The Department of Veterans Affairs building in Washington. (Stars and Stripes)
WASHINGTON — A mortgage industry group representing small and mid-sized lenders urged Department of Veterans Affairs Secretary Doug Collins to delay ending a home loan rescue program run by the VA that lets veterans facing foreclosure refinance their mortgages at a lower interest rate.
The Community Home Lenders of America warned in a letter to Collins that the VA has provided no instructions to loan servicers and lenders about the steps needed to phase out the program, which is scheduled to end May 1.
There are many veterans seeking to qualify for the program who might miss the deadline because they have not submitted the required documentation to be accepted in the Veterans Affairs Servicing Purchase program, the nonprofit group wrote.
“No detailed instructions, guidance and parameters have been remitted by the VA to the mortgage servicers and originators responsible for ensuring that the transition here is fair and understood by our veterans [and] families directly affected,” the group wrote in an April 14 letter to Collins.
Community Home Lenders of America, which represents community-based mortgage lenders, is asking for a 60-day extension to enable borrowers with VA-backed loans to complete applications. Veterans do not apply directly for the special refinancing but work with mortgage servicers who make the request on their behalf.
The program has purchased more than 17,000 delinquent loans valued at nearly $5.5 billion since launching in May 2024, according to the VA.
But Community Home Lenders of America estimated there are thousands of additional veterans with delinquent loans who might still qualify and benefit from the program, which lowers interest rates to 2.5% and places the home loan in the VA’s portfolio.
Borrowers of VA-backed mortgages must be at least three months behind with their payments but have a steady source of income to be eligible for the program. The veteran or an immediate family member must be living in the home.
Community Home Lenders of America is asking the VA to notify veterans officially and meet with lenders virtually to answer questions that they have about handling pending applications.
Rob Zimmer, director of external affairs at the lenders association, said Wednesday that the organization has not received a response from Collins or VA leadership.
The organization is urging VA to provide guidance about how the program will operate as it winds down.
For example, there are some veterans who submitted documentation for refinancing but were informed key information is missing from their application or there are questions about the title, according to the group.
The program has enabled borrowers with delinquent mortgages to restructure home loans at a 2.5% interest rate, which is well below the average market rate. The national average this week for a 30-year, fixed-rate mortgage was 6.9%, according to BankRate, a consumer financial services company that surveys major lenders.
The Mortgage Bankers Association has stated thousands of veterans would have lost their homes without the VA loan program.
But VA is not set up or intended to be a mortgage loan restructuring service, Peter Kasperowicz, the VA press secretary, said when he announced April 4 that the agency will end the program. The loan program was “unilaterally created” by former President Joe Biden’s administration and lacks congressional authority, Kasperowicz said.
Several Republican lawmakers have criticized the program as putting taxpayer dollars at risk.
Rep. Derrick Van Orden, R-Wis., who is a member of the House Veterans’ Affairs Committee, said he is concerned the program could become an entitlement and encourage veterans to fall behind on home loans intentionally to qualify for better terms and a lower interest rate.
Van Orden has introduced legislation called the VA Home Loan Program Reform Act as an alternative program. The legislation would create a partial claim program to help veterans catch up with overdue mortgage payments while keeping the original loan.
The bill was referred to the House Veterans’ Affairs Committee’s subpanel on economic opportunity. Van Orden is the subpanel chairman.
