Thousands of mortgage borrowers with VA-guaranteed loans who've been affected by the coronavirus (COVID-19) pandemic have received COVID-19 forbearances. These forbearances allow borrowers to forgo making loan payments for up to a year, sometimes longer. But it's important to note that a forbearance isn't the same as loan forgiveness; borrowers still owe the amounts they skipped paying after their forbearance ends.
To help borrowers catch up on the overdue amounts, the U.S. Department of Veterans Affairs (VA) has issued a final rule creating a "partial claim" program. As of July 27, 2021, this option allows homeowners to resume making their regular monthly mortgage payments without first having to get current on the payments that were missed during a forbearance.
The new "partial claim" option allows loan servicers to offer 0%-interest loans to VA-guaranteed borrowers to bring their overdue loans current. The partial claim is recorded as a second mortgage lien on the home. This loan comes due only at the end of the first mortgage loan, like at the first mortgage's maturity, after a refinance, or when you sell the property. The borrower doesn't have to make any payments on the partial claim loan until then.
After the VA pays the partial claim to the loan holder, the borrower resumes making the regular monthly mortgage payments in the same amount as before getting a COVID-19 forbearance.
VA-guaranteed borrowers exiting their COVID-19 forbearance plans who were current or less than 30 days delinquent as of March 1, 2020, or whose loan originated on or after March 1, 2020, are eligible for a partial claim. The borrower must also currently occupy the property securing the guaranteed loan as a principal residence.
Borrowers have to indicate to their mortgage servicer that they can resume paying their previous monthly payment amount. And the partial claim loan amount can't be more than 30% of the first mortgage's unpaid principal balance.
This program is available from July 27, 2021 through October 28, 2022. To find out if you qualify, call your loan servicer.
If you can't afford to make the regular mortgage payment that you paid before entering a COVID-19 forbearance, you might qualify for a:
VA extended its foreclosure and eviction moratorium through July 31, 2021, and extended the date by which borrowers can request a COVID-19 mortgage forbearance until September 30, 2021.
Effective date: July 27, 2021