VA issued Circular 26-21-13 to provide a waterfall of home retention options for borrowers financially affected by COVID-19 (COVID-19 Home Retention Waterfall) and to announce the COVID-19 Refund Modification. Per the Circular, VA developed the COVID-19 Home Retention Waterfall to help servicers apply VA’s preferred order of home retention options when assisting borrowers affected by the COVID-19 pandemic. Servicers must follow the COVID-19 Home Retention Waterfall, choosing appropriate options based on the borrower’s self-assessment of their ability to resume regular payments on a VA-guaranteed loan and to repay amounts missed under a COVID-19 forbearance. In addition, VA announced a new type of loan modification called the COVID-19 Refund Modification. Under this type of loan modification, VA consents to the servicer’s modification of a guaranteed loan and purchases a portion of the borrower’s indebtedness from the servicer, which is then secured as a junior lien in favor of VA. VA’s junior lien does not accrue interest, does not require monthly payments and only becomes due when the property is sold, or the loan is paid off or refinanced. The changes announced in the Circular are effective July 27, 2021.
Click to view the VA Circular 26-21-13: https://www.tenaco.com/wp-content/uploads/2021/07/VA-Circular-26-21-13-07-23-21.pdf
