More than 10,000 veterans lost homes to foreclosure since May of last year after the VA abruptly shut down a key rescue in the VA home loan program, industry data show. Another roughly 90,000 veterans are behind on mortgages or in the foreclosure process. That pace is the highest for VA loans in a decade.
VA-backed loans are a highly valued benefit for service members, but a years-long series of policy changes and missteps left many veterans with weaker protections than other federally backed borrowers. Advocates and industry groups warned the Trump administration that ending the VA’s rescue plan without a ready replacement would trigger foreclosures; the mortgage industry said the shutdown would be “foreclosure. Period.” Yet the program was ended.
How this happened
The crisis traces to October 2022, when the VA closed part of its COVID-era forbearance system that had let struggling borrowers defer missed payments. Millions of homeowners used pandemic-era forbearance programs, and for VA borrowers an additional VA policy allowed missed payments to be deferred and ultimately moved to the back of the loan. When that option was halted, tens of thousands of veterans were suddenly told they owed a year’s worth of payments in a lump sum — an unaffordable demand for most.
After an NPR investigation in late 2023 found roughly 40,000 veterans trapped by the abrupt policy change, the VA halted foreclosures nationally for a year while planning a fix. The agency developed a rescue program called the VA Servicing Purchase program (VASP), which when operational provided new low-cost mortgages and relief for veterans behind on payments. By early 2025, VASP had helped more than 33,000 veterans secure new mortgages at an interest rate around 2.5 percent.
Then, on May 1, 2025, the VA ended VASP. The agency gave mortgage servicers and some VA staff roughly a week’s notice. Veterans already enrolled in VASP kept their loans, but the program was closed to new applicants. Mortgage servicers scrambled to enroll as many borrowers as they could before the cutoff, but thousands were left out.
Consequences for veterans
Industry tracker ICE Mortgage Technology reports more than 10,000 foreclosure sales of VA-backed homes since the closure. Some veterans who might have qualified for VASP’s affordable terms were pushed into loan modifications with much higher interest rates and larger monthly payments — in effect trading temporary relief for long-term cost increases.
Stories from the ground:
– Leann Ledford of Spokane, Wash., and her husband, a combat-disabled Marine injured in Afghanistan, fell into a VA forbearance after medical and financial shocks. They were repeatedly told they were in a loss-mitigation process and not permitted to resume payments. When the VA halted the deferral option and later ended VASP, the Ledfords were not enrolled and their home went to foreclosure. Freedom Mortgage sold the property; the VA now owns it and the family faces eviction. The VA offered the Ledfords $3,500 in a “cash for keys” arrangement. The couple receives about $3,971 a month in disability pay and say they could have afforded mortgage payments under VASP or by moving missed payments to the back of their loan, but those options weren’t available when needed.
– Army veteran Jon Henry (Kansas City) accepted a modified loan that raised his payment by $380 a month after missing payments while unemployed.
– Shante and Mark Benfatto (Clarksville, Tenn.) said they tried for months to get into VASP but missed enrollment before the shutdown; they accepted a modification that increased their payment by about $300 monthly, plus late fees.
– Jerome Thomas (Port Charlotte, Fla.) says his interest rate more than doubled to 6.8 percent and his payment rose by about $800 monthly; he now faces renewed delinquency notices.
Why outcomes differ from other federal loans
Other federally backed mortgage programs — e.g., Fannie Mae, Freddie Mac, FHA — provide loss-mitigation options that can keep delinquent borrowers on their original rates without raising monthly payments. Since VASP’s shutdown, VA borrowers have been more likely to be steered into rate-increasing modifications rather than having missed payments tacked onto the end of their original, lower-rate loans. Because mortgage rates rose sharply from roughly 3 percent to about 7 percent in recent years, a refinancing or modified loan at current rates can dramatically increase monthly obligations.
The VA’s replacement plan and industry concerns
The VA says it is developing a new program that will allow veterans to move missed payments to the back of their loan term, preserving their existing mortgage and interest rate. But the agency says the new program won’t be operational for months.
A draft of that plan contains a significant qualification: servicers would be required to place veterans into a higher-rate modified loan if the increase in monthly payment is up to 15 percent. For example, a borrower with a $2,000 payment could be directed into a modification that raises their payment by up to $300 instead of being offered the option to keep the original rate and push missed payments to the end of the loan. Mortgage industry groups and housing advocates have urged the VA to make higher-payment modifications a last resort and restructure the “waterfall” of options to prioritize payment reductions that improve a borrower’s ability to stay current.
The Mortgage Bankers Association warned the VA that the draft policy would leave veterans with worse options than similar non-veteran borrowers and could increase redefault rates. Housing advocates have called on the VA and the mortgage industry to pause foreclosures until the new program is operational to prevent additional losses.
Agency response
VA officials did not answer detailed questions about why VASP was shut down 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 also said it has helped thousands of veterans avoid foreclosure but did not provide further specifics. Freedom Mortgage declined repeated requests for comment.
What veterans and advocates are asking for
Advocates want the VA to (1) delay foreclosures until the new program is in place, (2) ensure veterans get options that do not raise their monthly payment if avoidable, and (3) allow veterans who were forced into higher-rate modifications to be reviewed and, where appropriate, moved into options that preserve their original rate and reduce monthly costs.
For many veterans and families, homeownership has provided stability after trauma and financial disruption. Critics say the abrupt policy changes and program shutdowns created needless hardship, and that the agency’s failure to coordinate a replacement left thousands of veterans with fewer options and heightened risk of losing their homes.