The U.S. Department of Veterans Affairs says it will end a mortgage rescue plan that has saved nearly 20,000 veterans from needlessly losing their homes.
Charles Dharapak/AP
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Charles Dharapak/AP
The U.S. Department of Veterans Affairs says it will end a mortgage rescue plan that has saved nearly 20,000 veterans from needlessly losing their homes.
Charles Dharapak/AP
The U.S. Department of Veterans Affairs said Thursday that it will end a mortgage-rescue program designed to help veterans who have fallen behind on their mortgages keep their homes.
But the scant details offered so far by the VA make it unclear whether the program will be replaced by a different rescue program — or whether the move will strand thousands of other vets, many of whom are in financial peril because of the VA’s own mistakes.
Tens of thousands of veterans were left facing foreclosure after the VA abruptly cancelled a key part of a pandemic-era mortgage relief program that allowed vets to skip mortgage payments if they had trouble paying. When NPR first uncovered the VA’s move in late 2023, there were about 40,000 vets in danger of losing their homes.
The VA responded by halting foreclosures for a full year while it rolled out a rescue plan. That rescue plan, called VASP, has now put 17,109 veterans and their families into new, low-interest-rate, affordable mortgages, according to the VA.
In a statement to NPR Thursday, the VA said it was ending the VASP program. “Beginning May 1, 2025, VA’s Veterans Affairs Servicing Purchase Program [VASP]… will stop accepting new enrollees,” it said. “This change is necessary because VA is not set up or intended to be a mortgage loan restructuring service.”
Republican critics in Congress don’t like that VASP buys the rescued loans from the mortgage industry, and then holds the loans on the VA’s own books. They say that puts too much taxpayer money at risk.
“The Trump administration rightfully put an end to VA’s VASP program,” said a joint press release Thursday from U.S. Rep. Mike Bost, an Illinois Republican and chairman of the House Committee on Veterans’ Affairs, and U.S. Rep. Derrick Van Orden, a Wisconsin Republican.
Veterans groups, housing advocates, and mortgage company executives all say they believe that ending VASP without replacing it with another affordable option for veterans who have fallen behind on their loan payments could result in unnecessary foreclosures.
At a recent hearing before the House Committee on Veterans Affairs, a representative of a trade group that works to advance the interests of real estate lenders said that would be a disaster.
”Without VASP, VA would have foreclosed on tens of thousands of borrowers,” said Elizabeth Balce, representing the Mortgage Bankers Association.
Balce said scuttling the VASP program, especially before VA stands up an alternative, would have one clear result.
“Foreclosure. Period,” she said, “That’s really where it’s gonna come to. The short answer is foreclosure.”
For thousands of veterans, it’s not their fault that they’re in this predicament. The vets had reached out to their mortgage companies during a time of financial hardship and were told that by taking advantage of the VA’s mortgage forbearance program they could skip some mortgage payments and have an affordable way to get current on their mortgages again.
After mortgage rates spiked from around 3 percent to 7 percent in 2022, however, the only affordable way for these vets to do that was through what’s called a “partial claim” that allowed the vets to move the missed payments to the back of their loan term, and then just resume paying their mortgage. But in October of 2022, the VA suddenly pulled the plug on that partial claim program, stranding tens of thousands of vets with no affordable way to get current and start paying their loans again.
The Republican critics of VASP have been pressuring the VA to restore the partial claim program because they prefer that option to VASP.
“This action underscores House Republicans’ intent to establish a partial claims program at VA to ensure veterans’ can stay in their homes if they’re in financial hardship,” Van Orden and Bost said in their statement.
But during the Biden administration, VA maintained that it lacked the authority to do that without an act of Congress, and it is unclear if or when Congress would pass legislation that Van Orden has introduced to that end.
VA officials did not say Thursday whether the agency now plans to stand up a partial claim or some other option for veterans to replace VASP, or whether agency officials are worried that this move to end the program will result in thousands of veterans losing their homes.
At the hearing last month, nonprofit consumer protection groups submitted a letter to the House Veterans Affairs committee warning of unnecessary foreclosures if VASP were to be scrapped, but also supporting a new partial claim program at VA.
Housing, industry, and veterans groups all say that if the VA ends its VASP program without first replacing it with another affordable option such as a partial claim, that will leave veterans with far worse options than most other American homeowners.
Loans backed by Fannie Mae, Freddie Mac, and FHA all have low-interest rate loan modification or partial claim programs for homeowners, but VA will not once VASP ends. That’s despite the fact that for generations VA home loans have been a path to the middle class for those who serve in the military.
