The U.S. Department of Veterans Affairs (VA) is launching its Veterans Affairs Servicing Purchase (VASP) program in an effort to assist veterans experiencing severe financial hardship stay in their homes. The program is set to begin May 31.
“This new program will help more than 40,000 veterans and their families stay in their homes, and there’s nothing more important than that,” VA Secretary Denis McDonough said in a release. “We at VA are committed to doing everything in our power to help veterans avoid foreclosure, and that’s exactly why we’re launching VASP – to help the veterans who need it most.”
According to the release, VASP is a last-resort tool of home retention options for eligible veterans, active-duty service members, and surviving spouses with VA-guaranteed home loans who are experiencing “severe financial hardship.” As part of the program, VA will purchase defaulted VA loans from mortgage servicers, modify the loans, and then place them in the VA-owned portfolio as direct loans. This way, the VA will be able to work directly with eligible veterans to adjust their loans, and their monthly payments so they are able to stay in their homes.
The VASP program will offer a fixed 2.5 percent interest rate to provide a consistent, affordable payment for the remainder of the loan, the VA stated.
The National Consumer Law Center (NCLC) and the Center for Responsible Lending (CRL) supported this new program and requested the VA extend its foreclosure pause, currently set to expire on May 31, until the program is widely available to eligible VA borrowers in need of assistance.
“The VASP program is badly needed as veteran borrowers have had no meaningful alternatives to foreclosure for over a year,” Steve Sharpe, senior attorney at the National Consumer Law Center, said. “The VA must extend the foreclosure pause until VASP is implemented so that all eligible borrowers have fair access to the new program. We also urge VA to eliminate any rules that unnecessarily limit access to VASP for borrowers who previously received unaffordable loan modifications.”
The VASP program does not require veterans to directly apply – instead, mortgage servicers will identify qualified borrowers and submit requests on behalf of veterans based on a review of all home retention options available and qualifying criteria. The VA stated it anticipates the VASP program will result in a reduction of $1.5 billion in government subsidy spending, because the savings associated with avoiding foreclosure outweighs the cost of purchasing the homes.
“The VA has designed a program that will be broadly available and provide relief that many VA borrowers need, especially in the current high interest rate environment,” CRL consultant Kanav Bhagat said. “We believe the program will provide tens of thousands of active-duty servicemembers and veterans with the assistance they have earned through their service, allow them to remain in their homes, and avoid foreclosures.”
Mortgage Bankers Association (MBA) President and CEO Bob Broeksmit said his organization welcomes the VASP program’s release, calling it especially important in the current high interest rate environment.
“Servicers have performed extraordinarily since the pandemic to implement new forbearance and home retention programs from the VA and other federal agencies, helping more than 8 million families stay in their homes,” Broeksmit said in a release. “While the VA has announced a May 31 effective date, it is important for veterans to understand that the VA has assured servicers that additional time will be provided to implement this complex and novel program. Servicers will work diligently to modify their systems and operations and train their staffs to implement the program by the VA’s deadline, when announced.
“The VA should also develop a permanent partial claim option as its preferred home retention solution, in addition to VASP,” he added. “The partial claim worked successfully for borrowers and servicers during the pandemic and is a crucial loss mitigation tool that exists for every other government loan program. Having both a partial claim option and VASP would provide servicers a durable loss mitigation framework to help struggling homeowners avoid foreclosure in any market environment.”
Broeksmit ended by ensuring MBA will work with the VA in executing the VASP program without placing undue operational and cost burdens on servicers and veterans.