If you dont pay PMI, how does this affect the bank if you default

[Jillian118]

I have very little knowledge of how this all works. But I know that in my situation I did not need to pay PMI.

I am curious to know then did the bank just pay the insurance policy for their own protection? Or do they just take the risk??

[faith]

[QUOTE=Jillian118;128084]I have very little knowledge of how this all works. But I know that in my situation I did not need to pay PMI.

I am curious to know then did the bank just pay the insurance policy for their own protection? Or do they just take the risk??[/QUOTE]

Hello Jillian118,
Lenders require private mortgage insurance (PMI) on mortgages with down payments less than 20% because the risk of default and loss to the lender is greater on loans with smaller down payments. Borrowers do not shop for mortgage insurance but are locked into arrangements established by lenders, who decide the insurance carrier with which they want to do business with. It is done for their own protection.

Hope this helps.

God bless and take care.

[BadBobMo]

I am curious to know then did the bank just pay the insurance policy for their own protection? Or do they just take the risk??
Yes Some will buy their own INS.

[caldwellb02]

Faith - I didn't put 20% down and I can find no evidence of PMI. interesting. I guess Long Beach Mortgage thought my predatory loan was a good risk.

[faith]

[QUOTE=caldwellb02;129311]Faith - I didn't put 20% down and I can find no evidence of PMI. interesting. I guess Long Beach Mortgage thought my predatory loan was a good risk.[/QUOTE]

Hello Caldwell,
Here's more information about PMI:

Federal “Homeowners' Protection Act,”applies to people who bought their homes after July 29, 1999. The Act says that you can ask that your PMI be canceled when you’ve paid down your mortgage to 80% of the loan, and that the lender must automatically cancel your PMI when you've hit 78%.

Lenders require PMI to be in place on a mortgage for as long as the principal balance is above 80% of the value of the home. Once the buyer pays the mortgage down to that level, the PMI can usually be cancelled. However, it can take quite a number of years for the principal balance of a mortgage loan to fall to 80% LTV (Loan-to-Value) unless you’re making extra payment every month.

PMI has some advantages. It gives lenders more security to grant a mortgage loan to the buyer who doesn’t have a big down payment. Both parties benefit. But there are drawbacks as well. One major disadvantage is that the PMI premium raises the buyers’ monthly payment, and unlike mortgage interest, it is not tax deductible

There are several ways to avoid the PMI premium. One common method is with combination financing, also known as a piggyback loan. With this type of financing, the buyer takes out a first mortgage for 80% of the purchase price of the home as well as a second mortgage for the remainder of the purchase price (less whatever down-payment money is applied).

Another way to avoid the monthly PMI obligation would be to add the entire premium to the mortgage at closing and finance the entire amount, including it in your normal monthly payment. Another one is to pay a higher interest rate on your mortgage in order to avoid PMI premiums. But don’t expect your lender to lower your payments after your equity has increased. Your interest rate is permanent, even if the lender used the extra money to purchase PMI to cover your loan. Your best course of action is probably to refinance which is very hard to do in this present economy.

God bless and take care.

[Angels]

I don’t understand how PMI works with a short sale or default loan. I was under the impression that the banks required PMI to cover the loan if it defaults. But that being the case, I don’t understand why banks may (or can) pursue a default judgment against the individual if they already have insurance to cover the loan. Does anyone know how this all works from the banks point of view?

[faith]

[QUOTE=Angels;129397]I don’t understand how PMI works with a short sale or default loan. I was under the impression that the banks required PMI to cover the loan if it defaults. But that being the case, I don’t understand why banks may (or can) pursue a default judgment against the individual if they already have insurance to cover the loan. Does anyone know how this all works from the banks point of view?[/QUOTE]

Angels,
The bank/lenders buys PMI insurance for their own protection and when the homeowner defaults then they turn to the PMI company to pay them back the money they've lost. In order for the PMI company pay back the lender, they want to get something back from the homeowner and they will ask the lender or servicer to ask the homeowner to sign a promissory note to pay back the balance owed. The lender/servicer will not take a risk to be disqualified of the claim they put to the PMI company, so they will ask the homeowner to sign a promissory note, the lender gives that money to the PMI company.

