In its Loan Guaranty Circular 26-21-07 the U.S. Department of Veterans Affairs (VA) expanded a temporary loss mitigation option.
As previously reported, in September of 2020 the VA temporarily authorized the use of deferments as a loss mitigation option for borrowers with a COVID-19 forbearance. The VA now will allow the use of a deferment for a borrower who has missed one or more payments because of the COVID-19 pandemic regardless of whether the missed payment was subject to a CARES Act forbearance.
Consistent with the prior guidance, a deferment may be used only with a borrower who can resume making the regularly scheduled loan payments. Pursuant to a deferment, the servicer would defer payment of the total amount of missed payments (including principal, interest, taxes and insurance) to the loan maturity date, or until the a borrower refinances the loan, transfers the property, or otherwise pays off the loan, whichever occurs first. There may not be any added cost, fees or interest to the borrower, nor any penalty for early payment of the deferred amount.
The VA notes that servicers do not need to enter into a modification agreement that alters the terms of the existing loan for the purposes of a loan deferment option. The VA also advises that it is temporarily waiving the requirement that a final installment payment not be in excess of two times the average of the preceding installments.
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