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Financial Services Law Insights and Observations

VA issues circular on pandemic-affected borrowers

Federal Issues Covid-19 Department of Veterans Affairs Forbearance

Federal Issues

On June 25, the Department of Veterans Affairs issued Circular 26-21-10, which provides an update for servicers on assisting borrowers who are affected by the Covid-19 pandemic. According to the circular, servicers should continue reporting the Electronic Default Notification with “National Emergency Declaration” as the default reason in cases that involve borrowers who are financially affected by the pandemic. In addition, “servicers are to continue to make every reasonable effort to assist borrowers who are experiencing financial difficulties due to the national emergency.” These efforts must be documented in servicers’ loan systems and are to include a servicer review of relevant loan files and consideration of all possible home retention options and alternatives to foreclosure. For borrowers who have not received a Covid-related forbearance, servicers should allow these borrowers to receive a such forbearance if the borrower makes the request by September 30. The circular also establishes that all properties securing VA-guaranteed loans are subject to moratoriums on foreclosures and evictions through July 31, 2021. excluding vacant or abandoned properties. The circular is rescinded effective July 1, 2023.

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