the loan amount. UPB. The second mortgage will not be paid until the home is paid off, refinanced, or sold. This program allows the borrower to settle late payments affecting their credit and no longer accumulate interest or penalties for missed payments.
VA requires a borrower to complete all required paperwork within 120 days after their COVID-19 waiver has ended in order to be eligible.
Patience remains available
Veterans can also request a COVID-19 waiver by September 30, 2021.
© 2021 Bradley Arant Boult Cummings LLPReview of National Legislation, Volume XI, Number 215