- A VA mortgage rescue program called VASP was abruptly shut down in May 2025, leaving tens of thousands of veterans without a safety net.
- More than 10,000 veterans have lost their homes to foreclosure since the program ended — the highest pace in a decade for VA-backed loans.
- Another 90,000 veterans are currently behind on their mortgages or actively in the foreclosure process.
- Veterans with VA-backed loans now have fewer protections than most other American homeowners if they fall behind on payments.
- A replacement program is in development but won’t be operational for several more months, and housing advocates warn it may still leave veterans worse off than non-veteran homeowners.
- Veterans already forced into higher-rate loan modifications will not see relief under the new program as currently written.
More than 10,000 veterans have lost their homes to foreclosure since the Department of Veterans Affairs shut down a critical mortgage rescue program last year, according to industry data from ICE Mortgage Technology. That figure represents the highest pace of VA loan foreclosures in a decade — and housing advocates warn that tens of thousands more veterans are at risk.
The foreclosure surge follows the May 2025 cancellation of a program called VASP, the VA Servicing Purchase program, which had been providing at-risk veterans with affordable loan options to help them get back on their feet. When it was discontinued, no replacement was in place. Veterans with VA-backed loans were left with fewer options than almost any other category of American homeowner.
A replacement program is now being developed by the VA, but it is still months away from launching — and housing industry groups are already raising concerns that, as currently written, it may still leave veterans worse off than their non-veteran counterparts.
How the Crisis Began
To understand how we got here, it helps to trace this back several years. During the COVID-19 pandemic, the federal government allowed homeowners across the country to pause mortgage payments through what is called “forbearance.” For veterans with VA-backed loans, this program allowed them to skip payments temporarily, with the understanding that those payments would eventually be moved to the back of the loan term.
In October 2022, however, the Biden administration abruptly discontinued a key component of the VA’s forbearance program — while tens of thousands of veterans were still enrolled in it. Suddenly, those veterans were told they owed all the skipped payments back immediately, in a lump sum. For most, that meant coming up with tens of thousands of dollars they didn’t have.
The alternative wasn’t much better. Veterans could accept a new loan modification, but mortgage rates had climbed steeply — from around 3% to 7% — and refinancing meant dramatically higher monthly payments. Many veterans found themselves trapped: they couldn’t afford the lump sum, and they couldn’t afford the higher monthly payment either.
After investigative reporting by NPR in late 2023 spotlighted the scale of the problem, the VA halted foreclosures across the board and began developing a rescue program. That program became VASP.
What VASP Was — and Why It Mattered
The VA Servicing Purchase (VASP) program was designed to give veterans who had fallen behind on their VA-backed loans a genuine path to staying in their homes. Under VASP, qualifying veterans could receive a new mortgage with an interest rate of 2.5% — a meaningful reduction that made monthly payments manageable for many families.
By early 2025, the program was operating at scale. More than 33,000 veterans had received new, lower-cost mortgages through VASP, according to reporting from NPR. For disabled veterans, families on fixed incomes, and service members who had run into financial hardship through no fault of their own, it was a genuine lifeline.
The VA loan program is widely considered one of the most valuable benefits available to those who serve. It allows eligible veterans and active duty service members to purchase homes with no down payment and without private mortgage insurance. When things go wrong financially, having a meaningful safety net within that program is part of what makes the benefit meaningful. VASP was that safety net.
When the Rescue Program Was Canceled
On May 1, 2025, the VA shut down VASP. The agency gave mortgage servicers — and even its own VA loan staff — roughly one week’s notice that the program was ending. No replacement was ready. Veterans who had applied for VASP but hadn’t yet been enrolled were cut off. The door, as one industry observer described it, was slammed shut.
The closure had been anticipated by some in the mortgage industry. At a March 2025 hearing before the House Committee on Veterans’ Affairs, representatives from the Mortgage Bankers Association had warned lawmakers directly about what would happen if the program were canceled without a replacement ready. The message was blunt: canceling VASP without a backup in place would lead to foreclosures.
Those warnings did not prevent the shutdown.
The VA has not publicly explained why VASP was discontinued before a replacement program was available. VA officials did not respond to NPR’s questions on that specific point.
The Human Cost: Veterans Losing Their Homes
Since VASP ended, the consequences for veterans and their families have been severe.
According to ICE Mortgage Technology, which tracks mortgage industry data, more than 10,000 veterans have lost their homes through foreclosure sales in the roughly ten months since the program was canceled. An additional 90,000 veterans are currently behind on their mortgage payments or actively in the foreclosure process.
Among those affected are combat-disabled veterans, veterans dealing with PTSD and traumatic brain injuries, and families who had used the original COVID-era forbearance program in good faith — believing their skipped payments would simply be deferred, only to find themselves caught in a years-long bureaucratic ordeal.
According to NPR’s most recent investigation, some veterans who narrowly missed VASP enrollment have been forced to accept loan modifications at today’s higher interest rates. Their investigation shows that some veterans have seen their payments go up by $350 to $800 each month.
For veterans rated 100% disabled, living on fixed disability compensation, these payment increases can be the difference between keeping a home and losing it.
