VA unveils loan modification program to help veterans avoid foreclosure

MBA urges the VA to extend the foreclosure moratorium until program is fully implemented

VA unveils loan modification program to help veterans avoid foreclosure

The Department of Veterans Affairs has launched a new program, the VA Servicing Purchase (VASP), to assist VA borrowers facing financial hardships and prevent unnecessary foreclosures.

VASP allows the VA to purchase and modify default loans to provide meaningful payment assistance to VA borrowers in financial distress.

Consumer advocacy groups, while supporting the program, urge the VA to extend its current foreclosure moratorium (set to expire May 31, 2024) until VASP is widely available.

“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 in a news release. “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 the VA to eliminate any rules that unnecessarily limit access to VASP for borrowers who previously received unaffordable loan modifications.”

Bob Broeksmit, president and CEO of the Mortgage Bankers Association, said the program is crucial in the current high-interest rate environment.

“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,” Broeksmit said. “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.”

Read more: Veterans get huge boost amid missed mortgage payments

Broeksmit also urged the VA to develop a permanent partial claim option alongside VASP, stressing its effectiveness during the pandemic.

“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.”

The VA said it would give servicers additional time to implement the complex VASP program beyond the effective date of May 31.

“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,” said Kanav Bhagat, consultant to the Center for Responsible Lending. “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.”

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