What if my home is affected by a Natural Disaster?

If your home has been damaged or destroyed during a declared natural disaster, the VA can still help you. There are different guidelines for each specific situation; loan origination issues, loan servicing and claims issues and the VA guaranteed benefits.

Loan Origination:

a. Loan Closed Prior to Disaster. Any loan closed prior to the date of the declared disaster is eligible for VA Guarantee without regard to the disaster.

b. Property Appraised Prior to Disaster. For a loan on a property appraised on or before the date of the declared disaster and not closed prior to that date to be eligible for VA guarantee.

Certifications:

Both of the following certifications must be submitted with the guarantee request:

a) Lender Certification - This is to affirm that the property which is security for VA loan number _________________ has been inspected to ensure that it was either not damaged in the recently declared disaster or has been restored to its pre-disaster condition or better.

________________	______________	________
(Lender Signature)	(Lender Title)	(Date)

b) Veteran Certification - I have inspected the property located at ____________________________________ and find its condition now to be acceptable to me. I understand that I will not be charged for any disaster-related expenses and now wish to close the loan.

___________________	______________
(Veteran Signature)	(Date)

Decline in Value. If there is an indication that the property, not including repairs, will be worth less at the time of loan closing than it was at the time of appraisal, then the lender must have the VA fee appraiser update the original value estimate. The payment of the appraiser's fee for that service will be a contractual matter between the buyer and seller.

* If the property value has decreased, the loan amount must be reduced accordingly.

Employment/Income Certification. The lender should ascertain prior to closing that the veteran’s employment and income have not changed since the loan application. If at the time of closing the veteran is no longer employed or family income has been reduced, this information should be reported to VA or the automatic underwriter, as appropriate, for evaluation prior to closing the loan.

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Loan Servicing and Claims Issues

a. Assistance to Homeowners. VA encourages holders of guaranteed loans in disaster areas to extend every possible forbearance to borrowers in distress through no fault of their own. It is the loan holder's responsibility to inspect damage to properties, counsel borrowers concerning assistance that may be available to them and provide the applicable Regional Loan Center with a report that outlines the findings and actions for each damaged property. Loan holders should contact the appropriate Regional Loan Center before consenting to an insurance adjustment where the proceeds will not be sufficient to pay the loan balance or restore the security.

b. VA Bulletin for Borrowers. Make sure to include a copy of the attached "VA Loan Guarantee Benefits" paper in any correspondence you send borrowers in the disaster areas. The information provided here needs to be beneficial to all parties involved.

c. Moratorium on Foreclosures. Although the loan holder is ultimately responsible for determining when to initiate foreclosure and for completing termination action, VA requests that holders establish a 90-day moratorium from the date of the declared disaster on initiating new foreclosures in the disaster areas. There are two exceptions to the 90-day moratorium on new foreclosures:

  1) When a default is clearly insoluble and there is no likelihood of reinstatement and the holder requests and receives VA prior approval to initiate foreclosure during the period of the moratorium;

  OR

  2) When a foreclosure sale, the product of an insoluble default which occurred prior to the disaster, was already scheduled.

d. Insurance Requirements. VA Regulations (38 CFR 36.4326) require that lenders and holders ensure that homes financed with the assistance of VA-guaranteed loans be sufficiently insured against hazards (including flooding, where appropriate). Insurance proceeds will be applied to the restoration of the security or to the loan balance. The burden of proof is upon the lender or holder to establish that no increase in VA's ultimate liability is attributable to the failure of the lender or holder to have the property properly insured, or to properly apply an insurance loss settlement.

Holders are reminded that hazard insurance policies are not to be canceled in the event of a foreclosure sale if the property is to be conveyed to VA. The policies are to be endorsed to the Secretary of Veterans Affairs.

Any case-specific Appraisal, Loan Production and/or Loan Administration issues may be directed to the appropriate Regional Loan Center.

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