VA leaders to halt mortgage rescue program launched last year

Yahoo

04-04-2025

Veterans Affairs officials next month will end a 10-month-old mortgage rescue program for veterans in danger of losing their homes, following significant Republican criticism over the effort.
The Veterans Affairs Servicing Purchase (VASP) program was launched in late May 2024 to purchase defaulted VA loans from outside mortgage servicers. Officials would then modify the terms of the loans to allow financially strapped veterans to avoid eviction from and 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.
In a statement, department officials said the program will stop accepting new enrollees on May 1. 'This change is necessary because VA is not set up or intended to be a mortgage loan restructuring service.'
VA support program to buy up veterans' defaulted home loans
Republicans immediately hailed the news.
'We had serious concerns about the impact VASP would have on not only the future of VA's home loan program, but the mortgage lending business as a whole,' House Veterans' Affairs Committee Chairman Mike Bost, R-Ill., and economic opportunity subcommittee Chairman Derrick Van Orden, R-Wisc., said in a joint statement.
'Today, the Trump administration rightfully put an end to VA's VASP program. This action underscores House Republicans' intent to establish a partial claims program at VA to ensure veterans' can stay in their homes if they're in financial hardship while still protecting the American taxpayer.'
The program was open to veterans who defaulted on their VA home loan mortgages in the past.
When the coronavirus pandemic hit the United States in spring 2020, Congress approved a forbearance program allowing some individuals who lost their normal stream of income to skip mortgage payments for months. But when that program ended in October 2022, thousands of veterans found they owed large payments, leaving them with insurmountable bills.
The VASP program was designed to fix that problem, providing an alternative to eviction for individuals facing significant financial hardship. Critics noted that veterans who renegotiated higher, costly new mortgages in lieu of missing payments did not benefit from the safety net program.
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.
House Republicans have called that an inefficient use of taxpayer money, noting that many of the veterans could still default on payments.
Congressional Democrats attacked the decision to end the VASP effort.
'Eliminating a program that keeps veterans in their homes — when they face painful financial hardship — is an act of consummate cruelty and incompetence,' said Sen. Richard Blumenthal, D-Conn., ranking member of the Senate Veterans' Affairs Committee.
'This program gives [veterans] last-resort options to avoid the emotional and financial crisis that often leads to homelessness. [VA Secretary Doug Collins] should … reverse this reprehensible misstep.'
Under the initial rules governing the VASP program, borrowers were guaranteed a fixed 2.5% interest rate for the remainder of their loans.
VA officials said the end of enrollment will not impact VA's loan guaranty services for veterans and will not affect any of the program's existing participants.
The department's VA home loan program is among the best-known and most used benefits by veterans across America. According to current department statistics for the first three months of 2025, VA was backing nearly 145,000 loans nationwide, totaling more than $56 billion in value.