Why VA Borrowers Now Have Fewer Options Than Other Homeowners
One of the most troubling aspects of the current situation is that veterans with VA-backed loans now have fewer protections when they fall behind than most other American homeowners.
Mortgages backed by Fannie Mae, Freddie Mac, or the Federal Housing Administration (FHA) all include emergency options for borrowers who fall behind — options that do not raise the homeowner’s interest rate or monthly payment. Veterans with VA loans lost access to that kind of protection when VASP was discontinued.
With mortgage rates hovering between 6% and 7% over the past several months, veterans who fall behind on a loan they originally took out at 2–3% face a difficult reality: the only available options may be selling the home, accepting foreclosure, or agreeing to a modified loan with a substantially higher monthly payment.
For veterans who entered forbearance during the pandemic and were never actually given a path to resolve their deferred payments through no fault of their own, this situation is particularly difficult to accept.
A Replacement Program Is Coming — But With Caveats
The VA is developing a new program intended to help veterans who are behind on their loans. The core mechanism would allow veterans to take their missed payments and move them to the back of the loan term, preserving their original interest rate and keeping monthly payments at or near their previous level. For veterans with low-rate mortgages, this could be a significant benefit.
However, housing advocates and the mortgage industry have flagged a significant problem with the program’s current draft language.
As written, the program allows mortgage servicers to place veterans into a higher-rate loan modification — rather than the payment-deferral option — if the modified loan raises the monthly payment by 15% or less. That means a veteran currently paying $2,000 a month could potentially be pushed into a modified loan costing as much as $2,300 a month, even if a deferral option that preserved their original payment was available.
The Mortgage Bankers Association wrote directly to the VA expressing concern that, under this structure, veterans will continue to face worse options than similarly situated non-veteran homeowners. The association is urging the VA to restructure the program so that loan modifications with higher payments are only offered as a last resort — after all other options have been exhausted.
Housing advocates are also asking the VA to request a foreclosure pause from mortgage servicers while the new program is being finalized, in order to protect the tens of thousands of veterans currently in the foreclosure pipeline.
The new program is not expected to help veterans who were already forced into higher-rate loan modifications after VASP ended. For those borrowers, the only potential path to relief would be a future refinance if mortgage rates drop significantly — a scenario that appears unlikely in the near term.
What Veterans Facing Foreclosure Can Do Right Now
If you are a veteran with a VA-backed home loan and you are behind on payments or concerned about foreclosure, there are steps you can take now:
- Contact the VA Home Loan program directly. The VA maintains a network of loan technicians who can discuss your options. You can reach the VA at benefits.va.gov/homeloans or by calling 1-877-827-3702.
- Request a HUD-approved housing counselor. The U.S. Department of Housing and Urban Development (HUD) offers free or low-cost foreclosure prevention counseling through approved agencies. Find one at hud.gov/counseling.
- Contact your mortgage servicer in writing. Document all communications. Request information about all available loss mitigation options — including any deferral options — in writing.
- Seek legal assistance. Veterans can contact their nearest JAG office or legal assistance center on a military installation. Civilian nonprofit legal organizations such as the National Consumer Law Center may also be able to help or refer you to local resources.
- Contact your state’s veteran services agency. Many states have veteran service officers (VSOs) who can advocate on your behalf. The VA maintains a directory of VSOs that can help connect you with representation.
- Reach out to veteran service organizations. Groups like the Veterans of Foreign Wars (VFW) and the American Legion have resources and advocates who may be able to assist.
If you have already received a foreclosure notice, time is critical. Do not wait — contact the VA, a housing counselor, or a legal advocate immediately.
This article is provided by Military.net, an independent educational resource. We are not affiliated with the Department of Defense, the Department of Veterans Affairs, or any government agency. For official benefit information, please visit VA.gov or contact your local VA regional loan center.
Frequently Asked Questions
VASP, or the VA Servicing Purchase program, was a mortgage rescue initiative that provided veterans who had fallen behind on their VA-backed home loans with new, affordable mortgages at a 2.5% interest rate. It was designed to help veterans who had been caught in a difficult situation stemming from the end of COVID-era forbearance programs. VASP was shut down on May 1, 2025.
According to data from ICE Mortgage Technology, more than 10,000 veterans have lost their homes through foreclosure sales since VASP was discontinued. An additional 90,000 veterans are currently behind on their mortgages or actively in the foreclosure process. The current rate of VA loan foreclosures is the highest in a decade.
The VA is developing a replacement program that would allow veterans to defer missed payments to the back of their loan term, preserving their original interest rate. However, the program is not yet operational and is not expected to launch for several months. Housing advocates and the mortgage industry have also raised concerns that, as currently written, the program may still leave some veterans worse off than non-veteran homeowners facing similar situations.
Veterans in this situation should contact the VA Home Loan program at 1-877-827-3702, request a HUD-approved housing counselor, document all communications with their mortgage servicer in writing, and consider reaching out to a veteran service organization or nonprofit legal organization for additional support. If you have already received a foreclosure notice, act immediately.
Based on current reporting, the new program will not reduce payments for veterans who were already forced to accept loan modifications at higher interest rates after VASP ended. Those borrowers would need to refinance separately if mortgage rates decline enough to make that beneficial — an uncertain prospect given current rate trends.
