As of Thursday, the U.S. Department of Veterans Affairs has officially terminated a critical mortgage-rescue initiative known as the VA Servicing Purchase program (VASP). This program has played a pivotal role in assisting approximately 20,000 veterans in avoiding foreclosure and retaining their homes. The discontinuation of VASP significantly diminishes the options available to millions of military veterans facing difficulties in managing their home loans, especially amid a troubling landscape where nearly 90,000 VA loans are seriously past due and 33,000 are already within the foreclosure process, according to data from the analytics firm ICE.
The VA Servicing Purchase program, established during the Biden administration, was a response to earlier mishaps by the VA that left veterans without affordable alternatives to catch up on their VA-backed home loans. Under VASP, missed payments were consolidated into a new, low-interest loan, fully owned by the VA. This option has become increasingly vital in a market where mortgage rates hover around 7%, making VASP one of the few affordable solutions for veterans struggling with their finances.
Despite its benefits, the program has faced scrutiny from Republican lawmakers who argue that it poses excessive risks to taxpayer money. In a recent statement to NPR, the VA announced, "As of May 1, the program, which was unilaterally created by the Biden Administration and lacks congressional authority, will stop accepting new enrollees." This abrupt decision has raised alarms among mortgage industry groups, housing advocates, and veterans organizations, who warn that discontinuing VASP without a suitable replacement could lead to widespread home losses among veterans.
Mike Calhoun, president of the nonprofit Center for Responsible Lending, emphasized the dire situation stating, "With the expiration of VASP, tens of thousands of Veterans and their families are now at significant risk of losing their homes." His organization is urging Congress to act promptly to establish a new program to mitigate these risks and has suggested extending VASP until a new solution is implemented.
This is not the first time veterans have faced uncertainty regarding their housing. Two years prior, the VA abruptly canceled a vital portion of a pandemic-era mortgage relief initiative, leaving around 40,000 veterans vulnerable to foreclosure. Among those affected is Kevin Conlon, a veteran from upstate New York who, along with his wife, Jenny, turned to a VA loan to purchase their home without a down payment. "Without the VA loan, there was no way that we could have afforded to buy a house," Jenny stated.
The VA home loan program has historically served as a cornerstone benefit of the GI Bill, elevating many veterans into the middle class. However, the discontinuation of the VASP program now endangers this stability for countless veterans, including the Conlons, who are currently in a precarious financial situation.
The VA's previous response to the crisis included halting foreclosures for a year to implement VASP, allowing veterans to pause their payments during financial hardships. However, as the Conlons have discovered, this has led to further complications, with families being advised not to make payments, causing them to fall deeper into arrears.
As Republican lawmakers criticize the VASP program, they propose alternative measures such as a partial claim program that would restructure missed payments by moving them to the end of the loan term. While these proposals exist, the gap between the cessation of VASP and the implementation of new legislation could result in preventable foreclosures for numerous veteran homeowners.
Both Democrats and Republicans express a desire to pass new legislation offering better options to veterans with VA loans; however, the timeline for such measures remains uncertain. In the interim, veterans grappling with mortgage payments find themselves with options that are considerably worse than those available to most American homeowners who are backed by Fannie Mae, Freddie Mac, or the Federal Housing Administration, which offer various loss mitigation strategies.
Many veterans feel abandoned by the VA, having been offered solutions only to see them revoked. Samuel McCrary, a Marine Corps veteran, voiced his frustration, stating, "I feel let down and deceived." He expressed that the VASP program appeared to be a lifeline, only to have the VA halt new enrollments, leaving him unsure about his future.
Even veterans currently enrolled in VASP find themselves in precarious situations, as many are in a three-month trial payment period. The VA has indicated that veterans in this trial can continue until August, but the availability of funding remains an unanswered question.
The concerns surrounding the VA's decision to end VASP resonate deeply with veterans like Conlon, who feel scapegoated for the VA's earlier mistakes. "How do you justify cutting something that is to help the vets who were basically put in this position because of you?" he questioned, emphasizing the mistrust that has developed between veterans and the VA.
As the situation unfolds, the VA has not provided clear answers regarding the potential for veterans to retain their homes following the program's termination. Inquiries directed to both the VA and Congressional offices have yielded little clarity, leaving many veterans feeling adrift in an uncertain financial future.
