VA loan program shutdown leaves thousands of veterans with higher payments

The Department of Veterans Affairs ended the Veterans Affairs Servicing Purchase program on May 1, 2025, a move that removed a low-interest option for veterans struggling with mortgage payments. The program had allowed borrowers to roll missed payments into a new loan at a 2.5% interest rate. Its abrupt end left many veterans without a viable alternative to avoid foreclosure.

New data obtained by NPR indicates that more than 15,000 veterans who received loan modifications saw their monthly payments increase by at least $150. More than 700 veterans faced increases of $1,000 or more. For 63% of veterans who received a modification, the payment went up. This compares to just 2% of borrowers in the Fannie Mae and Freddie Mac markets, which cover most of the U.S. mortgage sector.

Scott Boyd, a veteran who bought a home near Columbus, Ohio, in 2021, exemplifies the financial impact. After losing his job and seeking treatment for PTSD, Boyd fell behind on his mortgage. His lender initially told him he could use the VASP program to catch up. When that option disappeared, Boyd was offered a modification that raised his interest rate from 2.75% to 6.75% and extended his loan term to 40 years. His monthly payment rose by $1,181.

Housing industry groups warned Congress before the shutdown that eliminating VASP without a replacement would force veterans into higher-cost loans. Matthew Douglas of the Housing Policy Council stated it was a mathematical certainty that borrowers would face shocking payment increases. Rep. Mark Takano, the ranking Democrat on the House Veterans' Affairs Committee, called the outcome the height of insanity. Rep. Mike Bost, the committee chairman, and Rep. Derrick Van Orden, who led the call to end VASP, did not respond to requests for comment.

Congress passed a bill to create a new VA Partial Claim Program to replace VASP. This new option allows veterans to move missed payments to the end of their loan term while keeping their original interest rates. The VA announced details in June of this year, more than 13 months after ending VASP. The industry was given 180 days to implement the program, with a deadline of November 28.

Veterans who took modifications during the gap between programs remain stuck with their higher rates and extended terms. The VA said in a statement that it helps thousands of veterans retain homeownership through various programs. However, the new Partial Claim Program does not retroactively fix loans that were already modified. VA foreclosures rose to a 10-year high after VASP ended, according to industry data. The VA press secretary Quinn Slaven noted that many leading voices in Congress supported the termination of VASP, which he said put the entire home loan program at risk.