VA Home Loans Carry Special Rights With Them
VA Home Loans are guaranteed and insured by the federal Department of Veterans Affairs. This means that these loans are governed by Title 38, Section 36.4350, Code of Federal Regulations. This federal law says that mortgage servicers servicing VA-backed loans must maintain a loan servicing program and must take certain actions in its collection procedures against borrowers in various stages of delinquency.
For example, the servicer must provide you with a written notice of default and this default letter must include specific information. For example, the letter must inform the borrower about the possibility of losing the entitlement to a future VA home loan guaranty and must give direction as to how the borrower can get assistance directly from the VA. See 38 C.F.R. 36.4350(g)(1)(iv)(B).
This letter, containing this specific information, must be sent to the borrower before the borrower is sued for foreclosure. This is called a condition precedent, which is basically something the mortgage servicer has to do before the foreclosure lawsuit can be filed. Failure of the lender or servicer to do this can result in dismissal of the foreclosure action. See, for example, DeLong v. Lakeview Loan Servicing (Fla. 5th DCA 2017), where the Fifth District Court of Appeal reversed a foreclosure judgment and ordered the case to be dismissed because the mortgage servicer did not present sufficient evidence that it complied with these requirements before foreclosing on the homeowner. This opinion can be read here.
These regulations serve an important purpose in protecting our veterans when they are facing foreclosure. It is important that we hold the mortgage lenders and servicers accountable when they fail to meet their legal obligations, to the detriment of our veterans.
Consumer Litigation Attorney