When borrowers receive their VHDA loan, they also receive our Guiding Principles of Homeownership, a booklet designed to answer questions about the servicing of their loan. In this booklet we encourage homeowners to contact us as soon as they realize they're having financial difficulties preventing them from making their mortgage payments.
VHDA has a sincere commitment to helping our homeowners experiencing difficulties beyond their control remain in their homes. This commitment is why we strive to help every customer who requests loss mitigation services. If their loan is serviced by VHDA, we identify what type of loan they have—FHA, VA, Rural Housing Services (RHS) or Private Mortgage Insurance (PMI). Then, rather than taking a “cookie cutter” approach, we customize our loss mitigation efforts to fit each particular borrower’s circumstances. For example, our staff will actually go over a customer’s financials with them.
If their loan is in default, we follow the loss mitigation guidelines for their particular type of loan. We also offer a number of options, including:
- Repayment plans
- Special forbearances
- Short sales
- Mortgage modifications
- Partial claims
- Deeds in lieu of foreclosure
In addition, VHDA’s Loss Mitigation staff is empowered to offer various types of flexibility, depending on required timeframes and specific customer circumstances.
What if loss mitigation can’t help?
In certain circumstances, if the borrower’s debts far exceed their income, our only recourse is to recommend the customer sell their house through the Short Sale Loss Mitigation program, and/or offer them a deed in lieu of foreclosure. (A short sale occurs when a property is sold by the customer, and VHDA—or the insurer/guarantor—agrees to accept less than what is owed on the loan as payment in full.)
If the loan is in the loss mitigation process, it remains so until a decision has been made regarding a solution for the customer. If a solution isn’t possible, then there’s no alternative but to put the loan in foreclosure.
What is VHDA’s BAP program?
VHDA’s goal is to always bring the borrower to a position of positive cash flow per month. Our Borrowers Assistance Program (BAP) is a new tool that offers loan modifications to borrowers who may not be eligible for standard loss mitigation options. This program is designed only for conventional VHDA loans with no insurance or guaranty.
For these specific loans, our policy is to:
1. Review the payment history of borrowers.
2. Obtain financial statements from the borrowers.
3. Pull the credit reports.
4. Determine if we have all the data and what type of assistance is needed.
If necessary, these modifications can include interest rate reductions and extending the term of the loan. Reduced interest rate payments are considered a deferment of interest, not a second mortgage. VHDA’s BAP policy temporarily reduces the interest rate on loans to a floor amount acceptable to VHDA’s bond program—currently that rate is 4 percent. This results in a 36-month interest deferral. The deferred interest is only due and payable if the property is sold or the loan pays off.
Why isn’t VHDA participating in the “Making Home Affordable” program? Since we don’t originate or service Fannie Mae or Freddie Mac loans, VHDA isn’t eligible to participate in this program.