VA issued Circular 26-26-2, authorizing certain servicers to use a non-judicial foreclosure process to discharge properties from a VA partial claim interest. Per the Circular, VA authorizes servicers in states that allow for non-judicial foreclosure processes and that comply with 38 U.S.C. § 3737(e)(2) to use a non-judicial foreclosure process to discharge properties from a VA partial interest if the servicer carries out the non-judicial foreclosure and distributes any excess proceeds in accordance with state law. These partial claim interests include:
- COVID-19 Veterans Assistance Partial Claim Payments (COVID-VAPCP) made under subpart F, part 36, title 38, C.F.R.;
- Partial purchases made as part of a COVID-19 Refund Modification; and
- Future Partial Claims4 as described in 38 U.S.C. § 3737(b).
In addition, servicers that initiated judicial foreclosure before August 11, 2026 to discharge properties from VA’s partial claim interest can continue with the judicial process. If switching to a non-judicial foreclosure under state law would reduce time and costs without jeopardizing the interest in the guaranteed loan, servicers may re-initiate foreclosure using a non-judicial process. On or after August 11, 2026, servicers should no longer initiate a judicial foreclosure solely because the property secures a partial claim interest held by VA (if the property is in a state where the non-judicial process is allowed for foreclosing a home loan).
Click to view the VA Circular 26-26-2: https://www.tenaco.com/wp-content/uploads/2026/08/VA-Circular-26-26-2-08-11-26.pdf
