Nearly 60,000 veterans at risk of foreclosure following VASP shutdown, group says

In early April, the U.S. Department of Veterans Affairs (VA), under the leadership of director Doug Collins began moving to end the program as of May 1, following through on prior criticism from Republican lawmakers that had previously accused the program of being “created for political purposes by the Biden-Harris administration to undercut the VA Home Loan program.”

Orgs urge Congress to pass VA partial claim as VASP ends

But the mortgage industry has pushed back on the decision to end the program, and adding to the chorus on the day of the program’s shutdown is the National Consumer Law Center (NCLC).

The organization said the decision will “dramatically [increase] the risk of foreclosure for tens of thousands of veterans and their families,” adding that VASP is “the only VA mortgage assistance option that currently helps the vast majority of borrowers obtain an affordable payment when they are delinquent on their mortgage.”

Last week, the VA issued a circular detailing the particulars of the VASP wind-down. As of Thursday, new submissions are not accepted. NCLC added that the department has rescinded the “prescribed steps for considering Veterans for hardship assistance, removing consistency and transparency from the process.”

Raul “Danny” Vargas, chairman, and CEO of the American Latino Veterans Association, blasted the decision to end the VASP program.

“The men and women who wore our nation’s cloth have faced adversity and challenges while defending our freedoms around the world,” he said. “The last thing we should do is turn our backs on them when they need help staying in their homes.”

NCLC pointed out that the VA’s partial claim option — where delinquent borrowers could put a past due balance at the end of the loan — was active for veterans between 2021 and 2022, similar to an offering available for Federal Housing Administration (FHA) borrowers.

But since it has long since expired, legislators are currently debating whether or not to bring such an option back for veterans. In the meantime, no partial claim option for veterans is in place and NCLC contends that there are few options for delinquent veteran borrowers to pursue.

“Today’s cancellation of the VASP mortgage assistance program for veteran borrowers puts tens of thousands of Veterans and their families with VA home loans at great risk of losing their homes,” said Alys Cohen, senior attorney at NCLC. “The VA Home Loan Program is a benefit that veterans have earned through service and sacrifice – it is meant to give them housing stability they deserve.”

Veterans’ options versus FHA, USDA and GSE borrowers

Terminating VASP without a partial claim program in place leaves impacted veterans with “substantially worse options than other borrowers with federally-backed mortgage loans from FHA, the U.S. Department of Agriculture (USDA), Fannie Mae and Freddie Mac and, as a result, veterans with VA mortgages will face otherwise preventable foreclosures,” the organization said.

It also aimed to contextualize the potential impact. As of April 1, 75,000 veteran borrowers “had missed 3 or more payments on their VA-guaranteed mortgage,” and that within that cohort there were 17,000 who were accepted by VASP, NCLC said. More veterans may have been able to qualify for the program prior to Thursday’s ending date for new applications, but the program’s end “still leaves up to 58,000 or more veterans and their families vulnerable to foreclosure.”

Mike Calhoun, president of the Center for Responsible Lending, urged Congress to act quickly in passing a VA-specific partial claim program.

“Financial hardship happens to everyone, and it’s a bedrock principle of federal housing policy that borrowers with a financial hardship should be able to bring their loans current and avoid foreclosure if they can afford the new plan,” he said. “Congress quickly enacting a partial claim program would benefit veteran homeowners and the VA as well, since avoidable foreclosures on federally-backed loans result in unnecessary government losses.”

NCLC said that VASP must be immediately restored at least until Congress can implement a new partial claim program. It also asks that the VA “examine its authority and implement any additional programs it can right now to protect Veterans’ homes,” and similarly urges Congress to act on passing a VA-specific partial claim option.