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HousingWire Magazine: December 2021/ January 2022

AS WE ENTER A NEW YEAR, let’s look at some of the events that we can look forward to in 2022. But what about what’s next for the housing industry?

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Mortgage

VA extends deadline for loan deferment

The VA announced that the loan deferment option will be available in the COVID-19 "waterfall" until Oct. 1, 2023

The Department of Veterans Affairs announced this week that it is extending the timeframe for borrowers to request loan deferment.

According to the VA’s circular, servicers may continue offering loan deferment until July 1, 2023, pushing the deadline for almost two additional years. The original expiration of this option was supposed to occur on Oct. 1, 2021.

Under this option, the servicer defers repayment of the arrearages (principal, interest, taxes, and insurance) to the loan maturity date or until the borrower refinances the loan, transfers the property, or pays off the loan, the VA said.

The circular noted that if the borrower opts for loan deferral, no added costs, fees, or interest will be tagged onto the borrower. Additionally, there will be no penalty for early payment of the deferred amount, the VA said.

In general, loan deferment is not an option offered by the VA as it goes against the department’s regulation 38 C.F.R. § 36.4310(a), which states that “the final installment on any loan shall not be in excess of two times the average of the preceding installments.”

However, the department is waving this requirement due to the COVID-19 pandemic.

The VA stressed in their announcement that the temporary waiver applies “only in the case of a servicer that is assisting a borrower under VA’s COVID-19 Home Retention Waterfall” and that the servicer must ensure that the deferment will not have a negative impact on the government’s interests in the VA-guaranteed loan.

Moreover, the circular said that any deferment that fails to comply with servicing laws, such as the Real Estate Settlement Procedures Act (RESPA) and the Truth in Lending Act (TILA), would negatively impact the government’s interest and thus would not be covered by this temporary suspension.

Other repayment options in VA’s “waterfall” for a borrower coming out of forbearance are a VA Disaster Extended Modification and a COVID-19 Veterans Assistance Partial Claim Payment program (COVID-VAPCP), both valid through 2022.

Earlier in the year, industry trade groups urged the department to establish a partial claim program, similar to what the FHA has.

In turn, the VA implemented COVID-VAPCP, a temporary program where the VA purchases a borrowers COVID-19 indebtedness if a borrower agrees to repay the amount upon established loan terms.

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