Hurricane season has come and gone but the latest natural disaster to hit homeowners is Thomas Fire ravaging Southern California. The extent of its damage and costs that continue to rise prompted the Veterans Affairs to roll out special relief for VA homeowners affected by California wildfires.
This special relief ranges from a temporary stop to foreclosure to permanent home loan modifications. Learn more about the VA’s mortgage assistance for VA homeowners affected by California wildfires in its circular dated December 12, 2017.
California Wildfires Trigger Mortgage Assistance
It’s not surprising to hear of mortgage delinquency rates rising after a natural disaster. Florida and Texas, for instance, each saw a surge in cases of delinquencies in areas devastated by Hurricanes Harvey and Irma per Black Knight’s October data.
This time around, the VA is encouraging loan servicers to lend a hand to VA loan borrowers who are or may be in distress because of the California wildfires.
VA Special Relief Options
Headlining the VA’s latest special relief announcement is forbearance, which is temporarily putting a stop on monthly loan payments of distressed borrowers.
VA loan servicers can put to use certain provisions of the Code of Federal Regulations as they relate to VA guaranteed loans for borrowers seeking forbearance. They can, for instance, reapply prepayments to cure a loan default or prevent it.
Indeed, the VA recommends that there be proper counseling to determine if a homeowner’s struggle with his/her mortgage stems from the natural disaster or from some other source.
Another option that can be extended to affected homeowners due to the California wildfires is loan modification. Relevant federal statutes allow VA loans to be modified without prior VA approval if it meets the conditions.
This disaster loan modification has been recently unveiled by the VA in the wake of hurricanes and is applicable to homeowners beset by California wildfires.
While forbearance is a temporary solution to mortgage payment problems, the VA disaster loan modification provides a permanent payment relief to delinquent borrowers.
Each affected borrower who is delinquent on his/her VA loan is encouraged to apply for this permanent relief. Moreso that the VA is calling on loan servicers to solicit requests for loan modifications from distressed borrowers up to a year since the declaration of a natural disaster.
3. A Temporary Stop to Foreclosure
Delinquency if not mitigated on the onset could lead to default and ultimately foreclosure. It’s up to the lender/holder of the loan to initiate foreclosure proceedings on a home.
For affected homeowners of California wildfires, the VA asked holders of its guaranteed loans to enforce a 90-day moratorium since the date of the disaster to initiate new foreclosures on loans affected by the wildfires.
The VA, however, has an additional task for loan holders to review foreclosure referrals given the scope of Thomas Fire. Under current mortgage rules, a lender is required to review a borrower’s application for a loan modification within 120 days of delinquency before referring his/her case for foreclosure.
This being said, the VA wants lenders to ensure that only those who were significantly affected by the disaster will be entitled to a delay in the foreclosure process.
Other VA Assistance
Affected homeowners may also receive this special relief:
- Their servicers may waive late charges on their loans.
- Credit reporting bureaus may temporarily not report loan payment transactions of VA borrowers.
- National Guard members, whose active duty in the recovery efforts may result in financial difficulties, may be entitled to special forbearance.
If you are one of those affected by the wildfires, speak with your lender/loan servicer today.