The Department of Veterans Affairs (VA) is planning to end a mortgage rescue program for veterans that was introduced less than one year ago.
The Veterans Affairs Servicing Purchase (VASP) program went into effect last May with the goal of purchasing defaulted VA loans from outside mortgage servicers. The VA would then modify the loan terms to help the struggling veterans avoid foreclosure and eviction.
The VA determined that roughly 17,000 veterans received loan modifications under the VASP program. However, the department stated it will no longer accept new enrollments in VASP beginning on May 1.
“This change is necessary because VA is not set up or intended to be a mortgage loan restructuring service,” said the department in a statement.
The announcement was welcomed by Rep. Mike Bost (R-IL), chairman of the House Veterans’ Affairs Committee, and Rep. Derrick Van Orden (R-WI), chairman of the Economic Opportunity Subcommittee.
“We had serious concerns about the impact VASP would have on not only the future of VA’s home loan program, but the mortgage lending business as a whole,” said the lawmakers in a joint statement. “Today, the Trump administration rightfully put an end to VA’s VASP program. 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 while still protecting the American taxpayer.”
However, Mortgage Bankers Association President and CEO Bob Broeksmit criticized the decision.
“Halting the VASP program will increase the number of veterans facing foreclosure unless the VA and Congress implement a permanent partial claim option as soon as possible,” said Broeksmit. “Against the advice of MBA and other industry stakeholders, the VA ended its Partial Claim Payment program in 2022, leaving thousands of struggling veteran homeowners at risk of foreclosure. The VA then created VASP last year as the only viable home retention option for many veteran homeowners who could resume making payments after a temporary hardship, offering them the opportunity to do so via a more affordable and sustainable payment. Mortgage servicers worked tirelessly, and often with conflicting guidance, to ensure that the program was able to work for the veterans they are proud to serve. Any characterization of VASP as a ‘lender bailout’ is patently false and entirely inappropriate, given that the mortgage industry voluntarily honored a foreclosure moratorium for months until the VA was able to provide VASP as the only available solution.”
Broeksmit added, “The work must start immediately to strengthen the VA’s loss mitigation toolkit, and that includes implementing a permanent partial claim option, a foreclosure avoidance tool that is widely used in every other government loan program. MBA is eager to continue to work with the VA and Congress to protect veterans and ensure that they can utilize the housing benefit they earned through their service.”
