Starting next month, Veterans Affairs officials will offer a “last-resort” program for tens of thousands of veterans in danger of losing their homes because of post-pandemic mortgage problems, leaders announced Wednesday.
The new Veterans Affairs Servicing Purchase (VASP) program, which launches May 31, will allow the department to purchase defaulted VA loans from outside mortgage servicers, then modify the terms to allow financially strapped veterans to avoid losing the properties.
Borrowers will be guaranteed a fixed 2.5% interest rate for the remainder of their loans.
“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,” VA Undersecretary for Benefits Joshua Jacobs said.
Department leaders estimate the new program will help about 40,000 veterans, troops and family members currently struggling with VA-backed home loans.
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But the new program will only be open to veterans who have defaulted on their mortgages and not others who renegotiated higher, costly new mortgages over the last year. Those individuals will not be able to opt into the lower-rate VASP loans.
“This is not an incentive for default,” Jacobs said. “If other home-retention options like a loan modification or repayment plan will resolve the home loan delinquency, then this program will not be an option.”
When the coronavirus pandemic hit the United States in spring 2020, Congress approved a forbearance program allowing some individuals who lost their normal stream of income to skip mortgage payments for months.
But when that program ended in October 2022, thousands of veterans 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.
VA last fall called on all mortgage companies to delay additional foreclosures until May 2024 while they set up the new support program. Under VASP, veterans will not need to apply to be included, but will instead have their mortgages purchased by VA if they qualify.
Jacobs said VA planners estimate that the new program will produce about $1.5 billion in savings over the next decade by avoiding costs for housing vouchers, federal loan defaults, and other complications related to veterans homelessness.
The department is currently backing more than 3.7 million active home loans, including more than 400,000 new loans in 2023 alone.
Veterans facing problems with housing bills can contact VA at 877-827-3702, option 4, or visit the VA home loans website.
Leo covers Congress, Veterans Affairs and the White House for Military Times. He has covered Washington, D.C. since 2004, focusing on military personnel and veterans policies. His work has earned numerous honors, including a 2009 Polk award, a 2010 National Headliner Award, the IAVA Leadership in Journalism award and the VFW News Media award.
