I just had a disabled veteran come to me who was told that they would lose ALL of their benefits if they did a VA short sale. 

Does anyone have a good and knowledgeable contact at the VA who handles short sales that I can direct him to? 

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Tni - That is ridiculous, whoever told your seller that!  The VA borrower will just lose the entitlement that was tied up for that mortgage. He will probably have remaining entitlement to buy another home, and he can also eventually pay back the lost amount to the VA if he wants all of it restored. He can call the VA that services his area. Google....

I know right?  Evidently whomever he spoke to at VA told him that -- or he misunderstood it.  I was hoping to hand him off to someone else directly...

 

The answer depends on how much of a “claim” the VA has to pay out on the short sale, so there is not a definitive answer at the moment.  If the full amount entitled is taken then you may exhaust the benefit, however if only a portion is used, then that portion will be available for a future purchase.  I believe you get to KEEP your bonus entitlement, but I would have to call and check on that. 

 

I don't have a contact at the VA though...sorry.

One issue veterans need to consider is losing, at least temporarily, some of their future buying power. The 

part of their VA entitlement tied up in the original mortgage guaranty will remain in limbo until the 

VA gets fully reimbursed. To learn more about this program, VA loan holders can contact the agency at
1-800-933-5499.


→ My prior VA loan was assumed, the assumer defaulted on the loan, and VA paid a claim to the lender.
VA said it wasn’t my fault and waived the debt. Now I need a new VA loan but I am told that my used
eligibility can not be restored. Why? Or, my prior loan was foreclosed on, or I gave a deed in lieu of
foreclosure, or the VA paid a compromise (partial) claim. Although I was released from liability on the
loan and/or the debt was waived, I am told that I cannot have my used eligibility restored. Why?
In either case, although the veteran’s debt was waived by VA, the Government still
suffered a loss on the loan. The law does not permit the used portion of the veteran’s
eligibility to be restored until the loss has been repaid in full.
→ Only a portion of my eligibility is available at this time because my prior loan has not been paid in full
even though I don’t own the property anymore. Can I still obtain a VA guaranteed home loan?
Yes, depending on the circumstances. If a veteran has already used a portion of his or her
eligibility and the used portion cannot yet be restored, any partial remaining eligibility
would be available for use. The veteran would have to discuss with a lender whether the
remaining balance would be sufficient for the loan amount sought and whether any down
payment would be required.

Q11. Who counsels the veteran about his/her benefits that may be affected by the compromise sale?
A11. The two paragraphs that are required to be placed in the VA loss mitigation letter will explain the effects on their benefit. These paragraphs can be found in the new 4800 series of regulations.

Thanks Kevin

Thank you all for the great information.  I am dealing with a veteran who will need to short sale his property due to a relocation but was unaware of the implications.  Thank you so much for your insight.

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