VA termination of VASP program leaves thousands of veterans with higher mortgage payments

The Department of Veterans Affairs ended the Veterans Affairs Servicing Purchase program on May 1, 2025. This decision removed a low-interest option for veterans who fell behind on their mortgages, forcing many into loan modifications with higher interest rates and larger monthly payments.

An investigation by NPR, which reviewed previously unreported VA data, found that more than 15,000 veterans experienced monthly payment increases of at least $150 following the program's closure. Over 700 veterans faced payment hikes of $1,000 or more. The data shows that 63% of veterans who received loan modifications saw their payments go up, a rate far higher than the 2% observed for similar modifications on loans guaranteed by Fannie Mae and Freddie Mac.

Scott Boyd, a veteran who served in the infantry and Army intelligence, bought a home near Columbus, Ohio, in 2021 with a VA loan at a low interest rate. After losing his job and checking into a VA hospital for PTSD treatment, Boyd fell behind on his mortgage. His lender advised him that the VA forbearance program would allow him to pause payments and catch up affordably. That advice proved incorrect once the administration shut down the VASP program, which had rolled missed payments into new mortgages at a 2.5% interest rate.

Boyd accepted a loan modification because he had few other options. He now pays $1,181 more each month. His interest rate jumped from 2.75% to 6.75%, and his loan term extended to 40 years. Previously, half of his payment went toward the principal; now, more than 90% covers interest. Boyd said he felt the modification was the only choice between foreclosure and taking on a much more expensive loan.

Rep. Mark Takano, a Democrat and ranking member of the House Veterans' Affairs Committee, called the outcome the height of insanity. He noted that the veterans affected are often already financially distressed. Rep. Mike Bost, the Republican chairman of the same committee, and Rep. Derrick Van Orden, who led the push to end VASP, did not respond to requests for comment from NPR. In a joint press release at the time of the program's end, Bost and Van Orden stated that the administration rightfully put an end to a program that threatened the future of VA home loans.

The VA warned that the new Partial Claim Program would replace VASP, but it took more than 13 months to design and announce the details. The program launched in June of this year, two weeks after Boyd signed his modification. The industry was given 180 days to implement the change, and most mortgage companies still have not offered it. The VA stated that it helps veterans retain homeownership through various programs, but the new PCP does not help those already stuck in modified loans.

Industry data shows that foreclosures on VA loans rose to a 10-year high after VASP was terminated. Matthew Douglas of the Housing Policy Council, which represents major mortgage companies, said it was a mathematical certainty that borrowers would face shocking payment increases if the program ended without a replacement. The VA gave the industry a deadline of November 28 to stand up the new program.

Boyd is still making his higher payments. He raised four children and cared for his dying father-in-law in his home when he made the decision. He said he wanted to ensure his family had stability and better school options. The VA's new program allows veterans to move missed payments to the back of their loan term, keeping their original mortgage terms, but it does not retroactively fix the terms of those already modified.