If you have Purchase Money mortgage, never refinanced, home is Primary Residence, and live in a state with anti deficiency judgment law like CA, you are protected under CA Section 580b which states , No deficiency judgment shall lie in any event after a sale of real property or an estate for years therein for failure of the purchaser to complete his or her contract of sale, or under a deed of trust or mortgage given to the vendor to secure payment of the balance of the purchase price of that real property or estate for years therein, or under a deed of trust or mortgage on a dwelling for not more than four families given to a lender to secure repayment of a loan which was in fact used to pay all or part of the purchase price of that dwelling occupied, entirely or in part, by the purchaser.

But sometimes the Negotiator will insist that you sign a promossory note or the PMI will not approve the Short Sale, then you can tell them you are protected under CA Section 580b which they can not pursue you for any deficiency judgment. It will prolong the approval and the buyer might back out, so it's important that the real estate agent has back up offers just in case they back out. I had 6 buyers back out on my 1st listing and 1 buyer back out on the 2nd listing, due to long process. Why? Because my lender CW wants me to sign a promissory note to pay the balance owed and I said no I rather foreclose and file for bankruptcy and I reminded him all the time that I am covered by CA Section 580b. I have offered to pay $3,000, I told him instead of using that money that I have to hire a bankruptcy lawyer, I rather give that money that I have left in my savings to the 2nd mortgage. The trick worked. Finally the investor on the 1st mortgage decided to buy out the PMI for $14k. But I insisted to put it in writing that they will not pursue any deficiency judgment against me and I got the letter, by fax, email, mail. I also want to make sure that they will send me 1099C and I've emailed the Negotiator who's going to send me the 1099C and how much is the balance owed that was forgiven. He responded and I've got everything I needed by email, letter, and they put it in escrow papers too. They let me have my $3,000. They paid 5% commssion to my agent and no costs to me.

That's why it is important that when you are dealing with 2nd mortgage and the Negotiator ask you to sign a promissory note that you don't sign the promissory note. You can settle by negotiating down the balance owed to pay 5% or 10% of the balance owed. For exmaple the balance of the 2nd mortgage is $100,000, make an offer to pay it start from 5% which is $5,000, payable in 5 years and no interest. Make sure that you get in writing that all is forgiven and that the Short Sale satisfied your obligation and it must be reported to the credit bureaus as Paid, Settled, in less than Full Balance.

Hope this helps.

Thanks and God bless.

[caldwellb02]

Faith - I do not have a PMI loan. It clearly states "Conventional loan without MI" and there are no other charges that I can see that could have been an upfront payment of the PMI. It seems to me that if they decided to foreclose on me (I'm not close yet) that they would really lose out - (CA) nonrecourse state, no PMI, the house is worth less than the first mortgage so the second mortgage would be toast.... It was 100% financing. (Yeah, I know - dumb - will never do that again). I don't know whether lack of PMI is a good thing, bad thing, or neutral for ME. Do you know?

[faith]

[QUOTE=caldwellb02;129674]Faith - I do not have a PMI loan. It clearly states "Conventional loan without MI" and there are no other charges that I can see that could have been an upfront payment of the PMI. It seems to me that if they decided to foreclose on me (I'm not close yet) that they would really lose out - (CA) nonrecourse state, no PMI, the house is worth less than the first mortgage so the second mortgage would be toast.... It was 100% financing. (Yeah, I know - dumb - will never do that again). I don't know whether lack of PMI is a good thing, bad thing, or neutral for ME. Do you know?[/QUOTE]

Caldwell,
It is not a PMI loan, they probably charge you an extra 1% interest to avoid being charge of PMI.
There are 2 basic ways to obtain 100% financing:
1) One loan with $0 down or 2) Two Loans (80/20 Combo).
-An 80% 1st Mortgage and a 20% 2nd Mortgage. There are household income limitations, approximately $40,000 per year, for the One Loan with $0 Down (this loan will also have Private Mortgage Insurance (PMI)). If you exceed this household income then the 80/20 Combo is the loan for you. You still have the advantage of 100% financing plus you have the added benefit of eliminating PMI (because the 1st loan is at 80% Loan to Value or less). In most cases, your total payment under the 80/20 Combo will be lower than the 100% One Loan because of the elimination of PMI.

