MBA throws support behind bill to give VA borrowers a partial mortgage claim option

The association explained the urgency of setting up a partial claim option in light of the VASP program’s effective discontinuation.

Need for partial claim

“Without swift legislative action and subsequent VA implementation, thousands of veteran homeowners recovering from temporary financial hardship could face heightened foreclosure risk due to the absence of a sustainable and scalable loss mitigation option,” said Bill Killmer, MBA’s senior vice president of legislative and political affairs.

“We should not repeat the mistakes of the past when a viable VA loss mitigation option was terminated without a replacement, unfairly stranding veterans without the options available to all other government supported borrowers,” he added.

Ending VASP without a viable replacement remains a source of deep concern for the MBA, Killmer said. But a series of amendments made to the current version of the bill prior to a markup hearing scheduled for Tuesday “offers a practical and permanent solution aligning with existing programs across other federal housing agencies and would ensure veterans are not left behind during moments of financial stress,” the letter stated.

Van Orden was a leading voice in Congress who opposed the VASP program. He previously said it was indicative of “the Biden-Harris administration wrongfully jeopardiz[ing] the future of this benefit by allowing billions of dollars to be used towards bailouts for lenders by creating the VASP program.”

Changes that ‘represent real progress’

In a March 11 hearing on the bill in front of the House VA economic opportunity subcommittee, an MBA witness provided feedback and Killmer commended lawmakers for “their responsiveness to stakeholder input and continued collaboration on this critical legislation.”

The most recent version of the bill includes several changes that MBA supports.

These include a clarification that the partial claim will not diminish the guaranty on an existing loan; elimination of a proposal to charge interest on the partial claim balance; replacing a fixed sunset date with a rolling five-year period after enactment to provide more predictability for mortgage servicers; and increasing the maximum claim amount from 25% to 30% of the unpaid principal balance (UPB).

These changes “represent real progress toward creating a partial claim solution that protects veteran borrowers, provides servicer clarity, and aligns with existing government-backed programs,” Killmer said.

MBA also appreciates the inclusion of “provisions dealing with the conditions for partial claims relief in the event of a natural disaster declaration by the president,” the letter explained.

Legislative support urged

MBA is urging the House Committee on Veterans Affairs to support the bill, seeing it as an appropriate “enhancement” of the loss-mitigation tools available for veteran borrowers.

“MBA supports the goal of this legislation — to provide VA borrowers with a long-overdue,  effective, and stable loss mitigation option — and looks forward to continuing our collaboration as the bill advances for eventual full House consideration,” the letter stated.

When news of VASP’s discontinuation was reported in April, the association came to the program’s defense. When asked to comment on guidance from the VA that sought to end new applications, an MBA representative referred HousingWire back to the association’s original statement on the matter.

“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,” MBA said at the time.