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VA proposal would pay veterans’ COVID-related late mortgage payments into 2021

Department of Veterans Affairs (Ed Schipul/Flickr)
December 15, 2020

Veterans who missed their mortgage payments during the COVID-19 pandemic may be able to repay late payments through a newly proposed Department of Veterans Affairs loan program.

Last week, the VA published its proposed plan, the COVID-19 Veterans Assistance Partial Claim Payment program (COVIDVAPCP), in the Federal Register. The COVIDVAPCP is proposed as a potential measure for extending payment coronavirus mortgage payment flexibility options to veterans into 2021.

The COVIDVAPCP program would serve as an extension to the CARES Act that passed in March of this year, which allows federally backed mortgagees experiencing COVID-19 related financial hardships to request forbearance for their mortgage payments, enabling them to avoid foreclosures. Federally backed mortgages are eligible for the program through the end of 2020, but the newly proposed VA program would continue to cover qualifying mortgagees with VA-backed mortgages into 2021.

Under the COVIDVAPCP program, the VA would serve as the mortgage investor of last resort and cover a veteran’s indebtedness to the amount it takes to catch them up on their mortgage payment.

From there the VA proposal states, “The veteran would have up to 60 months (five years) to defer repayment to VA and up 120 months (10 years) to repay the loan in full, with the interest rate fixed at 1 percent per annum.”

Veterans would only be eligible for the program under the conditions that they:

  1. Were up to date on their mortgage payment, or less than 30 days late, as of March 1, 2020.
  2. Received a CARES Act forbearance from their lender but missed at least one scheduled monthly payment since qualifying, and
  3. The Veteran must have enough income to resume their mortgage loan payments and still be able to meet their other living expenses.

Those qualifying VA-backed loan holders would have to be able to resume their mortgage payments and be able to pay back the VA loan program.

The VA proposal estimates between 33,000 and 60,000 veterans would qualify for the program under the prescribed conditions. The VA estimates that about 28.5 percent of the qualifying loans are also serviced by small entities, accounting for between 9,600 and 17,300 loans.

The VA estimates the loan program may last into 2022 but states Given that this proposed temporary program is limited to help veterans recover financially from
the COVID-19 national emergency, VA does not anticipate any partial claim payments (or applications) will be received in FY 2023 and beyond.”

The VA published the loan program in the Federal Register, opening it up for a 30-day public comment period, which ends on Jan. 7.