COVID-19 Refund Modification

VA is keeping this information collection open for resubmissions regarding the loan modification options available to servicers that do not require VA’s prior approval to include the COVID-19 Refund Modification, to assist certain COVID-impacted veterans as they exit a COVID-19 forbearance. Under 38 U.S.C. 3720(a)(2), Congress has provided the Secretary with discretion “[n]otwithstanding the provisions of any other law” to set the terms and conditions to which the Secretary will consent to loan modifications. Additionally, while VA has outlined in regulation at 38 CFR 36.4315(a) the terms of loan modifications that do not require prior VA approval, VA may waive a regulatory requirement if VA finds the interest of the Government are not adversely affected and such waiver would relieve undue prejudice to a debtor, holder, or other person without impairing the vest rights of any person affected. 38 CFR 36.4338(a). Under the COVID-19 Refund Modification, servicers will be able to combine a partial VA purchase (refund) that includes arrearages and, if needed, outstanding principal amounts (hereinafter known as a COVID-19 Refund) with a modification of the guaranteed loan terms to achieve an affordable loan payment for the veteran. Servicers who offer the COVID-19 Refund Modification will be required to originate a new loan repayable to VA and provide documentation to VA. This collection of information is necessary to ensure that the COVID-19 Refund is appropriately established as a loan repayable to VA. Specifically, the servicer is required to prepare a note and security instrument in favor of “the Secretary of Veterans Affairs, an Officer of the United States.” VA requires that the note be consistent with the terms described in the Circular and include all borrowers who are obligated on the guaranteed loan. The security instrument is required to include all non-borrowers who have an interest in the property securing the guaranteed loan. The servicer is required to submit to the Secretary the request for COVID-19 refund within timelines prescribed in the Circular. VA also requires the servicer to provide VA with the original note no later than 120 days after the veteran exits forbearance; the servicer must also provide VA with the original security instrument and evidence of recordation not later than 180 days following the date the security instrument is executed. If the recording authority causes a delay, VA allows the servicer to request an extension of time, in writing, from VA. Finally, the servicer is required to report information related to the COVID-19 Refund Modification event to VA electronically; this information, however, has been included as a revision to an already approved information collection for VA’s electronic loan servicing system (OMB control number 2900-0021).

The latest form for COVID-19 Refund Modification expires 2027-12-31 and can be found here.