The Department of Veterans Affairs (“VA”) recently published guidance on what steps may be taken regarding a VA-guaranteed loan when the related property is affected by a natural disaster such as a hurricane or wildfire. The VA Guidance on Natural Disasters form provides information for veteran borrowers, mortgage lenders, and mortgage servicers.
The form encourages veteran borrowers to first contact the Federal Emergency Management Agency (“FEMA”) to register and receive assistance that may be available for disaster recovery. Since borrowers are still required to make mortgage payments even if their home is not habitable, VA also recommends that a borrower should file a claim with their insurance company and contact their mortgage company to discuss forbearance or loan modification.
Mortgage lenders are instructed to check with FEMA for disaster declarations for specific counties. The VA Guidance on Natural Disasters form also includes a Lender Certification and a Veteran Certification. For VA loans that have not closed, but have been appraised prior to a natural disaster, both the lender and veteran borrower must certify that the property is not damaged or has been restored, and the loan should move forward. The signed form must be submitted with the VA guaranty request along with VA Form 26-0286, Loan Summary Sheet, and new employment/income certification. If there is any indication that the subject property’s value has decreased after a natural disaster, even with repairs, then the lender must have the appraiser update the original value estimate, and the loan amount must also be reduced accordingly.
For VA-guaranteed loans that closed prior to a natural disaster, VA encourages mortgage servicers to extend all possible forbearance assistance to veterans and to provide counseling concerning all available assistance. VA also encourages servicers to take other steps such as waiving late charges, and suspending credit report and VA reporting, to avoid damaging a veteran’s credit record.
DocMagic will make the VA Guidance on Natural Disasters form (Form ID: VAGND.VA) available from the Forms List beginning on November 7, 2024.
