VA Loan Shutdown Strands Veterans in Higher Payments

Scott Boyd now pays $1,181 more every month for his home in Columbus, Ohio. The increase followed a loan modification he accepted after losing his job and struggling with PTSD. Boyd’s mortgage rate jumped from 2.75% to 6.75%, and his loan term extended to 40 years. He described the situation as broken, noting that over 90% of his payment now covers interest rather than principal.

Boyd is one of thousands of veterans hit by higher payments since the Trump administration ended the Veterans Affairs Servicing Purchase, or VASP, program. NPR analysis of unreported Department of Veterans Affairs data shows that more than 15,000 veterans who received loan modifications saw their monthly payments rise by at least $150. More than 700 veterans face increases of $1,000 or more.

The VASP program allowed veterans who fell behind on payments to roll those arrears into a new mortgage with a fixed 2.5% interest rate. The administration ended the program on May 1, 2025. Without VASP, veterans were often forced into standard loan modifications at current market rates, which hover around 7%. For most other American homeowners, loan modifications typically lower or maintain monthly payments. For veterans relying on VA loans, the opposite happened.

NPR found that 63% of veterans who received a loan modification faced a payment increase. In comparison, only 2% of borrowers with loans guaranteed by Fannie Mae or Freddie Mac saw their payments go up after modifications. Mark Takano, the ranking Democrat on the House Veterans' Affairs Committee, called the outcome the height of insanity. He noted that many affected veterans were already financially distressed.

Industry leaders warned Congress against killing VASP without a replacement. Matthew Douglas of the Housing Policy Council said it was a mathematical certainty that borrowers would face shocking payment increases. Douglas represented major U.S. mortgage companies that lobbied the VA not to terminate the program abruptly. The warnings came as interest rates remained high, leaving veterans with fewer affordable options than other homeowners.

Rep. Derrick Van Orden, a Wisconsin Republican who helped lead the effort to end VASP, argued that the Biden-era program put taxpayers at risk. He stated during a March 11, 2025, hearing that allowing VASP to continue threatened the future existence of VA home loans. Van Orden and Rep. Mike Bost, the committee chairman, issued a joint press release supporting the administration’s move. Both representatives did not respond to subsequent requests for comment from NPR.

Congress passed a bipartisan bill to create a replacement, the VA Partial Claim Program, or PCP. The new program allows veterans to move missed payments to the back of their loan term, preserving their original mortgage terms. However, the VA took more than 13 months to design and announce the program details in June 2026. Mortgage companies were then given 180 days to implement it, with a deadline of Nov. 28, 2026.

Boyd signed his loan modification two weeks before the VA launched the PCP. It took another two months before a mortgage company first offered veterans access to the new program. Most lenders are still working to implement it before the deadline. The PCP does not retroactively help veterans who already accepted modified loans during the gap between the two programs.

Foreclosures on VA loans rose to a 10-year high after VASP ended, according to industry data. VA press secretary Quinn Slaven said the department helps veterans retain homeownership through forbearance and repayment plans. Slaven noted that many leading voices in Congress supported terminating VASP to protect the broader home loan program. Takano said the VA could move veterans back into lower-cost mortgages, or Congress could pass a law to do so.

Boyd remains in his home, which he bought in 2021 to provide stability for his partner and four children. He recently moved his ill father-in-law into the finished basement for home hospice care. When he was presented with the modification or foreclosure choice, he was newly employed and managing shaky PTSD symptoms. He decided to accept the higher payment to keep the family housed.