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VA establishes VAPCP requirements

Federal Issues Department of Veterans Affairs Mortgages Covid-19 Agency Rule-Making & Guidance CARES Act Loss Mitigation Forbearance

Federal Issues

On May 28, the Department of Veterans Affairs (VA) published a final rule in the Federal Register, which establishes the “COVID–19 Veterans Assistance Partial Claim Payment” (VAPCP) program to help veterans resume making normal loan payments on VA-guaranteed loans after exiting forbearance due to the Covid-19 pandemic. The final rule incorporates several revisions in response to comments submitted by veterans, lenders, servicers, consumer groups, and trade associations on the VA’s proposed rule published last December (covered by InfoBytes here). Under the final rule, the partial claim maximum limit is increased from the proposed 15 percent to 30 percent of the unpaid principal balance of the guaranteed loan as of the date the veteran entered into a Covid-19 forbearance. The timeframe for servicers to submit partial claim payment requests to the VA also was increased from 90 to 120 days. Additionally, the final rule will allow servicers to use the Covid-VAPCP program “even if other home retention options are feasible, provided the partial claim payment option is in the veteran’s financial interest.” For a loan to qualify for a Covid-VAPCP, among other things, (i) the guaranteed loan must have been either current or less than 30 days past due on March 1, 2020, or made on or after March 1, 2020; (ii) the veteran must have received a Covid-19 forbearance and missed at least one scheduled monthly payment; (iii) at least one unpaid scheduled monthly payment must remain that the veteran did not make while under a Covid-19 forbearance; (iv) the veteran must indicate the ability to “resume making scheduled monthly payments, on time and in full, and that the veteran occupies, as the veteran’s residence, the property securing the guaranteed loan for which the partial claim is requested”; and (v) the veteran must timely execute all necessary loan documents in order to establish an obligation to repay the partial claim payment.

Notably, the final rule strikes the following requirements that were included in the proposed rule: (i) veterans will not be required to repay the partial claim within 120 months; (ii) interest will not be charged on the Covid-VAPCP; and (iii) servicers will not have to complete financial evaluations of veterans in the program.

The rule is effective July 27.

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