Congress has passed legislation to help veterans avoid foreclosure after the Department of Veterans Affairs ended a mortgage relief program in May without a permanent replacement.
The VA Home Loan Program Reform Act, which passed the Senate last week and awaits President Donald Trump’s signature, creates a five-year partial claims program for delinquent borrowers with VA-backed loans. It lets the VA buy a portion of a loan in default, allowing veterans to catch up on payments without immediately losing their homes.
The move comes after the VA ended the Veterans Affairs Servicing Purchase (VASP) program on May 1, leaving tens of thousands of veterans at risk of foreclosure. VASP had helped about 33,000 borrowers stay in their homes by offering new low-interest loans directly from the VA.
“This bipartisan and bicameral legislation will assist veterans who are facing financial hardships and provide VA with a tool to better help veterans stay in their homes and avoid foreclosure,” a joint statement from the House and Senate Committees on Veterans’ Affairs said.
The measure grants the VA the power to “pay the holder of a loan guaranteed by the VA an amount necessary to avoid the foreclosure of the loan,” provided that legal documents are executed to give the VA a secured interest in the property, according to a bill summary on Congress.gov. Borrowers would repay the VA later when refinancing, selling, or paying off the home.
The Mortgage Bankers Association praised the bill’s passage.
“MBA applauds the Senate for taking swift bipartisan action to support veterans at risk of foreclosure by passing the VA Home Loan Program Reform Act,” MBA President Bob Broeksmit said in a statement. “This important legislation… is a critical step forward in ensuring that distressed veteran homeowners have access to a proven and sustainable loss mitigation solution.”
The National Association of Realtors also expressed support for the proposal.
“We are grateful to the House of Representatives and the Senate for passing this measure and providing veterans and active-duty service members the same advantages as other buyers in a competitive real estate market,” Shannon McGahn, NAR’s EVP and Chief Advocacy Officer, said in a statement.
As of April 1, about 75,000 veteran borrowers had missed three or more payments on their VA-backed loans. Of those, 33,000 were already in foreclosure, NPR reports.
Rep. Derrick Van Orden, R-Wis., a retired Navy SEAL and lead sponsor of the bill, criticized the Biden administration for creating VASP unilaterally.
“Under the Biden administration, the VA created the VASP program without consulting Congress, costing the American taxpayers $5.8 billion and endangering the entire VA home loan guarantee program,” his statement said. “My bill offers a real solution to help every servicemember and veteran maintain the American Dream of homeownership.”
With interest rates around 7%, many veterans who defaulted on their mortgages have been left with few realistic options, according to Mortgage Point. After VASP ended, loan modifications often meant higher monthly payments, and some lenders advised veterans to sell or face foreclosure. The partial claims program is designed to offer a more viable alternative, the report said.
The VA has not yet said when it will launch the new program or whether it will ask mortgage servicers to pause foreclosures in the meantime.
“We appreciate Congress’s work on the VA Home Loan Program Reform Act, which VA will implement once President Trump signs it into law,” VA press secretary Pete Kasperowicz told reporters.
