VA shutdown leaves thousands of veterans paying $1,000 more monthly

The Department of Veterans Affairs ended its Veterans Affairs Servicing Purchase, or VASP, program on May 1, 2025. This administrative move removed a low-interest option for veterans facing financial hardship. Without VASP, many borrowers were forced into loan modifications at current market rates, which have risen significantly in recent years.

An NPR investigation using previously unreported VA data found that more than 15,000 veterans saw their monthly mortgage payments increase by at least $150 following a modification. Of that group, more than 700 veterans experienced payment jumps of $1,000 or more. The data indicates that 63% of veterans who received a loan modification faced a higher payment. This contrasts sharply with the 2% increase rate for loans guaranteed by Fannie Mae and Freddie Mac.

Scott Boyd, a veteran who purchased a home near Columbus, Ohio, in 2021, illustrates the financial impact. Boyd lost his job in a mass layoff and struggled with PTSD, leading to missed mortgage payments. His lender suggested he use the VASP program, which he was told would allow him to catch up on payments at an affordable rate. When VASP was terminated, Boyd was presented with a modification that raised his interest rate from 2.75% to 6.75% and extended his loan term to 40 years. His monthly payment increased by $1,181.

Industry leaders warned Congress against ending VASP without a viable replacement. Matthew Douglas of the Housing Policy Council stated that it was a mathematical certainty that borrowers would face shocking payment increases if the program ended abruptly. Despite these warnings, House Republicans supported the termination. Representative Mike Bost, a Republican and chairman of the House Veterans' Affairs Committee, and Representative Derrick Van Orden, a Republican who led the call to wind down VASP, both declined to respond to repeated requests for comment.

Congress passed a bill to create the VA Partial Claim Program, or PCP, to replace VASP. This new program allows veterans to move missed payments to the back of their loan term, preserving their original interest rates. However, the VA took more than 13 months to announce the program's details, which occurred in June 2026. Mortgage companies were given 180 days to implement it, and most did not offer it until well after the gap between programs had closed. Boyd signed his high-cost modification two weeks before the PCP launched, locking him into the higher terms.

Foreclosures on VA loans reached a 10-year high after VASP ended, according to industry data. Mark Takano, the ranking Democrat on the House Veterans' Affairs Committee, called the situation the height of insanity. He noted that the VA could retroactively adjust loans or Congress could pass legislation to help affected veterans. The VA stated in a release that its new program helps veterans retain homeownership, but it did not address the specific group of veterans who were locked into higher payments during the transition period.