Here are some ways to get around PMI.
1. Gather or borrow enough funds to make your down payment greater
than 20 percent.
2. Buy a less expensive property to get your down payment to or above 20 percent.
3. Increase the amount of the purchase price of the home and have seller credit the additional money toward a greater down payment
4. Lender will charge a slightly higher interest rate in lieu of requiring PMI. The benefit here that you'll be paying a slightly higher payment due to the higher interest rate, but all the interest will be tax deductible. The extra cost to you, as a home loan borrower, will be approximately 1 percent extra on your mortgage interest rate. The exact PMI monthly
premium varies according to the amount of your insured mortgage. See example:

The lender charge you a 6.25 percent interest rate mortgage. If you need PMI, you will be paying roughly the equivalent of 7.25 percent interest. Considering you have little or no cash invested in your home, that's still a "good deal" if you can afford the total monthly payments.

The number 4 is what my lender did to me when they told us conventional loan without Mortgage Insurance. My interest should be 5.75% but when I checked the interest rate charged to me was 6.75%. I didn’t say anything at the time I was signing the loan documents. Now I’ve realized what that extra 1% for. But at least it’s tax deductible compare to having a PMI monthly payment.

It’s a good thing if you don’t have PMI, but since yours is 100% financing they charged you an extra interest to cover for PMI. But you don’t have to worry about the 2nd mortgage, if the house forecloses, the 2nd mortgage is wipe out and be treated as unsecured loan and no matter what they cannot pursue you for any deficiency judgment because you are covered under CA Section 580b.

Thanks and God bless.

[Angels]

Thanks Fath for the info. so it sounds like what i thought i was paying in foreclosure insurance (PMI) really is not insurance and they can come after me for the difference. I have a property in Mississippi that i just started the short sale process, is that in a recourse state? Wells Fargo is the bank if that helps.

BTW - sorry if i hijacked the thread. this PMI thing was bothering me.

[caldwellb02]

Faith - you are incredibly knowledgable. I get it. I do have and 80/20 100%. So it's a non-issue right now.

[faith]

[QUOTE=Angels;129893]Thanks Fath for the info. so it sounds like what i thought i was paying in foreclosure insurance (PMI) really is not insurance and they can come after me for the difference. I have a property in Mississippi that i just started the short sale process, is that in a recourse state? Wells Fargo is the bank if that helps.

BTW - sorry if i hijacked the thread. this PMI thing was bothering me.[/QUOTE]

Angels,
No, you didn't hijacked the thread and you don't have to worry about PMI because you can negotiate to pay down the balance at a rate of 5% or 10% of whatever you owe. Say you owe $100,000, you can start offering to settle the debt to $5,000, or $10,000 payable in 5 years and no interest, $166.67 a month for 10 years no interest, or $83.33 for 5 years no interest or come with $5,000 cash and pay them to get rid of them for good.

Make sure that you do not sign the promissory note and the escrow papers unless they have given a letter stating that they have accepted the Short Sale and it satisfies your obligation and the balance is forgiven, they will report it as Paid, Settled In Less Than Full Balance..

Now is the time to negotiate your 2nd mortgage and the balance owed and not after. Do not be influenced by your agent to accept the Short Sale unless everything is in writing that they will not pursue any deficiency judgment against you. When you sign the escrow papers, it should include in the escrow the demand of the lender stating that they have accepted the Short Sale with the following conditions:
1. The sale price
2. The buyer and no substitution
3. The Title Company
4. 5% commission to your agent, you don't pay your agent a dime
5. No costs to you at all.
6. The name of the bank where the buyer's bank wire the payment
7. The letter stating WF, its insurers and investors accept the Short Sale and stating the balance is forgiven
8. The letter stating that the 2nd mortgage accepts the settlement to pay $5000 and the balance is forgiven.

If they give you hard time and say no, do a scare tactics, let the house foreclose and you will file for bankruptcy. Most of the time the scare tactics work, it worked for me.

