VA loans: servicing and workout options before foreclosure
38 C.F.R. § 36.4350(f)
In plain words
If you have a VA-guaranteed home loan, the lender must have a system to work with delinquent borrowers: try to reach you by phone, send letters that explain your options, and make a face-to-face interview or a reasonable effort to arrange one when it has not reached you. VA lists workout options in order of preference: repayment plan, special forbearance, loan modification, short sale, and deed in lieu of foreclosure.
Who is protected
Borrowers with a VA-guaranteed home loan (veterans, servicemembers and eligible surviving spouses, and anyone who assumed the loan).
When it applies
- Only while you are behind but have no foreclosure notice yet, after a notice of default or once a sale date is set.
- Only for VA loans.
What you can do
Ask your servicer for VA workout options
Ask in writing for a review for a repayment plan, special forbearance or VA loan modification, and send the documents requested.
Open the toolTalk to a VA loan technician
VA's loan servicing staff can talk with you and your servicer about options. Find contact details on va.gov under home loans.
Open the tool
Honest limits
- The rules say what lenders must do; they do not guarantee you a modification. VA's modification rule says plainly that it creates no right to a modification.
- VA options and programs change over time; ask the servicer and VA which are available now.
- These are rules the government sets for lenders. Whether you can enforce them in court depends on your state: some courts treat them as conditions a lender must meet before foreclosing, others do not.
- This is general legal information, not legal advice, and it does not promise any result. A HUD-approved housing counselor or a lawyer can look at your facts.
The law
- Federal regulationVA — system for servicing delinquent loans
38 C.F.R. § 36.4350(f)
Exact part: (f)
What it says: Holders must have a system that trains staff to counsel delinquent borrowers on curing the default and on alternatives to foreclosure.
Read the official texthttps://www.ecfr.gov/current/title-38/part-36/section-36.4350#p-36.4350(f) - Federal regulationVA — minimum collection actions
38 C.F.R. § 36.4350(g)(1)
Exact part: (g)(1)
What it says: The holder must attempt phone contact, send letters, and hold a face-to-face interview or make a reasonable effort to arrange one if other contact fails.
Read the official texthttps://www.ecfr.gov/current/title-38/part-36/section-36.4350#p-36.4350(g)(1) - Federal regulationVA — interviews with delinquent borrowers
38 C.F.R. § 36.4350(h)
Exact part: (h)
What it says: When contact is made, the holder must gather the information needed to evaluate forbearance or other relief.
Read the official texthttps://www.ecfr.gov/current/title-38/part-36/section-36.4350#p-36.4350(h) - Federal regulationVA — loss-mitigation options and order of consideration
38 C.F.R. § 36.4319(a)
Exact part: (a)
What it says: VA lists repayment plans, special forbearance, loan modifications, short sales and deeds in lieu, in preferred order of consideration.
Read the official texthttps://www.ecfr.gov/current/title-38/part-36/section-36.4319#p-36.4319(a) - Federal regulationVA — loan modifications
38 C.F.R. § 36.4315
What it says: Sets when a holder may modify a VA loan without VA approval; it does not give the borrower a right to a modification.
Read the official texthttps://www.ecfr.gov/current/title-38/part-36/section-36.4315
Court cases
- Homeowner lostSame topicMartins v. BAC Home Loans Servicing, L.P.
Martins v. BAC Home Loans Servicing, L.P., 722 F.3d 249 (5th Cir. 2013)
a mortgage servicer acting for a properly assigned mortgagee may foreclose in Texas without possessing the original note, and an oral promise to modify a large loan is not enforceable
- Homeowner lostSame topicLage v. Ocwen Loan Servicing LLC
Lage v. Ocwen Loan Servicing LLC, 839 F.3d 1003 (11th Cir. 2016)
a servicer's duty to evaluate a loss-mitigation application depends on its being submitted more than 37 days before the sale date scheduled at that time
- Homeowner lostSame topicGresham v. Wells Fargo Bank, N.A.
Gresham v. Wells Fargo Bank, N.A., 642 F. App'x 355 (5th Cir. 2016) (per curiam) (unpublished)
the federal dual-tracking bar applies only when the servicer receives a complete loss-mitigation application more than 37 days before the foreclosure sale
- Homeowner lostSame topicBoren v. U.S. National Bank Ass'n
Boren v. U.S. Nat'l Bank Ass'n, 807 F.3d 99 (5th Cir. 2015)
a lender may abandon a prior acceleration by giving notice that it seeks less than the full accelerated balance, which restarts the four-year limitations period
- Homeowner lostSame topicWhittier v. Ocwen Loan Servicing, L.L.C.
Whittier v. Ocwen Loan Servicing, L.L.C., 594 F. App'x 833 (5th Cir. 2014) (per curiam) (unpublished)
a RESPA claim against a servicer fails without evidence of actual damages caused by the violation
- Homeowner lostSame topicMilton v. U.S. Bank National Ass'n
Milton v. U.S. Bank Nat'l Ass'n, 508 F. App'x 326 (5th Cir. 2013) (per curiam) (unpublished)
an agreement to delay a Texas foreclosure falls within the statute of frauds and must be in writing to be enforced
Related rights
A fair, on-time review of your application for help
12 C.F.R. § 1024.41(b)(1)
When you apply for help (like a loan modification), your servicer must tell you within 5 business days whether your application is complete and what is missing, if you applied 45 days or more before a sale. If your complete application arrives more than 37 days before a sale, the servicer must review you for every option it has and tell you its decision in writing within 30 days.
Read this rightNo foreclosure without a court order during service and for 1 year after
50 U.S.C. § 3953(a)
If you took out your mortgage before you entered military service, a foreclosure sale during your service — or within 1 year after it ends — is not valid unless a court approves it first (or you signed a valid waiver). A court can also pause the case or adjust the loan if military service affected your ability to pay.
Read this rightEarly contact and help information when you fall behind
12 C.F.R. § 1024.39(a)
When you miss a mortgage payment, your servicer must try to reach you live (by phone or in person) by the 36th day of the delinquency and tell you about options to avoid foreclosure. By the 45th day it must send you a written notice explaining loss-mitigation options and how to get help, including housing counselors.
Read this rightFHA loans: a meeting before foreclosure
24 C.F.R. § 203.604(a)(1)
If you have an FHA-insured mortgage, your lender must meet with you — or make a reasonable effort to arrange a meeting — before three full monthly payments are unpaid and at least 30 days before starting foreclosure. A reasonable effort means at least two verifiable attempts to contact you. HUD now decides how the meeting may be held.
Read this rightFHA loans: the lender must look at ways to avoid foreclosure
24 C.F.R. § 203.605(a)
If you have an FHA-insured mortgage, your lender must review loss-mitigation options every month before four full payments are unpaid, and take the appropriate action. FHA options can include special forbearance, loan modification, a partial claim (an interest-free second loan from HUD to cover arrears), a pre-foreclosure sale, or a deed in lieu.
Read this rightUSDA guaranteed loans: servicing options before foreclosure
7 C.F.R. § 3555.301
If you have a USDA Rural Development guaranteed home loan, the lender must contact you promptly after a default, try to learn why you fell behind, and send a certified letter asking for an interview before you are 60 days behind. If you qualify, it must consider options in order: repayment agreement, special forbearance, loan modification, and a mortgage recovery advance. Streamline options may be available later.
Read this right