May 1 marked the expiration of the Veterans Affairs Servicing Purchase (VASP) program, a mortgage assistance option that allowed a number of borrowers to obtain an affordable payment when delinquent on their mortgage.
On April 23, 2025, the U.S. Department of Veterans Affairs (VA) issued Circular 26-25-2, announcing the termination of VASP as of April 30, 2025 at 11:59 p.m. Effective May 1, 2025, the VA will no longer accept VASP submissions, and the VA announced it is rescinding the prescribed steps for considering veterans for hardship assistance, removing consistency, and transparency from the process.
According to NPR, nearly 90,000 VA loans are seriously past due, with 33,000 of those already in the foreclosure process. The National Consumer Law Center (NCLC) reports that as of April 1, there were 75,000 veteran borrowers who had missed three or more payments on their VA-guaranteed mortgage. Among those, the VA reported that 17,000 had been accepted for VASP.
“The men and women who wore our nation’s cloth have faced adversity and challenges while defending our freedoms around the world. The last thing we should do is turn our backs on them when they need help staying in their homes,” said Raul “Danny” Vargas, Founder, Chairman, and CEO of the American Latino Veterans Association.
The VASP program, launched on May 31, 2024, was designed to assist veterans experiencing severe financial hardship in avoiding foreclosure and remaining in their homes, with eligible borrowers given a fixed 2.5% interest rate, providing a consistent, affordable payment for the remainder of their loan.
From 2021-2022, the VA had a separate hardship assistance program in which delinquent borrowers could put a past due balance at the end of the loan. This approach, known as the “partial claim,” was similar to one offered by the Federal Housing Administration (FHA). A partial claim allows veteran borrowers to bring their loan current, and resume their former payment. The borrower repays the deferred amount to VA when the loan pays off at 0% interest. Congress is currently considering legislation to re-start a partial claim program at VA.
“Today’s cancellation of the VASP mortgage assistance program for Veteran borrowers puts tens of thousands of veterans and their families with VA home loans at great risk of losing their homes,” said Alys Cohen, Senior Attorney at the NCLC. “The VA Home Loan Program is a benefit that Veterans have earned through service and sacrifice–it is meant to give them housing stability they deserve.”
Those qualifying for VASP must have met 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.
“Financial hardship happens to everyone, and it’s a bedrock principle of federal housing policy that borrowers with a financial hardship should be able to bring their loans current and avoid foreclosure if they can afford the new plan,” said Mike Calhoun, President of the Center for Responsible Lending (CRL). “Congress quickly enacting a partial claim program would benefit veteran homeowners and the VA as well, since avoidable foreclosures on federally-backed loans result in unnecessary government losses.”
