The U.S. Department of Veterans Affairs has called on mortgage servicers to pause foreclosures until May 31, 2024.
The pause will provide VA borrowers with an opportunity to access the upcoming VA Servicing Purchase (VASP) program. Through VASP, the agency will modify and purchase qualifying loans in default to provide meaningful payment assistance to VA borrowers in financial distress.
“The foreclosure pause is badly needed as veteran borrowers have had no meaningful alternatives to foreclosure for over a year,” said Steve Sharpe, Senior Attorney at the National Consumer Law Center (NCLC). “We applaud VA and the Biden Administration for taking necessary steps to protect veteran families, and we look forward to the release of VASP.”
Consumer advocates at the NCLC and the Center for Responsible Lending (CRL), along with U.S. Sens. Jon Tester, Sherrod Brown, Jack Reed, and Tim Kaine, had urged the VA to pause foreclosures until its VASP program is effective and widely available.
“The VA’s foreclosure pause is critically important for giving Veteran borrowers a path to avoid foreclosure. We now urge VA to ensure that VASP 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 CRL. “The VASP program will give tens of thousands of active-duty servicemembers and veterans the assistance they have earned through their service, allow them to remain in their homes, and avoid foreclosures.”
Earlier this year, NCLC and CRL provided comments to the VA urging expansion of home retention alternatives for borrowers with VA-guaranteed loans who are facing financial difficulties. The comments explained that the VA’s current system fails to provide relief and will unnecessarily cause some active-duty servicemembers and Veterans to lose their homes. The comments also urged the VA to avoid placing unneeded and burdensome procedural barriers on borrowers trying to access the relief.
Sens. Tester, Brown, Reed, and Kaine sent a letter last week to Denis McDonough, Secretary of the U.S. Department of Veterans Affairs, calling for foreclosure relief for veterans.
“[Tens] of thousands of veterans and servicemembers are left with no viable options to get back on track with payments and save their homes. Stories from across the country show that this is already having severe consequences for veterans and their families,” the Senators wrote in their plea to the VA. “With each additional day that passes, risks mount for borrowers who are facing foreclosure while they wait for a solution from VA.”
Just last month, Sen. Brown, who serves as Chair of the Senate Committee on Banking, Housing, and Urban Affairs, and Sen. Mike Braun, introduced new legislation, the VA Home Loan Awareness Act of 2023, to help inform veteran homebuyers of their eligibility for the VA Home Loan Program.
The VA Home Loan Program serves as a tool for helping veterans and their spouses achieve the American dream of homeownership—offering veterans perks for financing their home purchases, including no down payment, no private mortgage insurance (PMI), and oftentimes lower interest rates than conventional FHA loans. Despite these benefits, only 13% of veterans ever utilize their VA Home Loan benefit.
Among veterans who choose not to use the VA loan when purchasing a home, 33% of them said it was because they were not aware of the program. This rate is even higher among surviving veteran spouses, as 46.3% said they did not know they were eligible for a VA Home Loan at the time of their purchase.