The VA Will Cover Late Mortgage Payments Under This Plan

By Jim Absher

Veterans who are behind on their mortgages thanks to COVID-19 related hardships could soon have their overdue payments covered by the Department of Veterans Affairs under a proposed low-interest loan program.

The plan, outlined in the Federal Register, could help about 60,000 veterans who hold VA home loans avoid eviction. The VA is seeking public comments on the plan through Jan. 7.

A major provision of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) gives protection from eviction and a mortgage payment forbearance option for all borrowers suffering financial hardship due to the COVID-19 national emergency. Under the act, borrowers who cannot make their mortgage payments on time are temporarily saved from being kicked out of their homes. Another provision of the CARES act gave borrowers the option to delay or stop their mortgage payments for up to 360 days if they face COVID-related financial hardship.

But the eviction protection and payment delay allowances are slated to end Dec. 31. And with the end of the foreclosure moratorium rapidly approaching, the VA’s plan allows the government to pay any overdue mortgage payments for qualifying veterans.

Under the proposal, any overdue mortgage payments that the holder of the VA-back mortgage has run up over the last nine months will be paid to the lender by the VA. The veteran will then have to pay back that money to the VA while they continue to make their regular mortgage payments.

Those borrows will have up to 10 years to repay any VA funds used for this program, with an up to five year delay before payments kick-in. VA plans to charge 1% interest on the loans.
Those receiving this assistance from the VA will still have to work with their lender to figure out a mutually agreeable payment plan (forbearance) for future payments, and they will have to stick to that payment plan if they wish to remain in their homes.

To qualify for the proposed program:

• The borrower must have been up-to-date (or less than 30 days late) on their loan payments as of March 1, 2020.
• The borrower must have received CARES Act forbearance from their lender and have missed at least one scheduled monthly payment since qualifying.
• The veteran must have enough income to resume making monthly mortgage payments to their lender and have a debt to income ratio within acceptable levels.

An estimated 33,000 and 60,000 veterans may qualify for the relief, according to the VA.