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Is the VA Mortgage Payment Reduction Program a Modification Program?

By Gina Pogol
Mortgage Credit Problems Columnist


Maria Asks: Dear Gina, I heard somewhere about a VA payment reduction program and was wondering if that was related to HAMP or FHA-HAMP. Can I use it to get a modification on my VA mortgage?

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Gina Says:

Hi Marla,

The Veterans Administration (VA) mortgage payment reduction program doesn't have anything to do with the Home Affordable Modification Program (HAMP) and is not a mortgage modification program. It's a refinancing program for veterans with VA mortgages. The program is also called the interest rate reduction refinancing loan (IRRRL) or VA streamline refinance.

If you have a VA loan and your rate is higher than today's interest rates, you should be able to use this plan to lower your payments (although perhaps not as much as you might with a mortgage modification).

Requirements to Refinance with an IRRRL

There aren't many. There is no appraisal (important in Las Vegas, where falling home values have caused so many problems), and no credit qualifying (which can be helpful if the economy has caused you to have bad credit recently). The only necessity is that you cannot have been more than 30 days late on your mortgage more than once within the last twelve months. You don't have to prove your income, or even that you have a job. The reason for this is that the VA is already on the hook if you default. And by letting you refinance to a better interest rate and a safer loan, the VA can lower the chance of that happening.

There are some limitations. The proceeds cannot be used to pay off a second mortgage or any other debts. An existing second mortgage must be subordinated to the new VA home loan. You can't take cash out in most cases, but you are allowed up to $6,000 for energy efficiency home improvements to be completed within 90 days of your closing.

Shopping for an IRRRL

It's important that you shop with several lenders for your refinance. The government doesn't set VA mortgage rates and doesn't require any closing costs other than the VA funding fee. It's a great way to refinance with bad credit if you qualify, and it can be even greater if you get a few mortgage quotes and make your best deal.

If You need a VA Mortgage Modification

VA counselors help borrowers with VA-guaranteed loans avoid foreclosure through counseling and if needed, they arrange to restructure the loan. Depending on your circumstances, the VA can intercede with your lender on your behalf to get you a repayment plan, forbearance, or loan modification and help you keep your home.

To obtain help from a VA financial counselor, call 1-877-827-3702.

Sources

http://www.homeloans.va.gov / http://www1.va.gov/

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