VA Home Loan Program Reform Act
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The VA Home Loan Program Reform Act gives the Department of Veterans Affairs new authority to pay loan holders directly to prevent foreclosure on VA-guaranteed home loans, and establishes a five-year Partial Claim Program letting the VA buy up to 25-30% of a defaulted loan's balance to help veterans stay in their homes.
The law responds to veterans who faced foreclosure after a prior VA loss-mitigation program lapsed, and also raises authorized funding levels for VA homeless veteran services and requires a report on veterans' access to real estate representation.
What this law does
What it does
The law authorizes the VA to pay a loan holder the amount necessary to avoid foreclosure on a VA-guaranteed home loan, in exchange for the VA obtaining a secured interest in the property, and requires the VA to set mandatory loss-mitigation procedures loan holders must follow before a loan can be purchased outright. It establishes a five-year Partial Claim Program letting the VA purchase a portion (generally up to 25%, or 30% for certain pandemic-era missed payments) of the unpaid balance on a defaulted or at-risk VA loan, taking a subordinate lien in return. Borrowers who later default on a loan with a partial claim become liable to the VA for any resulting loss. The law also requires a VA report to Congress within 90 days on ensuring veterans are not disadvantaged in securing real estate agent representation, and raises authorized funding for VA comprehensive homeless veteran service programs through fiscal year 2030. VA decisions under these new authorities are made final and not subject to judicial review.
Key provisions
- 1Authorizes the VA to pay a loan holder the amount necessary to avoid foreclosure in exchange for a secured interest in the property, with mandatory loss-mitigation procedures required first.
- 2Establishes a five-year Partial Claim Program allowing the VA to purchase up to 25% (or 30% in certain pandemic-related cases) of a defaulted VA loan's balance, taking a subordinate lien.
- 3Makes borrowers who default on a loan with a VA partial claim liable to the VA for any resulting loss, recoverable as a debt to the United States.
- 4Requires the VA to report to Congress within 90 days on its strategy to ensure veterans are not disadvantaged in securing real estate agent representation.
- 5Increases authorized funding for VA comprehensive service programs for homeless veterans through fiscal year 2030.
Who is affected
Veterans with VA-guaranteed home loans who are in default or at risk of default, the banks and mortgage servicers that hold those loans, the Department of Veterans Affairs, homeless veterans served by VA comprehensive service programs, and veterans seeking real estate agent representation when buying a home with a VA loan.
Why it matters
Veterans facing foreclosure gain a new mechanism to keep their homes after a prior VA foreclosure-prevention program lapsed, while loan holders get a faster, VA-backed path to resolve defaults. The mandatory loss-mitigation sequence and non-reviewable VA decisions shape how much leeway veterans and servicers have before a loan is foreclosed or purchased.
What changed
Changes to existing law
Amends 38 U.S.C. § 3732 (Sec. 2)
Authorizes VA payments to loan holders to avoid foreclosure, requires a mandatory loss-mitigation sequence, and makes such VA decisions final and unreviewable.
Amends 38 U.S.C. § 3720 (Sec. 2)
Bars the VA from taking certain administrative actions on a guaranteed loan until the mitigation sequence for the veteran is completed.
Creates 38 U.S.C. § 3737 (new) (Sec. 3)
Establishes a five-year Partial Claim Program letting the VA purchase a portion of a defaulted VA loan's balance and take a subordinate lien.
Amends 38 U.S.C. § 2016 (Sec. 5)
Extends and raises authorized funding levels for comprehensive service programs for homeless veterans through fiscal year 2030.
Agencies directed to act
Effective dates
- Deadline for VA report on veterans' access to real estate agent representation
- The Partial Claim Program authority terminates
Funding and costs
- $344,000,000
Comprehensive service programs for homeless veterans
- $257,700,000
Comprehensive service programs for homeless veterans
Congressional Budget Office estimate
CBO estimates H.R. 1815 would decrease net direct spending by $147 million and increase discretionary spending subject to appropriation by $146 million over the 2025–2035 period, yielding a near-zero net budgetary effect.
CBO estimates that H.R. 1815 would decrease net direct (mandatory) spending by $147 million over the 2025–2035 period, driven primarily by the new Partial Claim Program: while the program itself would cost roughly $124 million in direct loan subsidies, it is expected to reduce VA's foreclosure-related guarantee payments by about $294 million, for a net direct-spending decrease of $170 million from that provision, partially offset by $23 million in increased mandatory spending from the Toxic Exposures Fund for the expanded Grant and Per Diem Program. Spending subject to appropriation (discretionary) would increase by $146 million over the same period, reflecting the temporary increase in the Grant and Per Diem Program's authorized funding cap. The bill contains intergovernmental and private-sector mandates — both related to restricting judicial review of VA lien decisions — but CBO estimates no costs associated with these mandates, placing them well below UMRA's statutory thresholds.
How it works
The VA must prescribe loss-mitigation procedures and a mandatory sequence of options loan holders offer veterans before a loan can be purchased outright or foreclosed. For partial claims, the VA determines eligibility and claim amounts, may contract with servicers (who must send quarterly statements), and may certify holder compliance while conducting random-sample post-payment audits. The VA may issue interim guidance for loans already in default before finalizing regulations, and all VA decisions under these authorities are final and not subject to judicial or benefits-appeal review.
Legislative status & sources
Latest action
Became Public Law No: 119-31.
Official CRS summary
Show the CRS summaryHide the CRS summary
This bill authorizes the Department of Veterans Affairs (VA) to take certain actions in cases of default on home loans under the VA home loan program and establishes a partial claim program.
First, the bill authorizes the VA to pay the holder of a loan guaranteed by the VA an amount necessary to avoid the foreclosure of the loan, provided that the holder of the loan and the veteran obligated on the loan execute documents to ensure the VA obtains a secured interest in the property covered by the loan.
The VA must prescribe loss mitigation procedures to help prevent the foreclosure of such a home loan. The VA may not take specified administrative actions (e.g., consent to the modification of loan terms) until the sequence of mitigation options has been completed.
Next, the bill establishes a five-year Partial Claim Program under which the VA may make a partial claim (purchase a portion of the indebtedness) on VA loans for primary residences that are in default or at imminent risk of default. Individuals who default on loans for which the VA has made a partial claim under this program must be liable to the VA for any loss resulting from the default.
Finally, the VA must report to Congress on its strategy to ensure that veterans who purchase homes under the VA home loan program are not at a disadvantage when attempting to secure representation by a real estate agent or broker.
Legislative subjects
Accounting and auditing; Armed Forces and National Security; Congressional oversight; Government lending and loan guarantees; Real estate business; Veterans' loans, housing, homeless programs
Committee report
H. Rept. 119-104