Beginning May 31, 2024, the U.S. Department of Veterans Affairs (VA) will launch its Veterans Affairs Servicing Purchase (VASP) program, designed to assist more than 40,000 veterans experiencing severe financial hardship to avoid foreclosure and remain in their homes.
VASP will be available to eligible veterans, active-duty servicemembers, and surviving spouses with VA-guaranteed home loans who are experiencing severe financial hardship. Through the VASP initiative, VA will purchase defaulted VA loans from mortgage servicers, modify the loans, and then place them in the VA-owned portfolio as direct loans. These actions will help the VA work directly with eligible veterans to adjust their loans and their monthly payments in order to remain in their homes.
Through VASP, eligible borrowers will have a fixed 2.5% interest rate, which will provide a consistent, affordable payment for the remainder of their loan.
“This new program will help more than 40,000 veterans and their families stay in their homes, and there’s nothing more important than that,” said VA Secretary Denis McDonough. “We at VA are committed to doing everything in our power to help veterans avoid foreclosure, and that’s exactly why we’re launching VASP–to help the veterans who need it most.”
The latest in VA actions
Prior to his role as head of the VA, McDonough served in the Obama Administration as the 26th White House Chief of Staff from February 2013 to January 2017, managing White House staff and working across the Cabinet to advance the Obama-Biden agenda.
Back in November, the VA called on mortgage servicers to pause foreclosures until May 31, 2024 while the VASP program was being finalized.
In addition, the VA extended its COVID-19 modification program through May 31, 2024, and worked with veterans directly to help them retain their homes. In total, VA helped more than 145,000 veterans and their families avoid foreclosure in 2023 alone.
“When a veteran falls on hard times, we work with them and their loan servicers every step of the way to help prevent foreclosure—including offering repayment plans, loan modifications, and more,” said VA Under Secretary for Benefits Josh Jacobs. “But some veterans still need additional support after those steps, and that’s what VASP is all about. This program will help ensure that when a veteran goes into default, there is an additional affordable payment option that will work in a higher interest rate environment—so they can keep their homes.”
Highlighting VASP program measures
Veterans interested in the VASP program will not apply directly for VASP. Instead, beginning May 31, mortgage servicers will identify qualified borrowers and submit requests on behalf of veterans based on a review of all home retention options available and qualifying criteria. Veterans facing financial hardship are encouraged to work with their mortgage servicers to explore their available options.
“The VASP program is badly needed as veteran borrowers have had no meaningful alternatives to foreclosure for over a year,” said Steve Sharpe, Senior Attorney at the National Consumer Law Center (NCLC). “The VA must extend the foreclosure pause until VASP is implemented so that all eligible borrowers have fair access to the new program. We also urge VA to eliminate any rules that unnecessarily limit access to VASP for borrowers who previously received unaffordable loan modifications.”
VA anticipates that VASP will result in a government subsidy spending reduction of approximately $1.5 billion from 2024 to 2033, making it beneficial for veterans, taxpayers, servicers, and loan holders alike. This is because the savings associated with avoiding foreclosures outweighs the cost of purchasing these homes. VA has existing authority to establish and implement VASP under 38 U.S.C. § 3732 and § 3720.
“Servicers have performed extraordinarily since the pandemic to implement new forbearance and home retention programs from the VA and other federal agencies, helping more than eight million families stay in their homes,” said Mortgage Bankers Association (MBA) President and CEO Robert D. Broeksmit, CMB. “While the VA has announced a May 31 effective date, it is important for Veterans to understand that the VA has assured servicers that additional time will be provided to implement this complex and novel program. Servicers will work diligently to modify their systems and operations and train their staffs to implement the program by the VA’s deadline, when announced.”
Government intervention in preserving veteran homeownership
The Biden Administration recently announced a $14 million initiative that seeks to find permanent housing for U.S. vets. Through the U.S. Department of Housing and Urban Development (HUD) and the VA, $14 million in HUD-Veterans Affairs Supportive Housing (HUD-VASH) vouchers were awarded to 66 Public Housing Agencies (PHAs) across the country for more than 1,400 vouchers. The HUD-VASH program provides housing and an array of supportive services to veterans experiencing homelessness by combining rental assistance from HUD with case management and clinical services provided by the VA.
“As President Biden reminds us, our one truly sacred obligation is to the men and women of the United States Military Services,” said HUD Principal Deputy Assistant Secretary Richard Monocchio. “The continued success of the HUD-VASH program stands as testament to our collective devotion to caring for Veterans and their families when they return home. At HUD we are committed to continuing to strengthen the HUD-VASH program to serve as many Veterans as possible.”
According to the U.S. Interagency Council on Homelessness (USICH), the number of veterans experiencing homelessness has fallen by 11% since early 2020—the most significant decline in more than five years. There are currently more than 110,000 HUD-VASH vouchers being administered by 700-plus PHAs. Since 2008, HUD has issued new HUD-VASH vouchers every year. Additionally, more than 81,000 of those total vouchers are actively under lease by HUD-VASH veterans, with many additional veterans having been issued vouchers and currently searching for housing to lease.
