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Veterans, VA Loans Weather Wave of Foreclosures

Foreclosure filings dipped slightly in May as the nation’s lenders continued to slog through almost two years’ worth of distressed properties, according to online foreclosure hub RealtyTrac.

Ten states accounted for more than 70 percent of the 322,920 filings last month. California alone accounted for more than 22 percent of that total. In all, foreclosure filings nationwide fell 3 percent compared to April and were up just less than 1 percent from May 2009.

Foreclosure rates have vacillated in previous months. Amid the economic uncertainty, there’s been a lone constant — the continuing safety of VA loans.

These flexible, powerful loans have weathered the subprime collapse and its devastating wake, outperforming all other major loan types, according to the Mortgage Bankers Association. Here’s the MBA breakdown of foreclosure rates for the four major loan types as of Q4 2009:

  • Subprime loan foreclosures: 15.58%

 

  • FHA loan foreclosures: 3.57%

 

 

  • Prime loan foreclosures: 3.31%

 

 

  • VA loan foreclosures: 2.46%

 

 

The Department of Veterans Affairs has long utilized a strict yet realistic underwriting process that puts a premium on the health, safety and financial security of the veteran. VA loans are typically easier for veterans to obtain than conventional loans. In fact, about 80 percent of VA borrowers could not have obtained a loan with conventional financing, according to agency studies.

That isn’t to say that the wave of home foreclosures has skipped VA loans entirely. But the VA has taken steps to minimize the impact and help veterans who are facing foreclosure. Veterans whose VA loans are in jeopardy have access to supplemental servicing to help stave off default. VA borrowers can connect with a loan specialist by calling 877-827-3702.

The VA has no legal authority to intervene on behalf of veterans without an agency-approved loan. But the VA has urged veterans facing default to immediately contact their lenders to discuss potential solutions, which can include loan forbearance, loan modification and new payment regimens.

There are also cases where veterans may be able to seek protection under provisions of the Servicemembers Civil Relief Act, or SCRA. This legislation provides qualified veterans with the ability to get a lower interest rate for a period of 12 months. Recently discharged service members can also use SCRA provisions to push back evictions or foreclosures for up to nine months.

The VA has also pointed veterans to a national nonprofit group that’s working to help underwater homeowners. The group, called the HOPE NOW Alliance, offers counseling and assistance to homeowners in need. Veterans can contact the agency by calling 1-888-995-4673 or by visiting www.hopenow.com.

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About the author: Chris Birk writes about real estate and the mortgage industry for a host of sites and publications, from Lenderama and Bigger Pockets to the Huffington Post and Motley Fool. A former newspaper and magazine writer, he is also content director for a leading VA lender. Follow him on Google+.

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