Mortgage industry reacts to pending shutdown of VA servicing program

The circular also explains that the VA home retention waterfall is being rescinded and advises servicers to stop using it by April 30 at 11:59 p.m. ET.

The VA’s Trial Payment Plan (TPP), which allows borrowers to demonstrate their ability to make a modified monthly payment, will be allowed to continue through Aug. 31. But failed TPPs cannot be resubmitted after April 30.

Servicers must report the completion status of TPPs in the VA Loan Electronic Reporting Interface (VALERI) by Aug. 31, the circular explained.

Servicers are also required to review veteran borrowers for all other applicable loss-mitigation options as VASP winds down, while keeping “VA’s preferred order of consideration in mind,” the document stated.

Industry reactions

Industry reactions to the document’s provisions were mixed. Matt Tully, chief compliance officer at Sagent, said the VA’s decision to end VASP is a reflection of current market realities.

“The VASP Program was launched in an environment of higher interest rates and winding down the program is an acknowledgement of declining interest rates,” Tully said. “The challenge for servicers will be implementing the changes to the VA loss-mitigation waterfall quickly and seamlessly.”

Since VASP is a program that was implemented less than a year ago, Tully called it “the last in a long line of loss mitigation options offered by the VA.” He added that servicers with real-time data access can be “more agile at getting up to speed with the all the recent updates to the loss mitigation options available to homeowners, at the VA and beyond.”

When news of VASP’s discontinuation was reported earlier this month, the Mortgage Bankers Association (MBA) came to the program’s defense. When asked to comment on the new guidance from the department, an MBA representative referred HousingWire back to the association’s original statement on the matter.

“The work must start immediately to strengthen the VA’s loss mitigation toolkit, and that includes implementing a permanent partial claim option, a foreclosure avoidance tool that is widely used in every other government loan program,” that statement read in part.

“MBA is eager to continue to work with the VA and Congress to protect veterans and ensure that they can utilize the housing benefit they earned through their service.”

Rob Zimmer, external affairs consultant with the Community Home Lenders of America (CHLA), told HousingWire that the timeline of the closure could impact veterans’ understanding of their status with the program.

“It used to be that it was working certain steps in a certain way with the presumption that the VASP ‘application’ would be successful,” Zimmer said. “Now it’s not clear. What CHLA has been in the business of here is reducing or eliminating uncertainty for veterans.

“All the veterans and the servicers have been doing is following the rules. The rules change — it happens — but we still need more clarity on how exactly this will work so veterans understand the process and don’t feel like they’re getting jerked around.”

David Dworkin, president and CEO of the National Housing Conference (NHC), said that there is “no good reason to foreclose on a borrower when a workout is possible.” He added that a borrower facing a temporary crisis should be allowed to move missed payments to the end of the loan term without penalizing a lender.

It is a “well-established strategy with a track record of success,” Dworkin said, adding that he doesn’t understand “why we would ever want to see a veteran lose their home if it can be avoided.”

While there are instances in which a loan cannot be cured — and he acknowledged that VASP has issues — Dworkin said there is a difference between addressing areas of improvement and simply ending a program.

“VASP is an imperfect program that needs to be improved,” he said. “Elimination is not improvement.”