A veteran in Texas defaults on a VA-guaranteed loan secured by a deed of trust. After a non-judicial foreclosure sale, the property sells for less than the outstanding loan balance. Under the VA loan program, what protects the veteran from personal liability for the deficiency?
Correct Answer
D) The VA guaranty covers the lender's loss up to the guaranteed amount, but the veteran may still owe a deficiency depending on state law and VA procedures
The VA guaranty covers the lender's loss up to the guaranteed portion, reducing the lender's risk. However, the veteran may still be liable for any deficiency not covered by the guaranty. Texas allows deficiency judgments, but the VA may negotiate with the lender on the veteran's behalf through its claims process.
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Related Concepts
An FHA loan is a mortgage insured by the Federal Housing Administration that allows lower down payments and credit scores than conventional loans. It is designed to help first-time homebuyers and borrowers with limited resources.
A fixed-rate mortgage has an interest rate that remains constant for the entire term of the loan, resulting in equal monthly principal and interest payments throughout the life of the mortgage.
Foreclosure is the legal process by which a lender takes possession of a property when a borrower fails to make mortgage payments. It allows the lender to sell the property to recover the outstanding debt.
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