New program of last resort keeps veterans in their homes

Starting in May, the Department of Veterans Affairs (VA) will offer a new program serving as the last line of defense for more than 40,000 veterans in danger of losing their homes because of post-pandemic mortgage problems.

The Veterans Affairs Servicing Purchase (VASP) program, which will launch on May 31, is designed to help veterans experiencing severe financial hardship avoid foreclosure and stay in their homes.

On Wednesday, VA leaders announced that VASP is a last-resort tool in the VA’s comprehensive suite of home retention options for eligible veterans, active-duty service members and surviving spouses with VA-guaranteed home loans experiencing severe financial hardship.

Through VASP, the VA will purchase defaulted VA loans from mortgage servicers, modify them and then place them in the VA-owned portfolio as direct loans. Borrowers will be guaranteed a fixed 2.5% interest rate, which will provide a consistent, affordable payment for the remainder of their loan.

“The VASP program really is a last-resort home retention option,” said VA Under Secretary for Benefits Josh Jacobs. “We’re working through a process by which we’re going to consider every other available option to keep veterans in their homes, whether it is a repayment plan, a loan modification or a number of other options.”

Since the program will serve as a last resort, VA leaders said that some individuals may be ineligible considering their circumstances. The program will empower the VA to work directly with eligible veterans to adjust their loans and their monthly payments so they can keep their homes.

Over the past several months, the VA has embarked on several programs to keep veterans in their homes. More than 145,000 veterans and their families have avoided foreclosure in 2023 alone.

When the COVID-19 pandemic hit the United States, Congress approved a forbearance program allowing some individuals who lost a regular source of income to skip mortgage payments for months.

However, when the program ended in October 2022, thousands of veterans were left in a position where they found they owed large payments on their homes, forcing some into default and others into unfavorable new home loans. An NPR investigation in 2023 uncovered numerous families hurt by the gaps in support services.

“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 Jacobs in a press release. “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.”

Veterans cannot apply directly for VASP. 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.

VA leaders said veterans facing financial hardship should work with their mortgage servicers to explore available options.

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. The savings associated with avoiding foreclosures outweigh the cost of purchasing these homes. VA has existing authority to establish and implement VASP under 38 USC § 3732 and §3720.

The VA has helped veterans, service members, and survivors obtain more than 28 million homes. Currently, more than 3.7 million veterans have active home loans guaranteed by the VA, and in 2023 alone, the VA guaranteed 400,695 home loans.

“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 in a press release. “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.”

Veterans facing problems with housing bills can contact the VA at 877-827-3702, option 4, or visit the VA home loans website.