The Trump administration announced it intends to eliminate a Department of Veteran Affairs’ (VA) program launched last year to help veterans who are struggling financially to avoid foreclosure. The mortgage industry supported the program as a replacement for the VA’s “partial claim” program, which some Republicans now want to bring back in some capacity.
According to VA Secretary Doug Collins, the decision to phase out the Veterans Affairs Servicing Purchase Program (VASP) is part of the administration’s cost-cutting efforts and its view that the agency is not intended to be in the business of restructuring mortgage loans. The program will stop accepting new enrollees on May 1.
The program was released in April last year, halting foreclosures for about 40,000 servicemembers covered by the VA while it rolled out a rescue plan that the agency estimates has helped place more than 17,000 veterans and their families into new, low-interest-rate, affordable mortgages.
Mortgage Bankers Association (MBA) President and CEO Bob Broeksmit, who praised the VA for the VASP initiative a year ago, released a statement emphasizing the importance of supporting servicemembers facing financial hardship.
“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,” Broeksmit said. “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.”
VASP was criticized in a joint statement by House Veterans’ Affairs Committee Chair Mike Bost (R-Ill.), and Economic Opportunity Subcommittee Chair Rep. Derrick Van Orden (R-Wis.), framing VASP’s creation as a fiscally irresponsible political move by the Biden-Harris administration.
“The Biden-Harris administration wrongfully jeopardized the future of this benefit by allowing billions of dollars to be used towards bailouts for lenders by creating the VASP program,” Van Orden said in the statement. “We – along with many of our colleagues – 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.”
Broeksmit refuted criticism of VASP, emphasizing the tireless work of mortgage servicers, often with conflicting guidance, to make the program viable for veterans and calling the program a “housing benefit [veterans] earned through their service.”
“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,” he said. “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.”
Van Orden said the elimination of VASP “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.”