The Department of Veterans Affairs (VA) has announced the termination of its mortgage bailout program, known as the Veterans Affairs Servicing Purchase Program (VASP). This initiative provided last-resort assistance to veterans at risk of foreclosure who held VA-backed loans. The program will permanently close on May 1 after restructuring over 17,000 delinquent loans valued at nearly $5.5 billion.
VASP allowed for the restructuring of delinquent mortgages at a reduced interest rate of 2.5%, significantly lower than the current national average of over 6% for a 30-year fixed-rate mortgage. Critics, including some Republican lawmakers, argued that the program placed taxpayer money at risk by having the VA hold loans in its portfolio without explicit congressional approval.
The VA cited its lack of setup or intent to function as a mortgage loan restructuring service as the reason for ending the program. Current participants or those enrolling before May 1 will not be affected. Mortgage servicers, rather than veterans directly, initiate requests for the special refinancing after exhausting other repayment options.
While some lawmakers praised the decision, others criticized it as harmful to veterans in financial distress. In response, House Republicans have proposed creating a partial claim program to assist veterans facing foreclosure by allowing them to defer missed payments without immediate foreclosure action.
Advocacy groups have urged the VA to ensure an alternative is in place before ending VASP, given the approximately 81,000 active-duty service members or veterans who have missed three or more mortgage payments.
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