When the Department of Veterans Affairs’ previous foreclosure prevention program ended, veterans at risk of losing their homes by defaulting on their VA-backed loans no longer had a viable path to avoid foreclosure.
President Donald Trump signed the VA Home Loan Program Reform Act into law July 30, 2025, creating a partial claim program that gives veterans behind on their mortgages a structured way to get current without losing their home or their original loan terms.
What Happened Before
The VA offered a COVID-era partial claim option from 2021 to 2022, and when that program closed, no permanent replacement was put in place. The stopgap was the Veterans Affairs Servicing Purchase program, which bought delinquent VA loans from servicers and modified them at a 2.5% fixed rate. VASP ended May 1, 2025.
Between the end of VASP and the new law taking effect, veterans who fell behind had few options. The only tool available was capitalizing missed payments into the loan balance and resetting the interest rate to current market rates, often leaving borrowers with higher monthly payments than they had before. As of the Urban Institute’s analysis last summer, nearly 90,000 VA loans were seriously past due, with 33,000 already in foreclosure.
Read More: VA Loans
How the New Partial Claim Works
Under the new law, the VA can advance funds to cover a veteran’s missed payments and bring the loan current. That amount is attached as a subordinate lien on the property with no monthly payment required. The veteran repays it when they sell, refinance or pay off the mortgage. The program allows the VA to cover up to 25% of the loan balance, or 30% if the borrower already used a COVID-era partial claim. It applies to primary residences in default or at imminent risk of default. The partial claim applies retroactively to loans affected during the period beginning March 1, 202, and ending May 1, 2025.
The key advantage is that the veteran keeps their original loan terms. If you locked in a 2.5% or 3% rate during the pandemic-era market, a partial claim lets you get current without resetting to today’s rates. This is the same basic structure the Federal Housing Administration and USDA have used for years.
What It Doesn’t Do
The Urban Institute noted that as currently structured, the partial claim cannot reduce the principal amount or subsidize payments over time to make a loan modification more affordable. It brings the loan current, but the veteran still needs to be able to resume their regular monthly payment going forward. For veterans whose income has permanently dropped, the partial claim alone may not be enough. The VA is required under the new law to prescribe a sequence of loss mitigation options, and the partial claim is one step in that process but not the only one.
Read More: 1 Million More Veterans Became Eligible for Tax-Free ABLE Accounts Jan. 1
What to Do If You’re Behind
If you have a VA-backed home loan and are behind on payments or at risk of falling behind, contact your loan servicer immediately and ask about VA home retention options. You can also call the VA Regional Loan Center at 877-827-3702 for guidance. The VA is still finalizing implementation details, so check with a VA-approved lender for the latest updates on eligibility and timing. The law passed unanimously in both chambers of Congress. The program is authorized for five years.
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