The letter reacts to draft policies for carrying out the VA Home Loan Program Reform Act, which authorized a brand-new partial claim choice for distressed borrowers with VA-guaranteed loans.
Under the proposition, qualified borrowers a minimum of 3 months overdue could access the program once their servicer sends a partial claim trial payment for VA review.
Customers need to also have made at least 12 payments considering that loan origination and at least 6 since any adjustment. Eligibility would be retroactive to Might 1, 2025, when the VA Maintenance Purchase (VASP) program ended.
Under the draft guidelines, the partial claim alternative would look like the seventh step in the VA’s loss-mitigation waterfall, with a 40-year loan adjustment remaining as the last home retention option. Servicers would not be permitted to charge interest on the partial claim balance.
MBA said the VA’s proposed structure could result in veterans having “substantially worse” loss-mitigation alternatives than debtors with loans backed by Fannie Mae, Freddie Mac or the Federal Real Estate Administration (FHA).
The group recommended reorganizing the waterfall so that loan modifications that increase a borrower’s monthly payment are used just as a last resort. MBA also recommended changing the proposed “unique forbearance” with a basic forbearance program, which would let borrowers stop briefly payments for one to 3 months at a time, up to 12 months of delinquency per default.
The association recommended restricting borrowers to one irreversible home retention choice within 24 months, cautioning that duplicated use of loss-mitigation programs can deteriorate home equity and boost VA guaranty fund losses.
The group raised issues about interactions with pandemic-era relief, saying veterans who got COVID-related help must still be qualified for the partial claim program.
Finally, the MBA’s letter called for clearer assistance on servicers’ duties and longer application timelines for servicers to change systems. The association suggested that the VA provide a minimum of 180 days before requiring loan providers to abide by the new rules.
In a letter sent Thursday to Zondervan, the Community Home Lenders of America (CHLA) suggested removing the provision to enable month-to-month principal and interest to rise up to 15% under a 30-year loan modification.
CHLA prompted the VA not to include waterfall provisions that increase regular monthly expenses for VA households. Like the MBA, it likewise suggested at least 180 days of preparation before the policy works.