February 15, 2024 — Press Release

NCLC Housing Expert to Testify before House Committee on Veterans’ Affairs, Highlight Need for Additional Mortgage Relief Options for Military Veterans

WASHINGTON – Today, Steve Sharpe, senior attorney at the National Consumer Law Center (NCLC), will testify before the U.S. House Committee on Veterans’ Affairs, Subcommittee on Economic Opportunity on behalf of NCLC’s low-income clients regarding the state of the U.S. Department of Veterans Affairs (VA) Home Loan Guaranty Program. The hearing will begin at 1:30 pm in the Cannon House Office Building and will be available virtually here. (Full written testimony is available here)

“It is a bedrock principle of federal housing policy that borrowers who are facing financial hardship should have access to workout options to bring their loans current and avoid foreclosure,” said Sharpe in written testimony submitted in advance of the hearing. “Unfortunately, homeowners with VA-guaranteed mortgages facing hardship have severely limited options to retain their homes and avoid foreclosure.” 

Home-retention policies provide stability for homeowners by giving them a path to recovery after financial hardships and provide stability for neighborhoods that suffer when foreclosure hits. These policies do not guarantee that all borrowers who fall behind can avoid foreclosure, but they help prevent avoidable losses.

Due to the combination of the recent dramatic increase in mortgage interest rates and a decision by the VA to discontinue a program that had allowed homeowners to repay missed payments at the end of their loans, homeowners with VA-guaranteed mortgages have fewer options to stay in their homes and avoid catastrophic losses, compared to other borrowers with federally backed mortgage loans. 

The rise in mortgage interest rates has created significant challenges for the Federal Housing Administration, the U.S. Department of Agriculture, and the Government Sponsored Enterprises, but they all have retained programs to allow borrowers to resume regular payments and pay the arrearage at the end of the mortgage without an increase in their interest rates. In contrast, the VA no longer has such a program.

“The VA Home Loan Program is a benefit program that Veterans have earned through service and sacrifice and that is meant to give them housing stability,” said Sharpe. “We applaud VA for recognizing the problems that its borrowers are facing and for implementing a foreclosure pause…However, the pause is only meaningful if VA puts options in place that Veterans can access before losing their homes.” 

Sharpe urged the VA to take several key steps:

  • VA must immediately release the previously announced VA Servicing Purchase (VASP) program and ensure that the program is easily accessible, accounts for the recent lack of options that have led to growing arrearages, and provides targeted payment relief for VA-guaranteed borrowers;
  • Because VASP will not be a one-size-fits-all solution, VA needs to develop further options, including the reestablishment of a partial claim program that allows borrowers to resume their payments without a change in interest rates;
  • VA must work with elected officials, Veteran Service Organizations (VSOs), consumer advocates, industry representatives, and other stakeholders so  Congress can ensure that funding constraints do not stand in the way of enabling Veterans to save their homes; and
  • VA must start releasing timely and consistent data on VA-guaranteed loan performance, using FHA’s reporting system as a model.

“The VA must take the steps necessary to provide Veteran borrowers what they deserve – a program that honors their service by providing housing stability even in the face of financial hardships,” Sharpe added. 

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