The U.S. Department of Veterans Affairs (VA) has announced that it will shut down a foreclosure prevention program designed to help veterans who have fallen behind on their mortgages to keep their homes.
The Veterans Affairs Servicing Purchase (VASP) program, launched on May 31, 2024, was designed to assist more than 40,000 veterans experiencing severe financial hardship in avoiding foreclosure and remaining in their homes. Through the VASP program, eligible borrowers were given a fixed 2.5% interest rate, providing a consistent, affordable payment for the remainder of their loan.
“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 Mortgage Bankers Association (MBA) President and CEO Bob Broeksmit, CMB. “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.”
Through the VASP initiative, the VA purchased defaulted VA loans from mortgage servicers, modified the loans, and placed them in VA-owned portfolios as direct loans.
“On behalf of the members of the National Mortgage Servicing Association (NMSA) and the Mortgage Servicing Executive Alliance (MSEA), we stand in support and unison with the Mortgage Bankers Association (MBA) and their recent statement on the potential elimination of the Veterans Affairs Servicing Purchase (VASP) program,” said Ed Delgado, Chairman Emeritus, Five Star Global and Founder of NMSA and MSEA.
Delgado’s comments were made in unison with the MBA’s statement on Thursday, when 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.”
NPR reports that since the launch of VASP, 17,109 U.S. veterans and their families have been placed into new, low-interest-rate, affordable mortgages.
Loans qualifying for VASP must meet the following criteria:
- The loan is three to 60 months delinquent when a servicer submits it into the program.
- The owner of the property or an immediate family member is living on the property.
- The mortgage holder is not in active bankruptcy (and neither is anyone else listed on the loan) when the servicer submits the loan into the program. The VA did accept a dismissed or discharged bankruptcy (Chapter 13 or Chapter 7).
- The mortgage holder has resolved the reason they were in default and can begin making monthly mortgage payments again.
- The mortgage holder and anyone else listed on the loan have a stable and reliable source of income.
- The VA-guaranteed loan is in first-lien position, and the property doesn’t have any liens or judgments that would risk a first lien position.
- The mortgage holder has made at least six monthly payments since the start of the loan (or since any modification to it).
- The mortgage holder is the legal owner of record on the property.
- The mortgage holder and all others listed on the loan agree to the terms of the VASP modification.
“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,” added Broeksmit. “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.”
Elizabeth Balce, EVP of Servicing for Carrington Mortgage Services, testified on behalf of MBA at a recent legislative hearing before the Committee on Veterans’ Affairs Subcommittee on Economic Opportunity. The hearing focused on reforms to the VA Home Loan Program, including the future of VASP, and the need for a permanent partial claim solution.
Delgado continued, adding, “The VASP program was built upon a foundation of support for veterans and their families, during a time of critical need and assistance. It is incomprehensible to consider removing such an initiative intended to support those who have so proudly and selflessly served our nation. The notion that servicers are looking to benefit from VASP or to assert that the VA is not a ‘loan restructuring service’ is beyond the pale. Time and time again, mortgage servicers look to mitigate the adverse effects of foreclosure by advancing programs like VASP that are designed to protect homeownership—not for financial profit, but for the purpose of preserving the American Dream.”
