How the VA Compromise Program Can Help Underwater Military Borrowers Sell a Home


Plummeting real estate values have taken a heavy toll on homeowners nationwide.

That’s especially true of military members, who must go where and when their nation directs. For service members constantly on the move, there’s no such thing as waiting out the market.

Often when they try to sell, they discover that the home they bought when the market was strong is now valued less, sometimes far less, than what they still owe on their mortgage. That difference can prove devastating.

But service members with VA-backed mortgages may be able to find relief through a unique government program aimed at helping bridge that gap and stave off financial disaster.

VA Compromise Sales
Under the VA’s Compromise Sale Program, the agency can pay a “compromise claim” to cover the difference between the sale price of a home and the borrower’s loan balance. This allows the veteran to complete a private sale to a borrower who either assumes the loan or who has secured separate financing.

These are unusual times, and they call for unique solutions. The VA Compromise Sale Program is not an everyday transaction. All stakeholders face a host of requirements.

There are a variety of criteria that must be met for basic eligibility for the program, including:

  • The ability to document financial hardship
  • A sale price that reflects fair market value based on current market conditions
  • Reasonable closing costs
  • An end result that is financially better for the government than foreclosure

Both VA-approved lenders and the VA itself can handle compromise sales. An appraisal is required. Lenders must also agree to having their VA guaranty reduced by the value of the compromise.

VA borrowers have to sacrifice as well. Part of their entitlement will remain caught up in their first mortgage until the VA is reimbursed.

Tools and Help
No one intends to default on a mortgage, but if you’re facing a must-sell situation, a compromise sale may represent a viable solution.

To learn more about the Compromise Sale program, VA loan holders can contact the agency at 1-800-933-5499.

It’s also important for service members struggling to stay current with their mortgage to contact their servicer as soon as possible.


About Author

Chris Birk is a recovering journalist and director of communications for Veterans United Home Loans, the nation's leading dedicated VA lender. He is also the author of "The Book on VA Loans: An Essential Guide to Maximizing Your Home Loan Benefits." Follow him on Google+.

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