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What is the VA Compromise
Sale Program?
It's a program to assist financially distressed VA
borrowers who are honorably discharge and/or retired from U.S.
Military Service.
Note: If you are active duty
and have a financial hardship, there is a program entitled
HAP, that you may wish to consider.
A VA Compromise Sale Program:
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Avoids foreclosure which has a long term
(7-10 years) impact on a borrowers credit rating
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Enables a VA borrower to recover faster
and avoid the long term stress from debt collectors who otherwise can
make life miserable for years to come.
How Does A Compromise Sale Work??
First the homeowner must list your home for sale, preferably from a
real estate broker or agent who is a Veterans Real Estate specialist and
understands the short sale market.
For a list of qualified Brokers and Agents who can best handle your
transaction, go to
www.VeteransRealEstate-Online.com, and search for
an agent in your state or a specific city to assist you.
Once you list your home for sale with a Realtor, when you receive an
offer based on current market value, that is lower than the total
amount of the loan payoff, the realtor, on your behalf, with homeowner
authorization, can ask VA to approve a compromise sale for you.
VA will review the situation with the mortgage company and if approved,
pay the difference between the mortgage balance and the proceeds of
sale. |
Sometimes the mortgage company can approve the sale on behalf
of VA through the Servicers Loss Mitigation Program. In fact, a majority of
the mortgage companies now have a Loss Mitigation Department authorized by
VA to process VA compromise sales..
For loans originated on or before December 31, 1989,
the seller may be required to sign a promissory note. A
promissory note obligates the seller to pay part of the difference back to
VA. The amount is always less than the amount the homeowner would owe VA if
a foreclosure sale takes place, and monthly payments are arranged based on
the homeowners financial ability.
Items Needed, To Consider A Compromise Sale
(provide
this info to your agent, and be sure to sign an authorization to represent
you in communications with the VA or your lender):
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Copy of the earnest money contract
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Proposed settlement statement with closing costs calculated
through projected closing date
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A VA appraisal
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Payoff or assumption statement from the mortgage company
calculated to the projected closing date
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Statement from the seller: Why is the property being sold?
How much money can the seller pay at closing? How much relocation assistance
is employer providing, if any?
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Sellers financial statement showing all income, assets,
debts, other obligations, marital status and ages of dependents
If The Loan Is To Be Assumed By The Purchaser:
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A complete release of liability package is required. Call
1-888-232-2571 extension 3130 to request a release of liability package
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A compromise assumption will not be processed without first
receiving a statement from the holder that they are willing to have their
guaranty amount reduced by the amount of the claim payment
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If it appears a compromise assumption is feasible, the buyer
must qualify
What Happens When A Compromise Sale Is Approved?
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A copy of the approval letter from the mortgage company or
VA is submitted to the closing agent prior to closing.
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The closing agent and/or his staff will review the approval
letter which will include the shortage amount that VA will pay upon
completion of the compromise sale.
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Approval of any additional amount needs to be submitted to
VA or to the mortgage company well in advance of the closing date.
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At the closing table, net proceeds are paid directly to the
mortgage company who then files a claim with VA for the difference between
the proceeds and the payoff amount.
SELLER REQUIREMENTS:1. Once it is apparent that the
seller needs to consider the VA Compromise Sale Program, the seller
should "authorize their realtor" to contact his/her lender, provided
they are a VA approved Servicer Loss Mitigation lender. Your lender
needs to be on the list below:
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Approved Loss Mitigation Lenders
AccuBanc Mortgage Corporation
Alaska USA Federal Credit Union
Alliance Mortgage Company
Allied Group Mortgage
Amera Mortgage Corporation
Atlantic Mortgage & Investment Corp
Aurora Financial Group
Aurora Loan Services
Banc One Mortgage Corporation
Banco Popular
BancOklahoma Mortgage Corporation
Bank United Mortgage
BankAmerica Mortgage
Benchmark Mortgage Corporation
California Housing Finance Agency
Cendant Mortgage Services
Charles F. Curry Company
Charter Bank for Savings
Charter Mortgage & Investment
Chase Manhattan Mortgage
Citi Mortgage
Citizens Bank
Clyde Savings Bank
Coastal Banc
Collateral Mortgage
Colonial Mortgage Company
Colonial Savings
Columbia National
Commerce Mortgage
Commercial Federal Mortgage Corp.
Continental Mortgage Company
Corstan Inc.
Countrywide Funding
Crestar Mortgage Company
Crossland Mortgage Corporation
Douglas County Bank & Trust
Downey Savings & Loan Assoc.
Eastern Mortgage Services
Empire of America Realty Credit Corp.
Essex Home Mortgage Servicing Corp
Fairbanks Capital Corporation
First Bank Kansas
First Bank Oklahoma
First Bankers Mortgage Corporation
First Commercial Bank
First Federal Savings & Loan Assoc. of Green County
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First Federal Savings Bank La Crosse - Madison
First Federal Savings Bank of Colorado
First Jacksonville Mortgage Company
First Madison National Inc
First Nationwide Mortgage Corp.
