The U.S. Department of Veterans Affairs has announced its new COVID-19 Refund Modification option to assist veterans who require a significant reduction in their monthly mortgage payments due to COVID-19- and pandemic-related circumstances. In some cases, veterans can receive a 20% payment reduction—in others, the reduction can be even larger.
This new option offered by the VA is part of the of Biden-Harris administration’s expanded, government-wide effort to help homeowners retain their homes as they weather the economic challenges resulting from the ongoing pandemic.
Under the COVID-19 Refund Modification, the VA can purchase a veteran’s past due payments and amounts of unpaid principal, depending on how much assistance is necessary, subject to certain limits. Loan servicers also modify the loan.
“The COVID-19 Refund Modification provides veterans a lasting and affordable solution to keeping their homes and avoiding foreclosure,” said VA Secretary Denis McDonough. Denis McDonough “As our country recovers and rebuilds from the economic devastation brought on by the pandemic, VA and the Biden-Harris administration continue to make every effort to help Veterans keep a roof over their head as they get back on their feet.”
Like with VA’s COVID-19 partial claim option, the Veteran’s deferred indebtedness from a COVID-19 Refund Modification will be established as a junior lien. The junior lien will not accrue interest; will not require monthly payments; and will only become due when the property is sold, the guaranteed loan is paid off, or the guaranteed loan is refinanced. Veterans can get a COVID-related forbearance through Sept. 30, 2021.
The VA’s relief program comes after the Federal Housing Administration (FHA) issued updated options for homeowners with FHA-backed mortgages who have suffered financially as a result of the coronavirus pandemic. The FHA’s streamlined recovery options will help bring homeowners' mortgages up-to-date and keep people in their homes by allowing mortgage servicers to offer eligible homeowners who cannot resume making their mortgage payments a reduction in the principal and interest portion of their monthly payments.
“Immediately upon taking office, President Biden prioritized the nation’s public health and economic crises by passing the American Rescue Plan,” HUD Secretary Marcia Fudge said. “As Americans get back to work and our economy continues to recover, we are taking targeted steps to make sure homeowners impacted financially by COVID-19 have the support they need to remain in their homes. Housing affordability is at its worst and losing your home now would devastate households. These options for FHA borrowers will ensure equitable relief and recovery to people who need it most.”