On May 29, the Department of Veterans Affairs (VA) announced a targeted foreclosure moratorium on VA-guaranteed loans intended to allow servicers sufficient time to implement the Veterans Affairs Servicing Purchase (VASP) program. Servicers may begin implementing the VASP program beginning May 31, 2024, and the VA expects servicers will fully implement the program no later than October 1, 2024.

VASP is a last-resort loss mitigation option for veterans whose servicers have determined that there are no other options available to help the veteran avoid foreclosure. Servicers must first evaluate veteran borrowers for other retention options in the Home Retention Waterfall, which include repayment plans, special forbearances, and loan modifications, before they can evaluate the loan for VASP assistance. Among other things, to qualify for the VASP program, (i) the loan must be 3-60 months delinquent; (ii) the property owner (or an immediate family member) must be living in the property; (iii) the borrower must have resolved the reason for the default and have an ability to begin making monthly payments; (iv) all borrowers on the loan must have a reliable stream of income; and (v) the borrower must have made 6 monthly payments since the start of their loan (or modification to the loan). If the loan qualifies, the VA will purchase the modified loan from the loan servicer.

In line with its commitment to help veterans retain their homes and avoid foreclosure, the VA is urging servicers to implement the targeted foreclosure moratorium through December 31, 2024. During this time, the VA expects servicers to refrain from initiating, continuing, and/or completing foreclosures on VA-guaranteed loans, except in one of the following situations: (i) the loan is secured by vacant or abandoned property; (ii) the servicer has documented that the borrower does not wish to retain home ownership nor avoid foreclosure; (iii) at least 210 days have passed since the servicer last received a monthly payment from the borrower and the borrower is not responding to the servicer; or (iv) the servicer has evaluated the borrower for all home retention options and determined that none of the available options, including VASP, will work for the borrower.

Servicers are expected to continue efforts to resolve the borrower’s delinquency during the targeted moratorium. Servicers are also expected to evaluate borrowers who previously received COVID-19 relief with respect to their loan for such relief during the targeted moratorium period.

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