VA Circular 26-10-02
January 11th, 2010
The VA has released Circular 26-10-02 titled,
"VA Making Home Affordable Program".
VA MAKING HOME AFFORDABLE PROGRAM
1. PURPOSE.
This circular provides authority and instructions for modifying VA-guaranteed home loans in accordance with the President’s Making Home Affordable (MHA) program.
These new procedures will be effective February 1, 2010.
2. BACKGROUND.
VA has a longstanding policy of encouraging servicers to work with veteran borrowers to explore all reasonable options to help them retain their homes, or when that is not feasible, to mitigate losses by pursuing alternatives to foreclosure. In an effort to help homeowners avoid foreclosure, the President announced the MHA program to make home loans more affordable. Two main features are the Home Affordable Refinance Program (HARP) and the Home Affordable Modification Program (HAMP). HARP was introduced to help borrowers refinance at lower interest rates despite high loan-to-value (LTV) ratios, and provides relief similar to VA’s existing Interest Rate Reduction Refinancing Loan (IRRRL) program. HAMP
was introduced to avoid foreclosures by modifying loans to increase affordability relative to borrower income. Under HAMP, an affordable modification is defined as a new monthly mortgage payment (including principal, interest, property taxes, insurance, and condominium or homeowners’ association fees (PITIA)) that is no greater than 31 percent of the borrower’s monthly gross income. HAMP requires a two-step process for modifications that includes: a Trial Period Plan, where the borrower makes the proposed new modified mortgage payment for 3 months; and, after determination of eligibility for HAMP, an Agreement outlining the terms of the final modification. This circular explains how VA loans fit into the MHA program.
To view the online Circular in its entirety, please click here.
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