Here's the list of Anti-Deficiency / Non-Recourse States

Alaska

Arizona

California

Connecticut

Florida

Idaho

Minnesota

North Carolina

North Dakota

Texas

Utah

Washington

[Angels]

Thanks again Faith, I really appreciate your advice. I only have one loan on this house so that should make things somewhat simpler.

I am in a different situation then most (I think), this particular property is an investment that went bad and I soon realized (and early enough thank goodness) that I will not be able to make the payments. I don’t know if I should start another thread on this topic so please move it if this is not the appropriate place. The background is we were supposed to get a government sponsored forgivable loan for the new construction which would have covered almost half of the cost of the property. This was put in place to encourage new construction in the hurricane hit areas. The rents at the time were high and we ran a worse case scenario what if the rents dropped a couple hundred a month and what if we did not get the forgivable loan and it looked like we could make it no problem under that scenario. Well, this became a “perfect storm” as it slowly sucked us in step by step starting with a higher then projected interest rate, insurance was way more then our lender projected, then the government changed the rules from the first phase to the second for the loan (my understanding was several people got caught on this one) so we did not get that, rents fell several hundred dollars, people are moving out of the area, and because of the incentives there are several new rentals on the market. What also makes our situation somewhat different is before this we invested in other properties (in different areas) and although overall we are loosing money on them we have been able to make the payments. Now that the market and the economy has turned, people are moving out (buying cheap homes) or loosing their jobs so this is really draining us and the Mississippi property put us over the edge. I believe we can continue making payments on the other properties as long as we no longer have this one so it was a decision to cut an arm off to save the rest. Without that property we pay 60% of our income towards mortgages and Costco is our friend. We really, really, really, don’t want to go the BK route (and I don’t think we qualify) so we are hoping for a quick resolution. I don’t know how the bank will view our other investments and try to take them or assess a lean on some or all or what but I am hoping they will be reasonable with us. This does bring up one question, when we get to the negotiation stage (provided they agree to a short sale), would it be beneficial to hire a lawyer or do it ourselves?

On the personal side, like others, we have not slept since coming to this realization and I keep running the past though my head on how we got here. Our credit is (was) above 800 and I have always paid my bills until now - I am really taking this personal. As I read though the posts I feel really bad for others knowing what they are going through and the banks don’t seem very responsive to the homeowners. In any case its feels somewhat good to vent on this forum and to share experiences with others which I appreciate.

As a side note, I saw a thread about “who will rent to us now” and I can say that even before this we always considered the whole person before making a decision to rent to them or not. As an example, one of our renters had absolutely horrible credit because of medical bills, charge offs, etc and has turned out to be a great tenant and later we have come to know her as a good person. I think we got really lucky with her and we hope she decides to stay with us for a long time.

[faith]

[QUOTE=Angels;130302]Thanks again Faith, I really appreciate your advice. I only have one loan on this house so that should make things somewhat simpler.

I am in a different situation then most (I think), this particular property is an investment that went bad and I soon realized (and early enough thank goodness) that I will not be able to make the payments. I don’t know if I should start another thread on this topic so please move it if this is not the appropriate place. The background is we were supposed to get a government sponsored forgivable loan for the new construction which would have covered almost half of the cost of the property. This was put in place to encourage new construction in the hurricane hit areas. The rents at the time were high and we ran a worse case scenario what if the rents dropped a couple hundred a month and what if we did not get the forgivable loan and it looked like we could make it no problem under that scenario. Well, this became a “perfect storm” as it slowly sucked us in step by step starting with a higher then projected interest rate, insurance was way more then our lender projected, then the government changed the rules from the first phase to the second for the loan (my understanding was several people got caught on this one) so we did not get that, rents fell several hundred dollars, people are moving out of the area, and because of the incentives there are several new rentals on the market. What also makes our situation somewhat different is before this we invested in other properties (in different areas) and although overall we are loosing money on them we have been able to make the payments. Now that the market and the economy has turned, people are moving out (buying cheap homes) or loosing their jobs so this is really draining us and the Mississippi property put us over the edge. I believe we can continue making payments on the other properties as long as we no longer have this one so it was a decision to cut an arm off to save the rest. Without that property we pay 60% of our income towards mortgages and Costco is our friend. We really, really, really, don’t want to go the BK route (and I don’t think we qualify) so we are hoping for a quick resolution. I don’t know how the bank will view our other investments and try to take them or assess a lean on some or all or what but I am hoping they will be reasonable with us. This does bring up one question, when we get to the negotiation stage (provided they agree to a short sale), would it be beneficial to hire a lawyer or do it ourselves?

