The VA has several different ways to help veterans get a loan to buy a house. But after a tragedy hits, such as Hurricane Harvey did in Texas and Irma is about to do in Florida, the VA has a special way to help veteran home-loan-borrowers keep their homes. And it has a very unassuming name: Circular 26-17-23.
VA circulars are additional policies and procedures to current VA home Loan regulations. They are issued for a limited time and cover specific areas of the country. They are not a policy for everyone with a VA home loan. VA can make these policies because the agency guarantees a part of each loan and so has a bit of weight to throw around when needed.
Specifically for Hurricane Harvey relief, this circular is a forbearance request – or as the VA puts it, “VA encourages holders of guaranteed loans to extend forbearance to borrowers in distress as a result of hurricane Harvey. Careful counseling with borrowers should help determine whether their difficulties are related to this disaster…” The circular then lists two regulations that lenders can use that will help VA borrowers.
VA has also requested that lenders put a moratorium on any foreclosures for 90 days from the first date of the hurricane. Because of the widespread impact of the hurricane and flooding, creditors are asked to review all foreclosure referrals to find borrowers in affected areas. And this should be enough to justify a delay in the referral.
The VA similarly requests that all late charges are waived and also encourages lenders to suspend credit bureau reporting on all affected loans. The VA also states that it will not penalize affected servicers for any late default reporting to the VA as a result.
The VA doesn’t issue circulars that often – only 9 in 2017 so far. Since August, five have been posted effecting areas in Iowa, Idaho West Virginia and Nebraska.
If you are in one of the listed areas, VA suggests you either bring a copy of the circular or refer to it specifically. A circular has not been posted for areas hit by Irma yet.