VA Loan

VA Loan — The VA loan program, established in 1944, enables military borrowers to access favorable financing terms that would otherwise require significant down payments or mortgage insurance. The Department of Veterans Affairs does not originate loans directly; instead, it guarantees a portion of each loan made by approved private lenders, reducing the lender's risk and enabling more competitive pricing.

Note investors occasionally encounter VA loans on the secondary market, particularly in non-performing pools sold by banks and servicers. Working out a defaulted VA loan involves additional complexity because the VA has its own loss-mitigation hierarchy and may offer to purchase the loan from the holder if certain conditions are met. Investors must understand VA-specific servicing requirements and the government's role in the resolution process before acquiring these notes.