WASHINGTON — Veteran homeowners facing financial hardship will soon have access to a new foreclosure-prevention option under the Department of Veterans Affairs’ home loan program, following the agency’s implementation of provisions included in the bipartisan 2025 VA Home Loan Program Reform Act.
The VA said it has finalized updates to its loss mitigation waterfall and partial claim program, creating a new tool designed to help eligible borrowers bring delinquent VA-backed mortgages current without increasing their monthly mortgage payments.
The VA said the new partial claim option aligns its loan servicing practices more closely with those available through other government-backed mortgage programs and is intended to help veterans recover from temporary financial setbacks while remaining in their homes.
Under the program, missed mortgage payments can be advanced and placed into a subordinate lien that is repaid when the home is sold, refinanced or the mortgage is otherwise paid off. According to National Mortgage Professional, the structure allows borrowers to resolve delinquencies without immediately facing higher monthly housing costs.
How Final Policy Differs
The final policy differs from an earlier proposal that would have allowed certain loan modifications associated with a partial claim to increase a borrower’s monthly mortgage payment by as much as 15%.
National Mortgage Professional reported that the VA removed that provision after receiving feedback from mortgage industry stakeholders, veterans’ organizations and veterans.
“MBA applauds the VA’s release of its partial claim program and updated loss mitigation waterfall, following a collaborative stakeholder feedback process that helped strengthen the proposed policies,” Mortgage Bankers Association President and CEO Bob Broeksmit said in comments reported by National Mortgage Professional. “We are pleased to see that veteran homeowners will have access to a key loss mitigation option available to other borrowers with government-backed mortgages, that can allow veterans to remain in their homes without increasing their monthly payments.”
Nov. 28 is Deadline
According to National Mortgage Professional, mortgage servicers will be permitted to begin submitting trial payment plans for loan modifications and partial claims beginning June 15. Servicers will have until Nov. 28 to update systems, processes and staff training needed to implement the program.
Broeksmit said the implementation period acknowledges the operational work required to activate the new option.
“After actively engaging in the legislative and policy efforts behind this important change, we will continue working with the VA and our servicer members to support implementation,” Broeksmit said, according to National Mortgage Professional. “Activating this new loss mitigation option will require servicers to update systems, modify processes, and train staff, and we appreciate the VA’s recognition of these implementation challenges by providing a 180-day timeframe. Our members are committed to implementing these changes as quickly as possible to ensure veteran homeowners can benefit from this important new tool.”
