Mortgage companies can submit requests on behalf of more than 40,000 borrowers who need the new VA Servicing Purchase program starting at the end of next month, according to a department press release. Servicers are charged with identifying qualified borrowers.
Confirmation of the successor program fulfills a promise the VA made when
VASP, while different in structure and implementation from the
"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," said Josh Jacobs, the department's undersecretary of benefits, in a press release.
Trade groups generally welcomed VASP's confirmation but expressed a continuing interest in seeing its predecessor reinstated; and warned implementation could take time.
"CHLA continues to believe that the best long-term action would be the implementation of a comprehensive, partial claims program," said Scott Olson, executive director at the Community Home Lenders of America in an emailed statement. "However, in the short run, it is critical that actions are taken to make sure distressed VA borrowers are protected."
Bob Broeksmit, president and CEO of the Mortgage Bankers Association, expressed a similar interest in reviving the department's partial claim, and also asked borrowers to be patient given that servicers may need beyond the end of next month to fully implement the new program.
"While the VA has announced a May 31 effective date, it is important for veterans to understand that the VA has assured servicers that additional time will be provided to implement this complex and novel program," Broeksmit said.
In a separate notice posted in the VA's servicing portal, the department said VASP would need to be implemented by Oct. 1, noting that mortgage companies facing challenges in meeting deadlines due to technology issues or otherwise could reach out for assistance.
"Veterans who are having difficulty reaching a resolution with their mortgage servicer can contact VA at 877-827-3702, option 4," the department said in its press release.
Even a Oct. 1 deadline may be a challenge for mortgage companies, according to the Housing Policy Council's Matt Douglas, when asked about the notice.
"We are pleased that we now can see the details of the VA's new VASP program. We are hopeful that the VA will be ready to meet their May 3 implementation timeline, which is quite aggressive for a new and significant program, and we call on the VA to assist with the lender execution by the Oct. 1 effective date, which will be similarly challenging," said Douglas, who is the HPC's director of mortgage policy.
"Our members are eager to work with VA staff to further refine and clarify the operational elements of the program to make the execution as efficient as possible, to be in a position to help veterans access this new loss mitigation tool as soon as possible," he added.
The VA confirmed it would work with servicers but noted that it expected compliance with the October deadline when asked about such statements, noting it is "announcing this policy more than 50 days in advance — both to help ensure that loan servicers are prepared to offer this program to veterans, and to make sure that eligible veterans do not fall through the cracks."
"VA recognizes that servicers may need time to operationalize requirements, therefore, servicers have until Oct. 1, 2024, to fully implement," the department added. "Servicers should ensure all home retention options, including the Veterans Affairs Servicing Purchase program, are considered prior to foreclosure."
The VA cited budgetary concerns in discontinuing the partial claim back in October 2022. Complications related to the nature of the partial VA backing for loans and the agency's structure may have played roles as well.
The department said in its press release that 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 mechanism the department will use to lower rates to 2.5% through VASP involves buying them from servicers, and modifying them. It will hold the mortgages in a VA-owned portfolio as direct loans, something that's only been done through smaller scale transfers in the past.
In contrast to VASP, the department's partial claim involved setting some borrower obligations aside in a second lien that generally comes due when the first mortgage is refinanced or the home gets sold.
VASP will be only a "last resort," according to the department, which instructed servicers to consider all other available options first. The department helped prevent a total of 145,000 foreclosures through other programs in 2023.
The National Consumer Law Center called for the new program to be made available to qualifying borrowers who previously had received other assistance if the previous option proved insufficient given their hardships, and also for an extended foreclosure suspension in a joint press release. The NCLC issued the release with the Center for Responsible Lending.
The VA said in its response to commentary that it has "ensured that there is an overlap between this new program, the foreclosure moratorium, and VA's extension of its COVID-19 Refund Modification program.
"We will work closely with servicers to ensure that eligible Veterans can transition directly from the moratorium to VASP, as needed, without a foreclosure," the department said.
The consumer trade groups want the VA to "eliminate any rules that unnecessarily limit access to VASP for borrowers who previously received unaffordable loan modifications," according to Steve Sharpe, a senior attorney at the law center quoted in the release.
