In a significant victory for Veteran homeowners and their families, the VA Home Loan Program Reform Act was enacted into law Wednesday, July 30. The new law provides a path for Veteran homeowners who have fallen behind on mortgage payments to get current on payments and avoid foreclosure. The new “partial claim” bill helps fill the gap in assistance created by the abrupt cancellation of the Veterans Affairs Servicing Purchase (VASP) in May, which created confusion and anxiety and put struggling Veteran borrowers at risk of foreclosure.
“We applaud Congress for passing the partial claim bill. It is an important first step toward giving Veterans the help they need and deserve when they face financial hardship and possible loss of their homes,” said Steve Sharpe, senior attorney at the National Consumer Law Center. “The VA now must streamline the new program to promote broad and timely access. We also call on Congress to work on further improvements to VA’s foreclosure prevention toolbox.”
The bill allows delinquent borrowers with Department of Veterans Affairs loans to put a past due balance at the end of the loan. This approach, known as the “partial claim,” is similar to one offered by the VA from 2021-2022 and by the Federal Housing Administration. A partial claim allows the Veteran to bring their loan current and resume their former payment. The borrower repays the deferred amount to the VA at 0% interest when the loan pays off.
"Meaningful payment assistance"
“Passage of the partial claim bill will provide meaningful payment assistance to VA borrowers in financial distress,” said Mike Calhoun, president of the Center for Responsible Lending. “We encourage Congress to give VA additional financial hardship tools offered by other federally backed mortgage programs to help Veterans avoid unnecessary foreclosures and remain in their homes.”
Even with enactment of the partial claim bill, Veteran borrowers still have substantially worse options than other borrowers with federally-backed mortgage loans. To bring the relief for VA-borrowers on par with the relief for other borrowers, Congress must further improve the partial claim program and must develop an option for borrowers who need monthly payment relief when they fall behind on their mortgages. In addition, the VA must act quickly to implement the new law to avoid unnecessary foreclosures of borrowers who may be eligible for partial claims.
As of April 1, there were 75,000 Veteran borrowers who had missed 3 or more payments on their VA-guaranteed mortgage.