VA Announces Foreclosure Moratorium as Servicers Implement New Loan Repayment Program

The Department of Veterans Affairs (“VA”) has announced a “targeted foreclosure moratorium” on VA-guaranteed loans to allow servicers time to implement the Veterans Affairs Servicing Purchase (“VASP”) program. The VASP program was designed to provide an option for borrowers who are unable to find relief with existing home retention options due to the rise in interest rates.

VASP allows the VA to purchase defaulted VA loans and then modify any individual loan to a fixed 2.5% interest rate, resulting in a more affordable monthly payment. Servicers must implement a program to identify eligible loans no later than October 1, 2024.

As servicers work to implement the VASP program, the VA “strongly encourages” servicers to cease initiating, continuing, and/or completing foreclosures on VA-guaranteed loans through December 31, 2024, unless one or more of the following exceptions applies:

• The loan is secured by property that is vacant or abandoned;

• The servicer has documented that the borrower does not wish to retain the home or avoid foreclosure;

• The servicer has not received a monthly payment for at least 210 days, and the borrower is not responding to the servicer’s outreach attempts; or

• The servicer has evaluated the borrower for all home retention options and has determined that no home retention option, including VASP, or alternative to foreclosure will work for the borrower.

To read the announcement in its entirety, please visit VA Circular 26-24-12 Loan Repayment Relief for Borrowers.