Congress Passes Bill to Prevent Veteran Foreclosures with New VA Loan Relief Program
In a bipartisan move, Congress passed the VA Home Loan Program Reform Act of 2025, a major piece of legislation designed to help prevent foreclosure for veterans with VA-backed home loans. The law reintroduces the VA home loan partial claim option, a critical foreclosure prevention tool that had previously expired. The program provides financial lifelines for qualified borrowers while aligning VA servicing with other federal loss mitigation frameworks.
What the Law Does: Key Provisions of the 2025 Partial Claim Program
- Reinstates Partial Claims: Allows the Department of Veterans Affairs to pay a portion (up to 25%) of a delinquent veteran’s mortgage directly to the loan servicer.
- COVID-Era Boost: For loans delinquent between March 1, 2020 and May 1, 2025, the VA may cover up to 30% of unpaid principal balance.
- No Interest, No Payments: Funds are issued as non-interest-bearing, deferred liens—repaid only when the home is sold or refinanced.
- Primary Residences Only: Applies exclusively to VA-backed loans on a veteran’s primary home.
- Five-Year Window: The program will remain in effect for five years following enactment.
Background: Foreclosure Risk and the End of VASP
Veterans faced increasing foreclosure risks in recent years, particularly following the end of pandemic-era relief programs. The Veterans Affairs Servicing Purchase (VASP) program, which allowed the VA to purchase entire loans and offer reduced-rate modifications, expired in May 2025. Critics argued VASP overextended VA’s servicing authority and left a policy vacuum. The new VA loss mitigation program offers a fiscally safer, more targeted alternative.
Industry and Advocacy Response
Veteran service groups and mortgage industry leaders praised the bill’s passage.
“This is a timely, compassionate fix that ensures no veteran loses their home simply because of bureaucratic delays or lack of repayment options,” said Rep. Mike Bost (R-IL), Chairman of the House Committee on Veterans’ Affairs.
“The partial claim option gives servicers a practical tool that prevents foreclosure without requiring costly loan modifications,” said a spokesperson for the Mortgage Bankers Association.
Comparison of Loss Mitigation Programs
| Program | Description | Interest Rate | Who Holds the Loan? | VA Risk |
| New Partial Claim (2025) | VA pays arrears via deferred lien | 0% (no monthly payments) | Original lender | Limited |
| VASP (2022–2025) | VA buys loan and issues new one | 2.5% fixed | VA | High |
| FHA Partial Claim | FHA pays arrears via 2nd lien | 0% | Original lender | Limited |
If you are a veteran struggling with a difficult financial situation, this program may help you to save your home from foreclosure. Reach out to your lender to discuss this new program if you have fallen behind on your mortgage payments. The Veterans Administration may be able to help.
Some mortgages that veterans have will not qualify under this program. If your mortgage does not qualify for this assistance, then you may wish to consider bankruptcy options. The bankruptcy code offers a number of options to help you save your home. It also provides several options with other debts that you may have. Those who serve or served our country should always consult with an attorney when exploring the option of bankruptcy. Having an attorney on your side during the bankruptcy process will save you money, time and stress. If you are considering filing bankruptcy in Eastern North Carolina or Greenville, North Carolina, C. Scott Kirk, Attorney at Law has been representing individuals in the bankruptcy process for over 25 years. Call 252-689-6249 to discuss your options.