Thousands of veterans to benefit from the recently established mortgage relief legislation, preventing impending foreclosures.
The VA Home Loan Program Reform Act: A New Lease of Life for Veteran Homeowners
The VA Home Loan Program Reform Act, enacted into law on July 30, 2025, brings significant improvements and financial hardship tools to the aid of Veteran homeowners. This legislation, hailed as a step forward by experts, aims to strengthen the protections for Veterans, align the servicing guidelines with FHA programs, and provide a comprehensive set of tools to reduce foreclosure risks and housing instability.
One of the key features of the Act is the establishment of a five-year Partial Claim Program. Replacing the previous VA Servicing Purchase (VASP) program, this new program allows the VA to purchase a portion of a delinquent VA loan, helping Veterans avoid foreclosure. Delinquent amounts are deferred to the end of the loan term and repaid at 0% interest when the loan is paid off. This critical tool ensures that Veterans can keep their homes during financial hardship.
The partial claim can amount to up to 25% of the loan balance, with an additional 5% if the delinquency occurred between 2020 and 2025. This provision bridges the gap in assistance created by the abrupt cancellation of the VASP in May.
The Act also significantly increases funding for the Grant and Per Diem Program, which supports transitional housing and services for homeless Veterans. Funding is raised from $258 million to $344 million for 2025 and 2026, including support for Veterans exposed to environmental hazards.
In addition, the legislation helps Veterans struggling with job losses, medical bills, or high mortgage interest rates that make refinancing difficult by offering a deferral mechanism and foreclosure prevention tools. This provision provides a path to maintain homeownership during economic challenges.
Furthermore, the Act enables ongoing funding for non-profit agencies that run homeless prevention initiatives through the Homeless Providers Grant and Per Diem Program.
Notably, the Act also allows Veterans to directly pay their buyer's agent fees when using VA loans. This change makes VA loans more competitive with conventional loans, especially in high-cost markets like California and Florida.
The passage of the partial claim bill has been applauded by Mike Calhoun, president of the Center for Responsible Lending, who states it will provide meaningful payment assistance to VA borrowers in financial distress. However, to bring relief for VA-borrowers on par with relief for other borrowers with federally-backed mortgage loans, Congress must further improve the partial claim program.
As of April 1, there were 75,000 Veteran borrowers who had missed 3 or more payments on their VA-guaranteed mortgage. To avoid unnecessary foreclosures of borrowers who may be eligible for partial claims, the VA must act quickly to implement the new law. The VA is also called upon to streamline the new program to promote broad and timely access.
The National Consumer Law Center further calls for improvements to VA's foreclosure prevention toolbox. To this end, Congress is encouraged to develop an option for borrowers who need monthly payment relief when they fall behind on their mortgages.
In conclusion, the VA Home Loan Program Reform Act introduces a range of measures to support Veteran homeowners, including the establishment of the Partial Claim Program, increased funding for homeless Veterans, and the direct payment of buyer's agent fees. While these reforms represent a significant step forward, further improvements are necessary to ensure that relief for VA-borrowers is on par with relief for other borrowers with federally-backed mortgage loans.
[1] National Consumer Law Center. (2025). VA Home Loan Program Reform Act: Key Provisions. Retrieved from https://www.nclc.org/issues/mortgage-foreclosure/va-home-loan-program-reform-act-key-provisions.html
[2] Center for Responsible Lending. (2025). VA Home Loan Program Reform Act: A Step Forward for Veteran Homeowners. Retrieved from https://www.responsiblelending.org/blogs/va-home-loan-program-reform-act-a-step-forward-for-veteran-homeowners
[3] Department of Veterans Affairs. (2025). VA Home Loan Program Reform Act: Overview. Retrieved from https://www.va.gov/housing-assistance/home-loans/reform-act.asp
- The VA Home Loan Program Reform Act, affecting both finance and business sectors, aims to provide comprehensive financial hardship tools for veteran homeowners, aligning the servicing guidelines with FHA programs and establishing the Partial Claim Program to aid delinquent VA loanholders.
- In the realm of politics and general news, the Act's passage is noteworthy for its strides in reducing foreclosure risks and housing instability among veteran homeowners, with additional funding allocated for homeless Veterans and changes to VA loan terms that make them more competitive with conventional loans.
