VA Home Loan Program Reform Act

Joe Wallace

The VA home loan is a significant benefit of military service, offering a path to affordable homeownership for millions of veterans. The program’s core advantages are clear. They include no down payment, no private mortgage insurance, and competitive interest rates.

However, despite these advantages, for decades, it has lacked a permanent safety net for VA loan applicants who face financial hardship and risk losing their homes. The VA Home Loan Program Reform Act, which took effect on July 30, 2025, addresses this need, as we explore below.

The Path to VA Home Loan Reform

Prior to the passage of this law, veterans with VA loans had fewer permanent options to save their home from VA loan default or foreclosure than homeowners with FHA or other federal mortgages. Following the COVID-19 pandemic, for example, many veteran homeowners fell behind on their mortgage payments. They faced foreclosure with a limited set of tools to help them.

In response, the House Committee on Veterans’ Affairs drafted a solution to give veterans protections similar to those of other homeowners. The result was H.R. 1815, the VA Home Loan Program Reform Act.

The bill passed the House and Senate with broad support before the President signed it into law.

Veteran service organizations and mortgage industry leaders, including The American Legion and the Mortgage Bankers Association, supported the legislation. Congress designed the law to give the VA the authority to help veterans sustain their homeownership.

The VA Partial Claim

The VA Home Loan Program Reform Act provides the Department of Veterans Affairs with additional tools to prevent foreclosure. The Partial Claim Program is the heart of the law.

This program provides direct relief to a veteran who is delinquent on their loan. When a veteran uses a partial claim, the VA pays the lender the amount necessary to bring the mortgage up to date.

This amount becomes a subordinate lien on the property, which the veteran owes back to the VA. This second loan has no interest and requires no monthly payments. A veteran usually repays it when they sell the house or refinance the mortgage.

The law caps the partial claim at a percentage of the unpaid principal balance, providing enough help to resolve most delinquencies. This tool provides veterans with an opportunity to recover from financial difficulties.

The act also creates a “mandatory loss mitigation sequence” directing the VA to create a required set of steps that lenders must follow to help a veteran avoid foreclosure. This sequence ensures that a lender offers options, such as repayment plans and the new partial claim, before initiating foreclosure. It empowers the homeowner and guarantees they have access to every available tool.

The law authorizes the VA Secretary to make payments to loan holders to prevent foreclosure, and allows the VA to establish a secured interest in the property when it provides this help. This authority enables the VA to manage defaulted loans and respond promptly when a veteran is at risk.

The VA Partial Claim program is a loss mitigation tool designed to help veterans who have fallen behind on their mortgage payments due to a temporary financial hardship.

How the VA Partial Claim Works

• You Experience Hardship. You encounter a temporary financial problem—like a job loss or medical emergency—and miss several mortgage payments.
• The VA Intervenes. After you and your servicer determine that a partial claim is the best option, the VA works directly with your mortgage company. The VA pays a lump sum to cover your entire past-due VA home loan amount, including principal, interest, taxes, and insurance.
• Your Mortgage is Made Current. Your primary home loan is now fully up to date. You immediately resume making your regular, on-time monthly mortgage payments as if you had never fallen behind.
• A Second Lien is Created. The amount the VA paid on your behalf is placed into a second, subordinate loan. This is the “partial claim.” This second loan is interest-free and requires no monthly payments.
• Repayment Happens Later. You typically repay the partial claim amount in the future when you sell your home, refinance your mortgage, or finish paying off your primary VA loan.

The primary goal is to cure the default and keep you in your home without increasing your current monthly housing expense.

How to Apply for Assistance

If you are experiencing financial difficulties, please contact your mortgage servicer immediately. Your servicer is the company you send your mortgage payment to each month. They are your primary point of contact and are required by the new law to discuss all available options with you.

When you call them:

• Explain that you are experiencing a financial hardship.
• State clearly that you want to keep your home and would like to be considered for all available loss mitigation options.
• Specifically ask about your eligibility for the new VA Partial Claim Program.

Your servicer will guide you through their process, which will include documenting your hardship and income. They will then work with the VA to determine if a partial claim is the right solution for your situation. You can also always contact the VA’s main home loan benefits line to speak with a loan technician for general guidance.