The House Committee on Veterans Affairs marked up a bill on Tuesday that would institute a successor to a last-resort relief program for distressed borrowers that ended this month.
The VA Home Loan Reform Act would create a new form of the partial claim used during the pandemic. The original partial claim's successor,
Mortgage bankers have been supporting recent updates to the legislative proposal while urging legislators to fast-track it given the phaseout of VASP.
"Without swift legislative action and subsequent VA implementation, thousands of veteran homeowners recovering from temporary financial hardship could face heightened foreclosure risk," Bill Killmer, a senior vice president at the Mortgage Bankers Association, said in a letter.
Updates to the bill that the MBA said it supported included a clarification that the new partial claim would not reduce the government guarantee on VA loans, and elimination of interest charges on the second-lien balance.
Legislators also recently increased the maximum claim amount to 30% from 25%, and replaced what had been a fixed date at which the program would end to a rolling five-year implementation, according to the association.
"These changes, many of which echo recommendations in
While the industry had ideally hoped for a permanent partial-claim program, the Department of Veterans Affairs has struggled to add one due to limitations in its authorizations as written, and its budget.
The department ended the pandemic partial claim in October 2022 due to budgetary considerations, but then later implemented VASP to replace it after finding the lack of a partial claim exposed tens of thousands of veteran borrowers to foreclosure risk.
Federal officials' focus on the VA's budgetary constraints has recently intensified as the Republicans currently in power in Washington have broadly engaged in efficiency initiatives that have included
The bill's sponsor, Rep. Derrick Van Orden, R-Wis., has been critical of VASP's costs and questioned whether its loan purchases fit within the VA's authorization. He said the new partial claim is a better alternative. Van Orden chairs the House's VA subcommittee on economic opportunity.
The committee's markup discussions suggest that the bill will have backing from the Republican majority, who said they have worked to strike a bipartisan compromise on the issue.The attempt to reach a middle ground appeared closer to achieving it than a previous version of the bill, which had left some Democrats dissatisfied.
Rep. Herb Conaway, D-N.J., called for a temporary restoration of VASP to help existing borrowers who need such assistance, which would give legislators more time to work on a bipartisan partial claim solution.
Rep. Mark Takano, D-Calif., sought a return to
Van Orden indicated VASP's purchase structure was inappropriate given it's not a loan buyer but a partial guarantor of mortgages, and the cost of the program was excessive, so he would not favor a return to it that could jeopardize department funding for other initiatives.
He also characterized a moratorium as a return to the kind of department overreach Republican legislators are trying to end.
Van Orden expressed disappointment with the two Democrats' caveats after what he said was bipartisan discussion on the bill's current form, while Conaway asked when he couldn't consider providing relief from a foreclosure when that can be less expensive than going through with one.
"Unless we can trust each other, this is never going to work," Van Orden said.
