The Department of Veterans Affairs (VA) will launch a “last resort” program for tens of thousands of American veterans who are in danger of losing their homes next month, the department announced on Wednesday.
The Veterans Affairs Servicing Purchase (VASP) program will allow the department to purchase defaulted VA loans from outside mortgage lenders so that the terms of the loans can be modified, allowing these veterans to avoid losing their properties. Then, these borrowers will be guaranteed a fixed 2.5% interest rate for the remainder of their loan terms.
VA Secretary Denis McDonough said in a statement that the program “will help more than 40,000 veterans and their families stay in their homes.”
The new program will only be available to veterans who have defaulted on their mortgages. These veterans will not need to apply to be included–instead, their mortgages will be automatically purchased by the VA if they qualify. Currently, the VA is backing more than 3.7 million active home loans.
The program is an attempt to prevent foreclosure actions against former military members still experiencing financial hardship post-pandemic.
When the COVID-19 pandemic hit the United States four years ago, Congress passed a forbearance program that allowed certain Americans who lost their incomes to skip mortgage payments for several months. That program ended in Oct. 2022, however, and thousands of veterans were left with large payments on their homes; this caused many of them to go into default or turn to other home loans with higher interest rates.
“This program will help ensure that when a veteran goes into default, there is an additional affordable payment option that will work in a higher-interest rate environment, so they can keep their homes,” VA Undersecretary for Benefits Joshua Jacobs said during a call with reporters on Tuesday.
Jacobs added that the VASP program is estimated to produce about $1.5 billion in savings over the next decade. This is because it’ll help avoid costs for housing vouchers, federal loan defaults, and more.
The program will officially launch on May 31. Veterans facing housing insecurity can visit the VA home loans website or call 877-827-3702, and select option 4.
