VA Compromise Sale Program
For those who have a VA mortgage on their home, this program offers assistance to financially distressed borrowers to help avoid foreclosure. If a homeowner is offered a price lower than the amount owed on the loan, the homeowner can ask the VA to approve a compromise sale that will pay the difference between the mortgage balance and the sale price of the home based on approval.
Many mortgage companies are authorized by the VA to approve compromised sales through their own Loss Mitigation Departments. Home owners whose loans originated on or before December 31, 1989, may be required to sign a promissory note that obligates them to pay part of the difference back to VA. This amount that may require payback is always less than the amount a homeowner would owe if foreclosed and is based on financial ability.
Items Needed for a Compromised Sale Consideration
- Copy of earnest money contract
- Proposed settlement statement with closing costs calculated through projected closing date
- VA appraisal
- Payoff or assumption statement from the mortgage company calculated to the projected closing date
- Statement from the Seller: Stating why the property is being sold, how much can the seller pay at closing and how much relocation assistance employer is providing, if any?
- Seller’s financial statement showing all income, assets, debts, other obligations, marital status and ages of dependents
If Loan is Assumed
- Complete release of liability package is required. Call 1-888-232-2571 ext. 3130 to request a release of liability package
- Compromise assumption will not be processed without a received statement from the holder that they are willing to have guaranty amount reduced by the amount of the claim payment
- If a compromise assumption is feasible, the buyer must qualify
When a Compromised Sale is Approved
- Copy of approval letter from the mortgage company or VA is submitted to the closing attorney prior to closing
- The closing attorney/staff will review the approval letter including the shortage amount VA will pay upon completion of sale
- Approval of any additional amount needs to be submitted to VA or the mortgage company well in advance of the closing date
- 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.
Read more about the VA Compromise Sale Agreement at Phil Sharp Homes.
For more information refer the U.S. Department of Veterans Affairs website (http://www.vba.va.gov/ro/houston/lgy/compsale.html) where this information was obtained.
It is highly recommended that homeowners that wish to take advantage of the VA Compromise Sale Program with closely with an Experienced Real Estate Agent, like Phil Sharp, who is familiar with VA loans, this program and able to meet the specific requirements for a smooth transaction.