VA mortgage partial claim restoration faces timing challenges

"President Donald Trump signed the VA Home Loan Program Reform Act in late July, adding a partial claim option to the VA's loss-mitigation waterfall. The move brings the VA's approach closer to that of the Federal Housing Administration (FHA) and the government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac. It replaces both a partial claim program that sunset two years ago and the Biden administration's Veterans Affairs Servicing Purchase (VASP)"

"When they suspended VASP, there were 73,000 VA borrowers that were 30 or more days delinquent; 40,000 of them were more than 90 days delinquent, which means they're heading to foreclosure, said Donna Schmidt, director of DLS Servicing and co-founder of Waterfall Calc. VA foreclosures have gone up 498% since last year. It's definitely a risk, said Matt Tully, Sagent's chief compliance officer, when asked whether the program could arrive too late."

"Obviously, you have to be thoughtful about how you set up a program, but the VA did have a partial claim in the past. It's not like unfamiliar territory for them, or you couldn't model it off FHA or even the USDA. Servicers and vendors need time after the rules are finalized to implement the program. Schmidt noted her system would need 60 days to adapt. Tully added that while technology isn't a barrier, servicers"

President Donald Trump added a partial claim option to the VA's loss-mitigation waterfall through the VA Home Loan Program Reform Act, aligning VA policy with FHA, GSEs and USDA approaches. The change replaces a prior partial claim program and the VASP program that stopped accepting new applications, and addresses high delinquency levels among VA borrowers. There were 73,000 borrowers 30+ days delinquent when VASP suspended, with 40,000 over 90 days and foreclosures rising 498% year-over-year. Servicers and vendors require time to implement rules, updating policies, procedures and call-center training; industry requests informal guidance to limit red tape.

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