On the personal side, like others, we have not slept since coming to this realization and I keep running the past though my head on how we got here. Our credit is (was) above 800 and I have always paid my bills until now - I am really taking this personal. As I read though the posts I feel really bad for others knowing what they are going through and the banks don’t seem very responsive to the homeowners. In any case its feels somewhat good to vent on this forum and to share experiences with others which I appreciate.

As a side note, I saw a thread about “who will rent to us now” and I can say that even before this we always considered the whole person before making a decision to rent to them or not. As an example, one of our renters had absolutely horrible credit because of medical bills, charge offs, etc and has turned out to be a great tenant and later we have come to know her as a good person. I think we got really lucky with her and we hope she decides to stay with us for a long time.[/QUOTE]


Angels,
I did my Short Sale without hiring a lawyer. I hired a very knowledgeable Real Estate Agent through Century 21 and we both have cooperated with each other. I did the most of the talking, emailing, and mailings letters and hardship letter and documents to CW my lender. He did his job as far as getting backup buyers and talking to my Negotiator and then he emailed me of the conversation. If I didn't like the offer or what was said, I emailed back to the Negotiator and made counter offers and demanded that short Sale was only acceptable to us if they give us a letter that they will not pursue any deficiency judgment against us.

By emailing him back and forth gave me all the evidence and proof that I needed to make him say that CW, its investors and insurers would not pursue any deficiency judgment against us. I asked him always through email, I even asked him how about the 1099C who was going to give us 1099C and how much was the balance owed forgiven. My Negotiator is a decent and honest man, he only wanted me to contact him via email and so is my agent. He faxed and sent me a letter stating that CW, its insurers and investors will not pursue any deficiency judgment against us and that was included in the escrow too. So all the letters that I needed I got and was able to use it to dispute the reports that they made to the credit bureaus.

As far as hiring a lawyer, you have to do it from the start, make sure you check the website of State BAR of CA, click the attorney search so you will have an idea if he is license to practice law, but make sure he is Real Estate lawyer. I would prefer a flat feeas far as his charges. By the hour is very expensive.

You can also go the Short Sale outpost and click on it, there's a lot of information on it. Please copy and paste the link to your browser.

http://www.loansafe.org/forum/short-sale-outpost/

Also if you want another topic, you can always click the NEW Thread botton, type a new topic and put your story there, so other members can see it and give you their opinions and advice as well.

In Short Sale you have to be bold, persistence, patient. Moe always said, the squeaky wheel gets the grease.


God be with you always.

[weneedpeace]

If anyone viewing this has had their home foreclosed on that is active duty military with a VA loan, could they reply?

I spoke with my VA Loan rep, who is based out of the St. Paul VA Loan Center, this week. Inquired with her if the VA pays out a claim to the lender against the veteran's entitlement (which is what I was told they do in the case of a deed in lieu). She placed me on hold to double check and returned to the line to confirm it's treated the same. She (and another VA rep through the Roanoke loan center said that a claim paid out the the lender against our entitlement does not necessarily mean we can never use our cert of eligibility again, but our amount that can be used may be decreased). They both said in cases of a claim payout against veteran entitlement to not worry that the VA is 'not coming after Veterans'.

.. but, if we're in a recourse state (Virginia) I'm trying to understand how the lender could warrant filing a deficiency judgement on a veteran, if an entitlement claim payout covers their loss. We loose our entitlement, so going on the train of thought with Faith's PMI replies, is this something that the Veteran's Administration will require that the lender try to recoup from us? Something isn't adding up or am I thinking too hard?