First of America Loan Services
First Trust Mortgage Company
First Union Mortgage Company
First Virginia Mortgage Company
Firstar Mortgage Servicing
First Trust Bank
Fleet Mortgage Group
FTB Mortgage Services
Glendale Federal Bank
GMAC Mortgage Corporation
Greentree Mortgage Company
Guild Mortgage Company
HSBC Marine Midland
Harbor Financial Mortgage
Heartland Bank
Heigle Mortgage
Homeside Lending
Huntington Mortgage Company
Iowa Bankers Mortgage Corporation
Irwin Mortgage
J.I. Kislak Mortgage Corporation
Kentucky Housing Corporation
Knutson Mortgage Corporation
LaSalle Talman Home Mortgage
Liberty Mortgage Company
Litton Loan Servicing
Lumbermens Mortgage Corporation
M & I Mortgage Corp.
M & T Mortgage Com
Magna Mortgage Company
Market Street Mortgage
Matrix Financial Services Corp.
Mercantile Bank
Mercury Mortgage Company
Merrimack Mortgage Company
Metwest Services
Miami Valley Bank
MidFirst Bank
Midwest Independent Bank
Mission Hills Mortgage Bankers
Mitchell Mortgage
Mortgage Clearing Corporation
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National City Mortgage
Nationsbanc
Nationsbanc Mortgage Corp. of New York (Bank of America)
Navy Federal Credit Union
North American Mortgage Company
North American Savings Bank
North Dakota Housing Finance Agency
Old Kent Mortgage Service
Onbank and Trust
Pennsylvania Housing Finance Agency
Philadelphia Freedom Mortgage Bankers
Pioneer Savings Bank
PNC Mortgage Corp.
Principal Residential Mortgage
R & G Mortgage Corporation
Regional Investment Company
Regions Mortgage, Inc.
Republic Bank
Resource Bancshares Mortgage Group
Rocky Mountain Mortgage Company
Roosevelt Bank
Ryland Mortgage Company
Seattle Mortgage
Secured Bankers Mortgage Company
Simmons First National Bank
Skowhegan Savings Bank
South Trust Mortgage
Standard Federal Bank
Star Bank Mortgage
Sun West Mortgage Company
SunTrust Mortgage, Inc.
Swain Mortgage Company
TCF Mortgage
Temple-Inland Mortgage
The Leader Mortgage Company
The Mortgage Service Center
Trans Financial Mortgage
Transworld
Trustmark National Bank
Turner Young Investment Company
Union Planters Mortgage
Universal American Mortgage Company
Washington Mutual Bank
Waterfield Mortgage Company
Wells Fargo Home Mortgage
West Virginia Housing Development
Weyerhaeuser Mortgage Corp.
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2. A financial statement is completed and signed by all parties. The
realtor, with your signed authorization, may obtain this from the lender
if the lender has been approved to process the compromise sale on behalf
of VA.
3. The seller should complete a letter of request.
4. A Compromise Agreement Sale Application should be completed. If the
lender will be processing the compromise sale, an application package
must be obtained directly from that lender. Your realtor can help
you obtain that package.
5. On loans that originated on or before December 31, 1989, the
seller should be prepared to sign a promissory note at closing agreeing
to repay VA for the difference between the sales proceeds and the total
debt. This indebtedness may be waived in order to process the
transaction and avoid a foreclosure sale.
REALTOR AND/OR SELLER REQUIREMENTS:
Upon receipt of an acceptable offer the realtor and/or the
seller should contact VA or the sellers lender (if applicable) and
advise them that they are in the process of submitting a compromise
package. This package should contain the following information:
1. A purchase and sale contract needs to signed by all parties (buyer and
seller) with a contingency which reads: This offer is contingent upon
approval of a VA compromise sale.
2. Good faith estimate projecting closing costs for the seller. This
document is usually prepared by the real estate agent to facilitate
processing.
3. A sellers Hardship Letter to the lender and VA requesting consideration
of a compromise sale.
4. Seller financial data and supporting documentation.
5. Seller's Compromise Agreement Sale Application.
OTHER REQUIREMENTS TO PROCESS A VA COMPROMISE SALE
A current VA appraisal must be obtained.
If the buyer is obtaining a VA loan, the buyers VA appraisal can be used
provided the buyer will agree to the same. Otherwise, the sellers lender
will have to contact VA for an appraisal assignment. Once an appraiser
has been assigned, the lender will order the appraisal directly from the
appraiser.
Title is reviewed. As stated earlier, in situations whereby there are
second liens or other liens, the seller can request that the lienholder
consider releasing the lien and converting the loan to a personal loan,
or attempt a less than full payoff.
A compromise assumption will not be processed without first receiving a
statement from the holder that they are willing to have their guaranty
amount reduced by the amount of the claim payment.
If it appears a compromise assumption is feasible, the buyer must qualify.
WHAT HAPPENS WHEN A COMPROMISE SALE IS APPROVED?
A copy of the approval letter from the lender or VA is submitted to the
closing agent (escrow company) prior to closing.
The closing agent (escrow company) and/or his staff will review the
approval letter which will include the shortage amount that VA will pay
upon completion of the compromise sale.
Approval of any additional amounts need to be submitted to VA or to the
lender well in advance of the closing date.
At the closing table, net proceeds are paid directly to the obligors
lender who then files a claim with VA for the difference between the
proceeds and the total indebtedness.
VA CANNOT pay a compromise claim beyond what the loan was guaranteed for.
Homeowner BEWARE!
Entitlement - Should VA agree to pay the difference between the sales
proceeds and the total debt to complete the compromise sale process, the
portion of the homeowners entitlement used to guaranty this loan will
remain tied up until VA is reimbursed in full.
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