“Beginning May 1, 2025, VA’s [VASP] […] will stop accepting new enrollees,” the department said in a statement to the outlet. “This change is necessary because VA is not set up or intended to be a mortgage loan restructuring service.”
Republicans have taken issue with the program buying distressed loans from the mortgage industry to hold them on the VA’s books.
Reps. Mike Bost (Ill.), chairman of the House Veterans’ Affairs Committee, and Derrick Van Orden (Wis.), chairman of the Subcommittee on Economic Opportunity, praised the VA’s decision on Thursday. They said that VASP “was created for political purposes by the Biden-Harris administration to undercut the VA Home Loan program.”
“The Biden-Harris administration wrongfully jeopardized the future of this benefit by allowing billions of dollars to be used towards bailouts for lenders by creating the VASP program,” Van Orden said.
MBA response
There have been few additional details offered directly by the VA thus far. But the Mortgage Bankers Association (MBA) has weighed in to advocate for an alternative assistance program for veterans at risk of foreclosure.
“Halting the VASP program will increase the number of veterans facing foreclosure unless the VA and Congress implement a permanent partial claim option as soon as possible,” Bob Broeksmit, the MBA’s president and CEO, said in statement on Thursday.
Broeksmit went on to describe the turbulent road that veteran-based foreclosure assistance has faced over the past few years — including the end of the VA’s partial claim payment program in 2022 that led to the creation of VASP last year.
He called it “the only viable home retention option for many veteran homeowners who could resume making payments after a temporary hardship, offering them the opportunity to do so via a more affordable and sustainable payment.”
Mortgage servicers, Broeksmit explained, “worked tirelessly, and often with conflicting guidance” to ensure that the program would work. He defended VASP from some criticisms that have been levied against it. And he took aim at some of the characterizations lawmakers have offered about the bill.
“Any characterization of VASP as a ‘lender bailout’ is patently false and entirely inappropriate, given that the mortgage industry voluntarily honored a foreclosure moratorium for months until the VA was able to provide VASP as the only available solution,” he said.
Work toward bolstering the VA’s loss-mitigation programs must “start immediately,” Broeksmit added, including through a permanent partial claim option.
“MBA is eager to continue to work with the VA and Congress to protect veterans and ensure that they can utilize the housing benefit they earned through their service,” he said.
‘Moral hazard’
Upon its unveiling last year, some politicians criticized the VASP program by citing a “moral hazard.” They assert that it could allow delinquent borrowers to take advantage of a much lower monthly payment, in addition to citing potential issues for the federal budget.
A report released earlier this week from independent military news outlet Stars and Stripes stated that congressional Republicans were already considering a legislative cut to the VASP program, with a bill spearheaded by Reps. Van Orden and Bost.
The bill would have capped the number of direct loans that the VA can repurchase through the VASP program at 250, citing a need for more financial stability.
“This legislation would limit the number of direct loans VA is authorized to purchase back to what VA had traditionally done before the creation of the VA Service Purchase Program,” Bost said at a committee hearing last month.
“I believe that if we don’t change VASP, this program will continue to be a trojan horse on VA’s books that could ruin the VA Home Loan program forever.”
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