(ETA we had a VA 30 yr 6% fixed, 100% financing with rolled in funding fee. There are some comps that support within $10,000 of our payoff, but others are so skewed with the forecloses and short sales that have closed in 2009, that even my broker had a 'jovial arguement' with the head loan officer of the local Wells Fargo branch (she called him to pick his brain on my issue, without disclosing my name/loan number/property address). He argued $270's, she argued $210's. I see support for both numbers, but if the lender were to list it as a foreclosed sale it would likely be in the $210's the same as the comps..)

*The reason for our mortgage issues is that we were involuntarily transferred with the military 19 months ago to a different state/duty station. Couldn't sell the home, tenants in the house now with a $1300/mo. negative with the rent considered!, we're sinking and have exhausted our TSP 401k under hardship withdraw, along with our regular savings, and are living negative every month. The house has to go. We have a loan modification in with Wells Fargo, but it does not look hopeful as we are no longer 'primary residents' of the home and are being coined as 'investors' even though we obviously occupied the home for over two years and only moved b/c we were told to transfer by the military. Can not short sale or deed in lieu, because of our state's protective and sticky laws with having a tenant in the property for such a long time remaining on their lease term still.. it's loan mod or foreclosure (based on input from 3 state real estate attornies - one specializing in landlord-tenant).

Sorry to threadjack, 1/2 of my post touches on the no-PMI issue and sparked my question. Thanks for your help!

[faith]

[QUOTE=weneedpeace;130580]If anyone viewing this has had their home foreclosed on that is active duty military with a VA loan, could they reply?

I spoke with my VA Loan rep, who is based out of the St. Paul VA Loan Center, this week. Inquired with her if the VA pays out a claim to the lender against the veteran's entitlement (which is what I was told they do in the case of a deed in lieu). She placed me on hold to double check and returned to the line to confirm it's treated the same. She (and another VA rep through the Roanoke loan center said that a claim paid out the the lender against our entitlement does not necessarily mean we can never use our cert of eligibility again, but our amount that can be used may be decreased). They both said in cases of a claim payout against veteran entitlement to not worry that the VA is 'not coming after Veterans'.

.. but, if we're in a recourse state (Virginia) I'm trying to understand how the lender could warrant filing a deficiency judgement on a veteran, if an entitlement claim payout covers their loss. We loose our entitlement, so going on the train of thought with Faith's PMI replies, is this something that the Veteran's Administration will require that the lender try to recoup from us? Something isn't adding up or am I thinking too hard?

(ETA we had a VA 30 yr 6% fixed, 100% financing with rolled in funding fee. There are some comps that support within $10,000 of our payoff, but others are so skewed with the forecloses and short sales that have closed in 2009, that even my broker had a 'jovial arguement' with the head loan officer of the local Wells Fargo branch (she called him to pick his brain on my issue, without disclosing my name/loan number/property address). He argued $270's, she argued $210's. I see support for both numbers, but if the lender were to list it as a foreclosed sale it would likely be in the $210's the same as the comps..)

*The reason for our mortgage issues is that we were involuntarily transferred with the military 19 months ago to a different state/duty station. Couldn't sell the home, tenants in the house now with a $1300/mo. negative with the rent considered!, we're sinking and have exhausted our TSP 401k under hardship withdraw, along with our regular savings, and are living negative every month. The house has to go. We have a loan modification in with Wells Fargo, but it does not look hopeful as we are no longer 'primary residents' of the home and are being coined as 'investors' even though we obviously occupied the home for over two years and only moved b/c we were told to transfer by the military. Can not short sale or deed in lieu, because of our state's protective and sticky laws with having a tenant in the property for such a long time remaining on their lease term still.. it's loan mod or foreclosure (based on input from 3 state real estate attornies - one specializing in landlord-tenant).

Sorry to threadjack, 1/2 of my post touches on the no-PMI issue and sparked my question. Thanks for your help![/QUOTE]

Hello,
Hope all is well with you and family.

The following information might help you:

THE GUARANTY
VA-guaranteed loans are made by private lenders such as banks, savings and loan associations, or mortgage companies. To get a loan, you apply to the lender. If the loan is approved, VA guarantees the loan when it is closed. The guaranty means the lender is protected against loss if you or a later owner fail to repay the loan.


