If you have a VA loan and find yourself in the position of needing a short sale transaction or having to “turn in your keys” to the lender holding your loan, that lender will now help you move out of the house that you are leaving behind[1]. The Department of Veteran Affairs announced today that its mortgage servicers will be paying relocation assistance to veterans who are compelled by their circumstances to complete a short sale or a deed-in-lieu (DIL) transaction. Assistance is to be advanced when necessary, and can be as much as $1,500 as long as the borrower in question has completed the necessary paperwork to conclude the short sale or DIL transaction.

The VA hopes to save homes via these two foreclosure alternatives and cut its own losses in the process. According to a circular released by the agency, properties that are turned over via DIL are usually left in better condition than foreclosure properties, so the new policy of paying relocation assistance on both short sales and DIL transactions will likely benefit mortgage servicers and the VA since there will be less to do on the properties before they can be resold.

The relocation assistance will also come with a written agreement. In that agreement, the homeowner states that they understand the requirements for receipt of the “relocation incentive” (either complete a short sale or a DIL according to VA requirements) and that the property will be “unencumbered by other liens or restrictions on the title…be kept in good and safe condition, and it will be left ready for sale in ‘broom clean’ condition upon homeowner departure.”

This seems like a great way to help homeowners exit their homes in a better situation than they would be if they completed the foreclosure. However, in recent months many lenders have said they would prefer to foreclose than take other routes like DILs and short sales. Do you think that the VA’s incentive program and accompanying guarantee of property condition could be applied successfully on a wider scale?

Thank you for reading! Your comments and questions are welcomed below.

[1] http://www.dsnews.com/articles/va-paying-relocation-costs-for-short-sales-and-deeds-in-lieu-2011-01-17