Department of Veterans Affairs headquarters has seen Dec. 23, 2024, in Washington, D.C. (Eric Kayne/Stars and Stripes)
WASHINGTON — The Department of Veterans Affairs will end a controversial mortgage bailout program that provides “last resort” assistance to veterans facing foreclosure and holding VA-backed loans, the agency announced.
The Veterans Affairs Servicing Purchase Program, known as VASP, will close permanently on May 1, after purchasing more than 17,000 delinquent loans valued at nearly $5.5 billion to keep veterans in their homes, the VA said.
Some Republican lawmakers had objected to the program, which was launched last May, because it involves the VA holding the loan in its own portfolio and therefore puts taxpayer money at risk.
“VA’s Veterans Affairs Servicing Purchase Program, which was unilaterally created by [former President Joe Biden’s] administration and lacks congressional authority, will stop accepting new enrollees,” said Peter Kasperowicz, the VA press secretary.
Kasperowicz said the VA decided to end the program because the agency is not set up or intended to be a mortgage loan restructuring service.
Under VASP, delinquent mortgages are restructured at an interest rate of 2.5%, which is well below the average market rate. The national average this week for a 30-year, fixed-rate mortgage is slightly more than 6%, according to BankRate, a consumer financial services company that surveys major lenders weekly.
Closing the year-old program to new enrollees will not affect current participants or mortgage holders who enroll prior to May 1, Kasperowicz said. Veterans do not apply directly for the special refinancing. Mortgage servicers make requests on their behalf after alternative repayment options are exhausted.
“Today, [President Donald Trump’s] administration rightfully put an end to VA’s VASP program,” said Reps. Mike Bost, R-Ill., chairman of the House Veterans’ Affairs Committee, and Derrick Van Orden, R-Wis., chairman of the committee’s subpanel on economic opportunity.
The VA has been unable to prove that individuals will not intentionally miss their mortgage payments to take advantage of a 2.5% interest rate, according to the congressmen.
But Sen. Richard Blumenthal of Connecticut, the top Democrat on the Senate Veterans’ Affairs Committee, described the elimination of VASP as “an act of cruelty and incompetence” toward veterans in severe financial distress who are at risk of losing their homes.
He said VASP was launched after pandemic-era mortgage relief programs expired and mortgage interest rates began to rise.
“This program gives [veterans] last-resort options to avoid the emotional and financial crisis that often leads to homelessness,” Blumenthal said.
But Bost and Van Orden said in a joint statement that House Republicans intend to create a partial claim program to assist veterans facing foreclosure. A partial claim program would allow veterans in financial hardship to defer missed payments without immediately facing foreclosure.
“This is the right move by [VA] Secretary [Doug] Collins and the Trump administration to protect the integrity of the VA home loan program, and today’s and tomorrow’s veterans will undoubtedly be better off because of it,” Bost and Van Orden said.
Last month, Van Orden introduced the VA Home Loan Program Reform Act, which would create a partial claim program and authorize the VA secretary to “pay the holder of a loan guaranteed … an amount necessary to avoid the foreclosure of such loan.”
The VA in turn would ensure the VA receives a “secured interest in the property covered by the loan” that serves as collateral, according to the bill’s language.
Housing and veterans groups have urged the VA not to end VASP without having an alternative in place.
There are about 81,000 active-duty service members or veterans who have missed three or more payments on their VA mortgages, according to figures from the Center for Responsible Lending and the National Consumer Law Center, nonprofit consumer protection groups.
The organizations endorsed a partial claim program as a solution to help veterans regain financial footing after falling behind on mortgage payments.
