What process occurs when a buyer assumes an existing Federal Department of Veterans Affairs loan and the veteran is released from liability?

The correct process where a buyer assumes an existing Federal Department of Veterans Affairs (VA) loan and the veteran is released from liability is novation. Novation is a legal concept where a new party is substituted for an existing party in a contract, with the consent of all parties involved. In the context of real estate and financing, when a buyer assumes the loan, they take over the responsibility for the debt, and the original borrower (the veteran) is released from liability on that loan.

This substitution is significant because the lender must agree to the change, ensuring that they are comfortable with the buyer's financial ability to meet the obligations of the loan. Novation creates a clean break from the original contract for the veteran, as they no longer retain any form of responsibility or liability related to that loan, which is essential in protecting the veteran’s credit and financial status.

In contrast, other terms like subordination, satisfaction, and relief do not capture the complete essence of what happens in this scenario. Subordination refers to a ranking of claims, often pertaining to the priority of liens or claims against property, not to the transfer of liability between parties. Satisfaction generally relates to the fulfillment or completion of a debt, indicating that it has been paid off. Relief