1. How much is the guaranty?
- VA will guarantee up to 50 percent of a home loan up to $45,000. For loans between $45,000 and $144,000, the minimum guaranty amount is $22,500, with a maximum guaranty, of up to 40 percent of the loan up to $36,000, subject to the amount of entitlement a veteran has available. For loans of more than $144,000 made for the purchase or construction of a home or to purchase a residential unit in a condominium or to refinance an existing VA-guaranteed loan for interest rate reduction, the maximum guaranty is the lesser of 25% or $104,250 which is 25% of the Freddie Mac conforming loan limit for a single family residence for 2007. This figure will change yearly.

2. Is $36,000 the biggest loan a veteran can get?
No. You may generally borrow up to the reasonable value of the property or the purchase price, whichever is less, plus the funding fee, if required. For certain refinancing loans, the maximum loan is limited to 90 percent of the value of the property, plus the funding fee, if required. To determine the reasonable value, VA requires an appraisal of the property.

3. What is the maximum VA loan?
There is no maximum VA loan, except that the loan cannot exceed the lesser of the appraised value or purchase price, plus VA funding fee and energy efficient improvements, if applicable. However, lenders usually won’t make a no-downpayment loan larger than $417,000 ($625,500 in Alaska, Hawaii, Guam, and U.S. Virgin Islands) due to secondary market limitations.

4. Must the loan be repaid?
Yes. A VA guaranteed loan is not a gift. It must be repaid, just as you must repay any money you borrow. The VA guaranty, which protects the lender against loss, encourages the lender to make a loan with terms favorable to the veteran. But if you fail to make the payments you agreed to make, you may lose your home through foreclosure, and you and your family would probably lose all the time and money you had invested in it.

If the lender does take a loss, VA must pay the guaranty to the lender, and the amount paid by VA must be repaid by you. If your loan closed on or after January 1,1990, you will owe the Government in the event of a default only if there was fraud, misrepresentation, or bad faith on your part.
5. Does VA make any loan directly to eligible veterans?
Yes, but only to Native Americans on trust land or to supplement a grant to get a specially adapted home for certain eligible veterans who have a permanent and total service-connected disability(ies).

REQUIREMENTS FOR VA LOAN APPROVAL
To get a VA loan the law requires that:
• You must be an eligible veteran who has available home loan entitlement (except in the case of an interest rate reduction refinancing loan--see "Interest Rates" below.
• The loan must be for an eligible purpose. The purchase price should not exceed the appraised value. Otherwise, you will have to pay the difference from your own resources;
• You must occupy or intend to occupy the property as your home within a reasonable period of time after closing the loan;
• You must have enough income to meet the new mortgage payments on the loan, cover the costs of owning a home, take care of other obligations and expenses, and still have enough income left over for family support (a spouse's income is considered in the same manner as the veteran's); and
• You must have a good credit record.



Please copy and paste the link below:
http://www.homeloans.va.gov/pdf/vap_26-4_online_version.pdf


Source: Department of VA , Home Loans For Veterans



Thank you, God bless and take care.

[weneedpeace]

Faith, it is so appreciated that you take the time to help families find details like this. I've read a few other threads that you've helped with!!!

From what this says, it jives with what I was told by both VA Loan Representatives:
'If your loan closed on or after January 1,1990, you will **owe the Government in the event of a default only if there was fraud, misrepresentation, or bad faith on your part**. '


I'm guessing this is likely why the Loan Reps both said that the 'VA is not coming after veterans' for the claim amount. I will have to consult with a Virginia real estate attorney and find out though if this still means that the lender can take recourse with us, even if the Veteran's Administration pays them a claim for their loss??

The extended military Homeowner Assistance Program provides us foreclosure legal expense benefit and also asks on the application what our potential future obligations (I think they're asking for the difference between loan payoff and auction sales price) in case someone comes after us in the future? I've got the forms and am going to go ahead and submit as it has a box to check if you're a 'pending Foreclosure' which I suppose we are as our certified letter states we're in default and have to remedy by end of October or they are going ot accelerate the loan.


Thank you!