Earlier this month, the US Department of Veterans Affairs announced that starting May 1, 2025, it will no longer accept applications from mortgage servicers for the Veterans Affairs Servicing Purchase (VASP) program. 

VASP was established in May 2024 to provide a last-resort foreclosure prevention option to US military veterans, active-duty service members, and surviving spouses experiencing financial hardship.

Now, without congressional action, we might see an increase in mortgage delinquencies and foreclosures among borrowers with VA-guaranteed home loans.

What is VASP?

During the COVID-19 pandemic, policymakers enhanced loss mitigation waterfalls to prevent the largest foreclosure crisis since the Great Recession. Research from the Urban Institute estimates that more than 500,000 borrowers avoided foreclosure as a direct result of enhanced loss mitigation programs.

As part of its pandemic response, the VA created VASP. But because of legislative constraints, the VA’s inability to maintain a portfolio, and the department’s lack of partial claim authority, the VA took longer than other departments and the government-sponsored enterprises to structure its loss mitigation plan.

VASP was designed to provide a last-resort option to borrowers facing financial hardship and possible foreclosure. The VA would purchase an eligible borrower’s defaulted loan from the mortgage servicer and modify it to a fixed 2.5 percent interest rate. If the borrower didn’t meet the 20 percent payment reduction requirement, the VA would extend the loan term to 40 years.

In 2024, we estimated that 72,500 VA borrowers could be eligible for VASP. Despite the program’s imperfections, more than 17,000 borrowers have been enrolled.

What resources are available to borrowers once VASP ends?

After May 1, the VA will no longer accept new applicants for VASP. Borrowers who are currently enrolled in the program will continue to receive assistance.

With the potential for military veterans, active-duty service members, and surviving spouses to face financial hardship in the coming months, and with no alternative solution to VASP to fill the gap, some VA borrowers might find their intergenerational wealth at risk if they cannot keep their homes.

With VASP ending, there are a few steps unenrolled VA borrowers can take to potentially access temporary relief. 

Borrowers experiencing hardship who are not enrolled in VASP should communicate their situation to their mortgage servicer as soon as possible to determine what options they might be eligible for. VA-approved and certified housing counselors can also provide guidance to borrowers.

Active-duty service members can reach out for information through Military OneSource, a resource authorized by the US Department of Defense that offers financial and legal advice to military personnel and their families. In addition, Veterans Service Organizations often provide support and guidance to VA loan borrowers who are facing hardships.

How Congress could expand support for VA borrowers facing financial hardship

To help ensure VA borrowers can stay in their homes, Congress could strengthen loss mitigation options for military veterans, active-duty service members, and surviving spouses by authorizing the VA to have partial claim authority, as the Federal Housing Administration and the US Department of Agriculture have. The VA launched a similar program on an emergency basis during the COVID-19 pandemic but discontinued it in 2022. If Congress granted the VA partial claim authority, borrowers would be required to make up any missed payments at the end of their loan.

Another possible solution, particularly in this high-interest-rate environment, is a partial claim as a payment supplement to make modifications possible and to lower borrowers’ mortgage payments. It remains to be seen whether there’s enough bipartisan support to implement a partial claim program in time to ensure VA borrowers currently facing hardship keep their homes.