Lenders voice concerns over decision to end VA home loan rescue effort
Mortgage industry officials this week expressed concerns over the recent Veterans Affairs' decision to abruptly end a home loan rescue program, saying that more guidance is needed from department planners to protect individuals facing severe financial hardships.
In a letter to VA Secretary Doug Collins on Monday, leaders from the Community Home Lenders of America — a non-profit association of small and mid-sized community mortgage lenders — said that companies working with veterans have received 'no detailed guidance, or in fact any information, to help them properly advise veterans families of imminent changes' with the Veterans Affairs Servicing Purchase (VASP) program.
On April 4, VA leaders announced the 10-month-old VASP program would stop accepting new enrollees on May 1. The effort was launched to purchase defaulted VA loans from outside mortgage servicers in an effort to allow financially strapped veterans to avoid forfeiture of their homes.
About 17,000 veterans received home loans with lower interest rates through the program, according to VA statistics. But the effort drew sharp criticism from conservative lawmakers on Capitol Hill, who claimed it undermined the existing VA home loans program by providing too much financial aid to a select few veterans.
VA leaders to halt mortgage rescue program launched last year
In a statement announcing the program changes, department officials said the decision to end VASP enrollment was made 'because VA is not set up or intended to be a mortgage loan restructuring service.'
But in the last two weeks, Democratic lawmakers have attacked VA leaders for the move. A group of 22 congressional lawmakers wrote in a letter to Collins last week that 'until better policy solutions are in place that provide for stronger underwriting, ending the VASP program abruptly will only harm veterans and their families.'
Monday's letter from the Community Home Lenders of America echoed those concerns.
'The VA must elaborate in writing what the VASP deadline actually means,' group leaders wrote. 'As just one example — if there is key information missing from an existing application VA should give the veteran and their servicer time to cure the fault if the application was submitted on time, rather than just deny the file.
'This is an area needing much more coordination between the VA and servicers.'
The nonprofit is asking for a 60-day transition deadline for individuals who may qualify for VASP but cannot get their enrollments finished before May 1.
But in an interview with Military Times on April 9, House Veterans' Affairs Committee Chairman Mike Bost, R-Ill., praised the decision to end the program and supported quick action on the change.
'The Veterans Home Loan Program has been around for a long time, and it is a golden opportunity for our veterans to get good lending rates for their homes so they can achieve the American dream,' he said 'This program was putting that in danger.
'No one is going to be forced out, but this is a wise change.'
Congressional officials said in the last 10 months, VA officials have purchased more than $5.4 billion worth of home loans through the VASP program, with an average price of $320,000 per loan.
When the VASP program was launched in May 2024, VA officials estimated that as many as 40,000 veterans could benefit from the financial assistance. Community Home Lenders of America expressed concern that tens of thousands of veterans are still unaware of the potential benefits of the effort to their finances.
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