VA Home Loan Program Reform Act

Veterans with troubled VA-guaranteed mortgages gain a new way to address overdue debt and a required sequence of options before foreclosure.

What the law does ​

• Creates a five-year Partial Claim Program allowing VA to cover overdue mortgage debt in exchange for a secondary lien on the home.
• Requires loan holders to offer VA-ordered foreclosure-prevention options before VA may purchase or otherwise manage the full loan.
• Limits a partial claim generally to 25 percent of unpaid principal, or 30 percent for certain borrowers who missed payments from March 1, 2020, through May 1, 2025.
• Generally allows one partial claim per loan, with another possible after missed payments tied to a presidentially declared major disaster.
• Requires a VA strategy to protect veterans’ access to real estate agents or brokers.
• Authorizes $344 million annually for homeless-veteran programs in fiscal years 2025 and 2026, and $257.7 million annually through fiscal year 2030.

Who it affects ​

• Veterans with VA-guaranteed primary-residence loans in default or at imminent risk of default.
• Holders of VA-guaranteed loans that must follow VA’s foreclosure-prevention sequence.
• Veterans using homeless-veteran services or seeking real estate representation.

Breakdown ​

VA Home Loan Program Reform Act ​

The law expands the Department of Veterans Affairs’ tools to help veterans avoid foreclosure on VA-guaranteed home loans. It creates a five-year Partial Claim Program that allows VA to cover part of a borrower’s overdue debt in exchange for a secondary lien on the home, and it requires loan holders to follow a VA-set sequence of foreclosure-prevention options. It also requires a strategy addressing veterans’ access to real estate representation and increases funding authorization for homeless-veteran service programs.

Key takeaways

• VA may pay loan holders amounts needed to prevent foreclosure, require forbearance, and obtain a secured interest in the veteran’s property.
• VA must establish an ordered sequence of loss-mitigation options that loan holders must offer veterans before VA may purchase the entire loan or use certain other loan-management powers.
• The new Partial Claim Program applies to VA-guaranteed loans on primary residences that are in default or at imminent risk of default.
• A partial claim generally may cover up to 25 percent of the unpaid principal balance, but the limit is 30 percent for certain borrowers who missed payments between March 1, 2020, and May 1, 2025.
• Generally, only one partial claim is allowed per loan, although an additional claim may be available for missed payments during or within 120 days after a presidentially declared major disaster.
• The law requires VA to report on protecting veterans’ access to real estate agents or brokers and authorizes $344 million annually for homeless-veteran programs in fiscal years 2025 and 2026 and $257.7 million annually through fiscal year 2030.