To The Point With Bob: Securing Justice and Parity for America’s Struggling Veterans

(To the Point with Bob is a periodic blog by MBA President & CEO Bob Broeksmit, CMB.
You can view this and past blogs here)

Thanks to a new law MBA shaped and championed for well over a year, thousands of veterans will again be able to avoid foreclosure on their homes during times of financial difficulty.

On July 30, President Trump signed the VA Home Loan Program Reform Act into law. It restores the Department of Veterans Affairs’ (VA) authority to offer partial claims, permitting veteran homeowners to move missed payments to the end of the loan term.

Borrowers and lenders have a shared interest in avoiding the pain of foreclosure. Most American homeowners who fall behind on their mortgage payments have affordable options for catching up. Partial claim programs have long been a mechanism to mitigate losses on loans backed by government programs through the VA, Federal Housing Administration (FHA), and Fannie Mae and Freddie Mac.

Unfortunately, in 2022, the partial claim option for homeowners with VA home loans expired without a new plan in place. Suddenly, tens of thousands of veterans, many struggling with COVID-related financial setbacks, faced foreclosure. With rising interest rates, traditional loan modifications were not a viable option for most borrowers. This created needless hardships for our nation’s veterans. Mortgage servicers, who would otherwise use the partial claim option to help their struggling borrowers, were put in a terrible position.

The previous Administration quickly created the VA Servicing Purchase program, or VASP, and called on mortgage servicers to stop foreclosures for one year. However, at the beginning of this year, VASP was cancelled over concerns about its long-term cost to taxpayers. That meant there were no viable loss mitigation tools available in the short term, leaving servicers in an untenable position. As news stories chronicled very well, the move left thousands of veterans, once again, in the lurch. The situation was unworkable, and elected officials on both sides of the political aisle recognized the need for a remedy.

MBA sprang into action to restore parity in government homeownership programs. While leading a diverse coalition made up of groups representing housing advocates, consumers, and veterans, we worked with key House and Senate members from both parties as well as VA officials to come up with a solution to the growing crisis. We provided testimony at public hearings and detailed the impact on veterans of VA’s inability to use partial claims.

This spring and summer, through the Mortgage Action Alliance, MBA members from across the country kept pressure on Congress to restore VA’s authority to use the partial claim. At a hearing before a House Veterans Affairs subcommittee in March, Elizabeth Balce, of Carrington Mortgage Services, on behalf of MBA, told lawmakers that a loss mitigation program without a partial claim for VA would be a “disaster.”

The House approved the legislation (H.R. 1815) by voice vote, and the Senate followed suit in July. The legislation MBA helped shape and persuade Congress to pass will give unambiguous authority to the VA to help America’s veterans overcome financial setbacks and keep their homes. The new law aligns the VA’s policies with FHA and GSE program structures that treat partial claims or loan deferrals as junior liens.

MBA members are committed to helping people achieve the dream of homeownership and doing all we can to keep those dreams alive, in good times and bad. Now that the President has signed the Veteran Home Loan Program Reform Act into law, we will remain tenacious on behalf of American veterans to ensure its swift and seamless implementation. We will also push for any needed technical corrections and fight to make the program permanent. Our veterans deserve no less.