After 12 years, the Department of Veterans Affairs is finally adjusting the price it pays VA lenders for newly foreclosed properties.
For 12 years VA’s Loan Guaranty Service has paid nearly 88% of the appraised value for REO. The 11.87% discount reflects the estimated cost to VA of acquiring, managing and selling the property.
Starting Oct. 8, VA will set the discount at 14.95%, according to VA home loan director Michael Frueh. “It will more accurately reflect the cost of selling properties in this market with tight credit,” Frueh told NMN.
VA issued a notice about the
VA purchases REO from lenders if it will reduce the cost of paying the claim on the defaulted VA loan. “We know if we sell, it will offset the cost of paying that guarantee claim,” Frueh said.
VA has contracted with Vendor Resource Management to manage and sell its nationwide REO portfolio. The mortgage servicer and property management firm is based in Carrollton, Texas.
VA sells about 13,000 to 14,000 REO properties a year.
Overall, VA has a low foreclosure start rate of 47 basis points and a low inventory of foreclosed properties—just 1.88%, according to the Mortgage Bankers Association.
“Our losses are so low, we generate money for the federal government,” the VA director said.
