A Guest Blog Written by Security America Mortgage*
The coronavirus has affected practically every aspect of our lives this year, and VA home loans are no exception. You are more than likely already familiar with how the government’s response to COVID-19 will affect your client’s eligibility for loans, as well as how to explain their rights as a borrower.
Well, whether you are working with first-time borrowers, or if you have clients that are concerned about paying off their existing VA home loans, this information will help you to easily explain things to your clients regarding mortgage payments during the COVID-19 emergency.
Additionally, we’ll provide some general tips to share with real-estate brokers and clients for staying healthy during the home-buying process.
Getting a Home Loan During COVID-19
First off, to obtain a VA home loan, you know your client will need to obtain a Certificate of Eligibility (COE). This process hasn’t changed, and is still the first step in getting a VA-backed home loan for your client.
Once you have obtained your client’s COE, we can then work on calculating mortgage rates.
What determines the mortgage rate also hasn’t changed. Although VA loans are partially backed by the government, as you know, the Department of Veterans Affairs does not set the interest rates. Instead, us lenders will determine your interest rate based on a variety of factors, including:
● Your client’s credit score
● The type of loan your client desires
● The duration of their loan
The coronavirus has certainly impacted our nation’s current economic conditions, but a VA home loan is still more than likely a good option for securing a low-interest rate for your client.
Coronavirus Mortgage Relief
If your client is having trouble paying their VA direct or VA-backed home loan during the coronavirus emergency, you can assure them that they are not alone. But there is help.
The new Coronavirus Aid, Relief, and Economic Security (CARES) Act specifically addresses VA loans, and it outlines solutions to protect veterans who are experiencing financial hardship during this time.
The CARES Act established a forbearance plan for veterans who cannot make mortgage payments due (indirectly or directly) to the coronavirus emergency. A forbearance is a period of time during which your loan servicer agrees to accept reduced payments or no payments.
Forbearance in the CARES Act is divided into two parts: an initial period and an additional period.
For the Initial 180 Days of Forbearance:
For the initial period, your clients may contact their mortgage servicer and request up to 180 days of forbearance. Be aware that they don’t have to use the entire forbearance period if they can make payments sooner.
After Your Initial 180 Days of Forbearance:
If your clients are still financially affected by the coronavirus emergency after the initial 180-day period, then they may request up to 180 additional days of forbearance. Again, they don’t have to use the entire period of forbearance if they can make payments sooner.
What happens when the forbearance period ends?
Forbearance doesn’t change, lower, or forgive the amount of money your client owes on their loan. During a forbearance under the CARES Act, their mortgage will continue to accumulate interest, but they will not be charged any late fees or other penalties. And, once the forbearance period ends, they need to contact their loan servicer to figure out how they will make up for missed payments.
Although they can pay their balance as soon as the forbearance period is over, loan servicers cannot require their borrowers to make a lump sum payment immediately after a CARES Act forbearance period ends.
Instead, you can advise your clients that they can talk with their loan servicer about creating a loan repayment plan or modifying the terms of their loan. For example:
● Repayment plan: They can pay more than the regular monthly mortgage payment to make up for missed payments before their loan term end date.
● Loan Modification: They can extend the term of their loan. Missed payments are included in the total loan amount, and a new balance is paid off over the new remaining term of their loan.
*Note: a loan modification may change their interest rate.
Federal Foreclosure and Eviction Moratorium
The CARES Act also banned evictions and foreclosures for people who live in properties under federally-backed mortgages. As VA home loans are financed through the government, VA loans qualify for the moratorium. The federal moratorium is set to expire on December 31, 2020. Additionally, certain states have created separate moratorium laws. For example:
● Arizona: Executive Order No. 2020-49 extends the moratorium of evictions and foreclosures until October 31, 2020
● New Jersey: Executive Order 106 places a moratorium on removals of individuals due to evictions or foreclosures until 60 days after the statewide state of emergency ends.
To help your clients find out if their home is protected from foreclosure beyond the December 31, 2020, federal deadline, visit the state government website that your client resides in.
Due to the risks posed by in-person contact during the coronavirus emergency, the VA has made it possible to conduct all necessary meetings with lenders, appraisers, title companies and VA personnel by telephone or other electronic methods.
If you have clients that are looking to get a VA home loan during the coronavirus emergency, there are also several things you can do to help them reduce physical contact throughout the process:
● Many real estate agents post virtual tours of properties for sale on their websites. Taking a virtual tour allows you to experience the property while eliminating the risk of physical contact. (Plus, virtual tours save you and your client’s time!)
● When your client hires an inspector to assess the home they wish to buy, they can join the inspection via Zoom or FaceTime rather than in-person.
● Depending on your client’s state’s online notarization laws, they may be able to sign settlement documents without meeting the seller or agents in person.
If your client is ready to tour a property in person, remember to advise the agents and buyers to stay 6 feet away from the homeowner or other people on-site at all times. Use hand sanitizer before and after visiting the premise, and refrain from touching any objects or surfaces within the home. And remember — wear a mask!
We will make it through this challenging time together.
About the author:
Based out of Houston, Texas, Security America Mortgage is a full-service mortgage lender with a heart for our military veterans. The team at Security America is experienced in home loans of all sizes and types but is most honored to serve in their role as Certified VA Lenders.
*This article was written by Security America Mortgage, NMLS 355253 www.nmlsconsumeraccess.org. American Financial Resources (AFR) is not affiliated with Security American Mortgage, a third party, independent company. The views and opinions expressed in the blog are those of the authors and do not necessarily reflect the official policy of American Financial Resources.