More than 10,000 veterans have lost homes to foreclosure since the Department of Veterans Affairs abruptly closed a core rescue option for VA-backed mortgages, industry data show. Roughly 90,000 more veterans are currently delinquent or in the foreclosure pipeline — the fastest pace for VA loans in a decade.
VA home loans are a prized benefit for service members, but a series of policy changes over several years left many veterans with weaker loss-mitigation protections than other federally backed borrowers. Advocates and mortgage industry groups warned that ending the VA’s stopgap rescue without a ready replacement would force foreclosures; despite those warnings, the program was terminated.
How the crisis developed
The problems trace back to October 2022, when the VA shut down a portion of its pandemic-era forbearance framework that had allowed struggling borrowers to defer missed payments. During the pandemic, millions of homeowners used forbearance; VA borrowers had an extra option that allowed missed payments to be deferred and ultimately moved to the back of the loan. When that deferral option was discontinued, many veterans were suddenly told they owed a year’s worth of payments in a lump sum — an unaffordable demand for most households.
After an investigation in late 2023 found roughly 40,000 veterans trapped by the sudden policy change, the VA imposed a national pause on foreclosures for one year while it designed a solution. The agency put in place the VA Servicing Purchase program (VASP), which issued new, low-cost mortgages and relief to veterans behind on payments. By early 2025, VASP had helped more than 33,000 borrowers obtain replacement loans with interest rates around 2.5 percent.
Then, on May 1, 2025, the VA shut VASP down. Servicers and some VA staff received about a week’s notice. Veterans already enrolled in VASP kept their new loans, but the program was closed to new applicants. Servicers raced to enroll as many eligible borrowers as possible before the cutoff; thousands were left out.
Immediate consequences
Industry tracker ICE Mortgage Technology reports more than 10,000 foreclosure sales of VA-backed homes since VASP’s closure. Many veterans who might have qualified for VASP’s affordable terms were instead pushed into loan modifications that raised interest rates and monthly payments — trading short-term relief for long-term higher costs.
On the ground, the outcomes have been devastating for some families. In Spokane, Wash., Leann Ledford and her husband, a combat-disabled Marine, fell into VA forbearance after medical and financial setbacks. They were told they were in loss mitigation and could not resume payments; when the deferral option was halted and VASP later closed, the Ledfords were not enrolled and their home went to foreclosure. Their property was sold by a servicer and now belongs to the VA; the family faces eviction and received $3,500 in a ‘‘cash for keys’’ offer. The couple receives roughly $3,971 a month in disability pay and say they could have kept their home under VASP or by having missed payments moved to the loan’s end, options they no longer had.
Other veterans reported similar hits: an Army veteran in Kansas City accepted a modification that raised his payment by $380 a month after a period of unemployment; a Tennessee couple missed VASP enrollment and took a modification that increased their bill about $300 monthly plus late fees; a Florida borrower saw his rate more than double to about 6.8 percent, boosting his monthly payment by roughly $800 and pushing him back toward delinquency.
Why VA borrowers fare worse than other federal borrowers
Fannie Mae, Freddie Mac and the FHA generally offer loss-mitigation paths that let delinquent borrowers keep their original interest rates and avoid large payment increases by tacking missed payments onto the end of the loan or using other rate-preserving options. Since VASP ended, VA borrowers have been more often steered into rate-increasing modifications instead of being offered to simply preserve the original rate and add missed payments to the loan term.
Because mortgage rates climbed from roughly 3 percent to around 7 percent in recent years, moving borrowers into current-rate modifications can sharply increase monthly obligations and make long-term affordability much harder.
The VA’s proposed replacement and industry concerns
The VA says it is developing a new program intended to let veterans move missed payments to the back of their loans, preserving the existing mortgage and interest rate. But agency officials acknowledge the replacement will not be operational for months.
A draft of the plan includes a notable limitation: servicers could be allowed to place veterans into higher-rate modified loans when the monthly payment increase is up to 15 percent. For example, a borrower with a $2,000 payment could be routed into a modification that raises the payment by up to $300 instead of being offered an option that preserves the original rate and pushes missed payments to the loan’s end. Mortgage industry groups and housing advocates have urged the VA to make higher-payment modifications a last resort and to reorder the ‘‘waterfall’’ of options so fixes that keep payments lower come first.
The Mortgage Bankers Association warned the VA the draft policy could leave veterans with weaker options than non-veteran borrowers and raise redefault rates. Housing advocates have called on the VA and servicers to halt foreclosures until the new program is in place to prevent additional avoidable losses.
Agency response and advocacy demands
VA officials did not provide detailed answers about why VASP was ended without an immediate replacement. VA press secretary Pete Kasperowicz said in a statement that, per federal law, VA’s home loan program ‘‘is based on the premise that while Veterans may need some assistance, they must generally be able to make their mortgage payments.’’ The agency said it has helped thousands of veterans avoid foreclosure but declined to offer further specifics. A major servicer, Freedom Mortgage, did not respond to repeated requests for comment.
Advocates and industry groups are urging the VA to: delay foreclosures until the replacement program is operational; ensure veterans are offered options that do not increase monthly payments when avoidable; and review cases where borrowers were forced into higher-rate modifications so those veterans can be transferred into rate-preserving options where appropriate.
For many veterans and their families, homeownership is a cornerstone of stability after service and trauma. Critics say the abrupt policy shifts and the shutdown of VASP created needless hardship and that the agency’s failure to coordinate an immediate replacement left thousands of veterans with fewer options and a much higher risk of losing their homes.