Mortgage assistance for veterans needs to be updated in light of higher interest rates, according to the American Bankers Association (ABA) and other organizations.
The ABA and 18 other groups wrote a joint letter to the Department of Veterans Affairs (VA) warning that current loss mitigation protocols for the VA Home Loan Program were “hampering loan servicers’ ability to help borrowers avoid foreclosure”.
The organizations estimated there were “between 100,000 and 130,000” veterans who had mortgages through the VA but were “seriously delinquent”, having missed three or more payments.
“Unfortunately, the options currently available to veteran borrowers are fewer and significantly less effective than those available to other government-insured borrowers,” the letter stated.
“Our organizations find this situation troubling and worthy of immediate attention. Policy changes and solutions — regulatory, statutory, or budgetary — are needed now.”
The letter recommended a series of actions, including reintroducing the “partial claim program”, which allows borrowers to receive payment relief or help in addressing missed payments without it affecting their mortgage rate.
The organizations also called for the VA to expand its refund program, which allows the department to buy back delinquent loans and restructure them to increase affordability.
Elsewhere, the Consumer Financial Protection Bureau is also seeking to help homeowners with mortgages by encouraging lenders to continue to use tools introduced during the Covid-19 pandemic to help avoid foreclosures.
“We understand these streamlined options have been very successful in keeping consumers in their homes, and note that Covid-19 will continue to impact families, even beyond the national emergency,” the bureau stated.
Streamlined loss mitigation options can be offered to borrowers not experiencing issues due to Covid-19, it said. Lenders should “utilize all the tools at their disposal… in their efforts to keep consumers in their homes”, the bureau added.