The Department of Veterans Affairs previously released a deadline with some leeway for a transition from
The Housing Policy Council and Mortgage Bankers Association in a letter released late last week asked for the VA to "extend the mandatory compliance date beyond Oct. 1" citing a need for more guidance related to the Veterans Affairs Servicing Purchase program.
The two groups specifically called for more direction "around loss mitigation and servicing transfers" as "critical components of the work that remains to prepare the program for implementation."
They're also awaiting a response to a request for regular meetings with the VA as part of the process.
Once those steps are in place, implementation could take six months, the trade groups said.
The VA said that it has been and will continue to work closely with the industry as it has throughout the development of the program, which allows the department to purchase defaulted loans from servicers, modify them and place the mortgages in its portfolio to prevent foreclosures.
"VA was present at numerous industry events, to include those held by the Mortgage Bankers Association, to discuss the upcoming VASP program. The goal of our efforts and external communications has been to provide transparency while creating an affordable alternative to foreclosure that benefits veterans, the Federal government and the taxpayer. Many program improvements to VASP were informed by those valued discussions," the department said in an emailed statement.
Around 40,000 veterans have been affected by the discontinuation of a temporary partial-claim program from the pandemic in October 2022. These distressed borrowers have been awaiting VASP's setup as the successor to the partial claim.
The VA wants mortgage servicers to be responsible for identifying borrowers eligible for the program, making them central players in its implementation.
Servicers will "try to implement VASP as soon as possible," even though they have the aforementioned reservations about the timeline, according to the two groups. They support "an extension of the voluntary foreclosure moratorium to align with the effective date."
"VA will continue to work with the industry, to include training and discussions, to address any questions regarding implementation," the department said. "Please note, although VA is available to take VASP loans on May 31, servicers have until Oct. 1 to comply. We expect servicers to explore all options for home retention prior to foreclosure, to include VASP. This could mean placing a loan in a special forbearance until the servicer can submit the loan for VASP consideration.
"We look forward to our continued work with industry partners and have confidence in them to deliver VASP to eligible Veterans."
Meanwhile, the nature of the VA's partial guarantee persists as an issue that complicates its efforts to provide manageable foreclosure prevention, the Housing Policy Council added in a separate letter to two senators.
In the letter to Democratic Sen. Jon Tester of Montana and Republican Sen. Jerry Moran of Kansas, HPC asked for more to be done to address the issue in the Veterans Housing Stability Act of 2024, a bill introduced earlier this year.
Tester is the chairman of the Senate Committee on Veterans Affairs. Moran is the ranking member of that committee.
The council showed concern that the current bill's proposal to restore the partial claim used in the pandemic runs into an issue the VA cited in originally discontinuing it: it introduces "additional VA risk exposure" that "is not budget neutral."
The department has said VASP "will result in a government subsidy reduction of approximately $1.5 billion from 2024 to 2033 because it'll cost less to purchase loans through the program than it would to go through the foreclosure process.
The HPC suggested a measure in the bill that could "make the VA's powers more like those of the Federal Housing Administration" might address issues resulting from the former's 25% guarantee
However, the council acknowledged the two are far different due to the FHA's 100% insurance, which makes doing this challenging.
VASP, while different in structure and implementation from the administration's new
Something needs to be done to change the current approach because the current delay in the foreclosure process "increases a veteran's indebtedness, adds to VA's mortgage credit risk, and imposes a liquidity burden on servicers," the council said.
