This form is for the situation where the seller is to apply for a release of liability from an assumed loan or reinstatement of VA entitlement.
Illinois Addendum for Release of Liability on Assumption of FHA, VA or Conventional Loan, Restoration of Seller's Entitlement for VA Guaranteed Loan
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US-00472-A1
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How to fill out Addendum For Release Of Liability On Assumption Of FHA, VA Or Conventional Loan, Restoration Of Seller's Entitlement For VA Guaranteed Loan?
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FAQ
Sell the property: Selling the property you bought with your current VA loan is the simplest way to restore your entitlement. However, you must also be able to repay the full amount of the loan in addition to selling your property.
Find a home seller who will allow you to assume their VA loan. Verify that you meet the VA's minimum credit score and income requirements. Agree to assume all obligations of the existing loan. Pay the funding fee, down payment (if required) and closing costs.
If the purchaser(s) is creditworthy and assumes the liability to the lender and VA to the same extent that you did when you obtained the loan, you will be released from liability on the loan. To obtain a release from liability, you should check with the company to whom you make your payments before you sell your home.
An FHA/VA financing addendum is attached to a purchase contract to state that a buyer with FHA/VA financing can back out of the sale if the appraised property value is less than the asking price.
Under VA guidelines, you can typically reinstate the loan and stop a foreclosure sale by bringing the delinquent loan current by paying all overdue payments, late charges, and foreclosure expenses. However, as with most things, exceptions exist. For example, some states don't give borrowers the right to reinstate.
For VA loan assumptions, the only way to safeguard your entitlement is to have a Veteran assume your loan and substitute their entitlement for yours. Unless that happens, Veterans will not regain their entitlement with a loan assumption ? it will remain tied to the property until the loan is repaid in full.
Addendum for Release of Liability on Assumed Loan and/or Restoration of Seller's VA Entitlement. Description: This Addendum is used in conjunction with the Loan Assumption Addendum if the Seller wants to be released from future liability of the loan.
However, borrowers who allow another buyer to assume their mortgage ?remain liable to the VA for any loss that may occur as a result of a future default and subsequent claim payment,? ing to VA Pamphlet 26-7, ?Unless the property is sold to a creditworthy purchaser who agrees to assume the payment obligation.?
