In the wake of the subprime mortgage meltdown, loans backed by the Department of Veterans Affairs continue to provide veterans with a secure way to finance a home purchase. These low-cost VA loans come with a rigorous yet flexible underwriting process that’s helped insulate veterans and their families from the ravages of default and foreclosure.  

VA Foreclosed Homes Rates

In fact, VA loans have the lowest rate of foreclosure of any major loan product available, according to recent data from the Mortgage Bankers Association. Here’s a snapshot of foreclosure rates as of fourth quarter 2009:

• Subprime loan foreclosures: 15.58%
• FHA loan foreclosures: 3.57%
• Prime loan foreclosures: 3.31%
• VA loan foreclosures: 2.46%

Despite success in the face of foreclosure, VA loans and veterans haven’t been completely immune to the economic turmoil of the past two years. However, the Department of Veterans Affairs has worked proactively to keep veterans and active-duty service members from losing their homes.  

Avoiding Foreclosure of a VA Loan

The agency urges struggling veterans to immediately contact their lenders and to explore options to avoid being a victim of VA foreclosed homes. Loan servicers may be able to provide veterans with one or more of the following options:

• Loan forbearance
  Veterans can get extra time to repay obligation.
• Loan modification
  Lenders roll the delinquent payments into the loan balance and start a new payment schedule.
• Repayment regimen
  Veterans pay off a portion of the delinquent payments each month along with their regular amount.
• Short Sale
  Lenders can allow veterans to sell