VA VASP Program Ending: What Servicers Need to Know
On April 23, 2025, the VA announced the “wind down” of the VA Servicing Purchase (VASP) Program that had launched just under a year ago. We’ve put together a summary of the key changes and points to note on this topic:
Official End Date for New Applications: May 1, 2025, was the effective date for the VA to stop accepting new VASP submissions, including new Trial Payment Plans (TPPs).
Rescission of the VA Home Retention Waterfall: The VA Home Retention Waterfall, which listed VASP as the final option, was also officially rescinded on May 1, 2025. Servicers are no longer required to follow this specific order.
Active Trial Payment Plans (TPPs): Veterans who had an accepted VASP TPP event reported by the deadline of April 30, 2025, can continue making payments through August 31, 2025.
VASP Loan Purchases: The VA will continue to purchase successful loans for veterans in active TPPs (with accepted events by April 30th), but this is now contingent on the availability of funds.
No VASP Payments After September 2025: No VASP payments will be issued after September 30, 2025. This means that even for loans purchased by the VA, payments will cease after this date.
New Guidance for Servicers: Effective May 1, 2025, servicers are mandated to discontinue using the VA Home Retention Waterfall. Instead, they must offer veterans the "best loss mitigation option" based on their individual circumstances, as detailed in Chapter 5 of the VA Servicer Handbook. This requires a comprehensive review of all available options while keeping the VA's preferred order of consideration in mind.
Removal of Minimum Payment Reduction for Loan Modifications: A significant change within Chapter 5 is the removal of the requirement for a minimum 10% reduction in monthly principal and interest payments for 30 and 40-year loan modifications. This offers servicers more flexibility in structuring loan modifications.
Concerns and Calls for a Replacement Program: Following the announcement, several veterans' advocacy groups and lawmakers have expressed serious concerns about the abrupt end of VASP without a clear replacement. In response, the "Veterans Housing Stability Act of 2025" has been proposed. This bill aims to establish a partial claim program, similar to those offered by the FHA/USDA/FNMA/FHLMC, which would allow veterans to bring themselves current by moving missed payments to the end of the loan (as a 0% interest subordinate lien, payable to the VA when the loan is paid off).
While the deadlines for new VASP applications and the rescission of the Home Retention Waterfall have passed, there's significant ongoing discussion and legislative efforts to establish a replacement program to support struggling veteran homeowners. Servicers of VA loans should continue to monitor for additional information and guidance. If you have any questions on servicing your VA loans, do not hesitate to contact SCA! Reach out to our Director, Bill Dolan, at wdolan@scapartnering.com or by phone at (617) 694-2617.
