VA launches new program to help veterans avoid foreclosure

VA Servicing Project is being launched in May.Photo byGetty Images

By Mia Khatib

mia.khatib@triangletribune.com

With COVID-19 relief programs halting and interest rates spiking, many veterans have been struggling to make their home loan payments.

To help veterans keep their homes, the U.S. Department of Veterans Affairs is launching a new program known as VA Servicing Purchase. It allows eligible veterans, active-duty service members and spouses with VA-guaranteed loans to modify their loans and maintain affordable monthly payment rates.

“We've known for quite a while now, since around the middle of 2022, that veteran borrowers who are falling behind in their loans really lacked a good and consistent tool to help them catch back up,” National Consumer Law Center Senior Attorney Steve Sharpe told The Tribune. “That's why VASP is so important. That’s what the VA developed to fill in where borrowers really needed something.”

Veterans can contact their mortgage servicers to evaluate if they qualify. Eligible borrowers will then be recommended to the VA, which will purchase the mortgage from servicers and work directly with borrowers to adjust their loan plan. Interest rates will be fixed at 2.5% compared to the current 7% market rate.

VASP will be available May 31, the same day the foreclosure moratorium for veterans with VA loans will expire. The National Consumer Law Center and the Center for Responsible Lending, among others, are advocating to extend the pause to give loan servicers a chance to effectively roll out the new program.

VASP will save the federal government $1.5 million from 2024 to 2033. Kanav Bhagat, president of consulting firm Housing Risk and Policy Advisers, said VASP is not only cost effective but can help offset social consequences for the wider community, too.

“Foreclosures are bad for everybody…and if there's a foreclosure in your neighborhood, it usually reduces your neighbors’ home values,” he told The Tribune. “There's research that shows that foreclosures lead to poor health outcomes, poor outcomes for children in school.”

VA borrowers who previously modified their loans are required to make at least six payments on that modification before qualifying for VASP. But this leaves many vulnerable veterans behind, Bhagat said, who have modified their loans only to end up with higher payments because interest rates skyrocketed.

“The whole purpose of VASP is to help borrowers like that,” Bhagat, who is consulting for CRL, said. “To have them be ineligible for the VASP program because of this requirement, we think that needs to be rethought and eligibility opened up to include those borrowers.”

The VA expects to help more than 40,000 veterans and their families avoid foreclosure through VASP. But in Durham County, more veterans are struggling to secure any type of housing let alone get into or maintain homeownership.

Durham Veteran Services Officer Supervisor Linzie Atkins told The Tribune, of the 15,000 veterans in the county, 355 are in the Durham Continuum of Care homeless system. And, according to federal data, approximately 250 VA-backed loans were issued in Durham last year.

“The VA-backed home loan is a wonderful benefit, but you still have to qualify for a mortgage, and I think that’s challenging for some folks who have limited income in this area,” Veteran Service Officer Jonathan Crooms said. “When somebody is either foreclosed or evicted, their ability to get permanent housing becomes that much harder next time around because that has an effect on credit.”

Veterans are also at higher risk for substance abuse and mental health issues than the general population, Crooms added. With the help of partners like Volunteers for America or the nonprofit TROSA, Durham Veteran Services can connect veterans to transitional housing opportunities, housing choice vouchers, back rent assistance and other resources.

“All of those factors together can make it harder for a veteran to maintain or obtain housing, especially if those mental disabilities and substance abuse disorders are untreated,” he said. “Really what is needed, not just affordable housing, but more permanent supportive housing.”

Visit www.benefits.va.gov.

Mia Khatib, who covers affordable housing and gentrification, is a Report for America corps member.