VA Borrowers Facing Foreclosure to Get Cash Relocation Assistance

01/21/2011 06:06 pm ET | Updated May 25, 2011
  • Chris Birk Content Director, Veterans United; Author, 'The Book on VA Loans'

Veterans who lose their homes to a short sale or a deed-in-lieu of foreclosure can now receive up to $1,500 in relocation assistance.

The VA has for years incentivized mortgage servicers to work with veterans on the edge of default. Now, the agency has directed its approved servicers to provide that cash advance to borrowers who use a deed-in-lieu of foreclosure or who complete a VA compromise claim to unload their short sale.

The directive went into effect on Jan. 6. Borrowers can use the money to cover moving expenses or to simply pay for lodging while they deal with the pending loss of their home.

"VA has a longstanding policy of encouraging servicers to work with veteran borrowers to explore all reasonable options to help them retain their homes or, when that is not feasible, to mitigate losses by pursuing alternatives to foreclosure," according to the two-page VA circular released on the subject. "These options generally provide a substantially better outcome than a foreclosure sale for borrowers, investors, and communities."

Borrowers won't receive that assistance as part of sale proceeds. The VA plans to reimburse servicers, who can secure a reimbursement up to the maximum VA guaranty along with any costs associated with resale.

The measure comes in part as a cost efficiency tool. Short sales and deeds-in-lieu of foreclosure take considerably less time and money to complete than the traditional foreclosure process. The odds are also better that the property will remain in good shape.

Servicers are expected to notify borrowers of their options regarding foreclosure.

Furthermore, the VA continues to push servicers to follow Home Affordable Foreclosure Alternatives (HAFA) procedures regarding potential short sales, mostly by halting any foreclosure proceedings while borrowers evaluate their options.

Despite the economic environment, VA loans as a whole continue to thrive in the face of foreclosure. These government-backed loans have the lowest rate of foreclosure among major lending programs, a staggering fact considering that 90 percent of VA loans come with no down payment.

VA officials continue to work hard to keep veterans in their homes. In fact, nearly 75 percent of the VA borrowers who defaulted in 2009 were able to avoid foreclosure.

A slightly different version of this article was published originally on, a leading source of real estate, mortgage and foreclosure news and information.