After nearly a year of anxious waiting for many veteran homeowners struggling to make their mortgage payments, the U.S. Department of Veterans Affairs announced the release of its new partial claim program and updated loss mitigation “waterfall” on June 1.
Congress passed legislation to establish the new VA’s new loss mitigation policy, known as the VA Home Loan Program Reform Act (H.R. 1815), on July 15, 2025, and it was signed into law by President Donald Trump on July 30, 2025.
Under the updated program terms, all qualifying loans will be eligible for reinstatement for an amount calculated by factoring in the payments a borrower would make under the requisite trial payment plan. This amount may not exceed 25 percent of the unpaid principal balance on the day the servicer would advance the funds for the partial claim.
The loss mitigation “waterfall” refers to a sequence by which lenders evaluate every option available to a borrower who is behind on their payments in a specific order, and servicers work through the alternatives one by one. It is currently available to other borrowers with government-backed mortgages.
The new program is meant to replace the VA Servicing Purchase (VASP) program, which stopped receiving new applications on May 1, 2025. Since then, many veterans who have fallen behind on their mortgage payments have faced the possibility of foreclosure.
The delay in implementation was due in part to debate over provisions concerning how the program would affect borrowers’ payments. One draft of the program would have allowed loan modifications to increase borrowers’ monthly payments by as much as 15 percent. This provision was removed, following opposition expressed by mortgage professionals and veterans organizations.
Subsequently, many lawmakers and advocacy groups called for the VA to impose a moratorium on foreclosures until VASP’s replacement was in place.
The National Consumer Law Center Federal Housing Advocacy Director Alys Cohen testified to the negative impact the program’s absence has had during a hearing held by the House Committee on Veterans’ Affairs Subcommittee on Economic Opportunity in March, titled “Kitchen Table Issues: Lowering Costs for Veteran Families Through the VA Home Loan Program.”
“The mortgage relief options available for Veteran borrowers remain less favorable than the options available to other borrowers with federally backed mortgages,” Cohen said. “We urge the VA to stabilize homeownership for Veterans who earned the home loan benefit through service and sacrifice.”
“More than 10,000 veterans have already lost their homes since the Administration abruptly terminated the VASP program in May 2025,” a coalition of 28 House members wrote in a letter to the VA. “With nearly 90,000 additional veterans currently delinquent or already in the foreclosure pipeline, veterans and their families nationwide are facing a housing crisis that is both tragic and preventable.”
Cohen cited research showing how providing payment relief to borrowers facing financial hardship can help them avoid defaulting on their mortgage loans and save the taxpayers tens of thousands of dollars in claims.
“The most important step the VA can take to promote affordability for Veterans is to help them retain their homes when feasible and avoid devastating home loss,” Cohen said. “These ‘home retention’ programs keep kids in school, stabilize neighborhoods, prevent home equity loss, and allow Veterans to avoid an unforgiving rental market.”
Mortgage Bankers Association President and CEO Bob Broeksmit applauded the VA for its willingness to consider collaborative feedback from mortgage professionals and veterans organizations when the finalizing the program’s parameters.
“After actively engaging in the legislative and policy efforts behind this important change, we will continue working with the VA and our servicer members to support implementation,” Broeksmit said in a statement. “Activating this new loss mitigation option will require servicers to update systems, modify processes, and train staff, and we appreciate the VA’s recognition of these implementation challenges by providing a 180-day timeframe. Our members are committed to implementing these changes as quickly as possible to ensure veteran homeowners can benefit from this important new tool.”
Mortgage providers will be able to submit trial payment plans for loan modifications and partial claims beginning on June 15, according to the VA. Companies will have until Nov. 28 to update their systems’ functionality to accommodate the new partial claim program.
Dodd Frank Update will have more analysis of what this means for veteran homeowners in an upcoming article.