Connecting the Dots on Congress’ VA Partial Claims Bill

The VA Servicing Purchase Program (VASP) is, thankfully, coming to an end. But its abrupt conclusion risks leaving some veterans in limbo—particularly those who, under guidance from the previous administration, were advised to stop making mortgage payments while waiting for the program’s launch. Now, Congress’s proposed fix—H.R. 1815, the VA Home Loan Program Reform Act—falls short of offering a comprehensive or sustainable solution.

To its credit, the bill includes a reasonable provision that limits partial claims—which allow unpaid mortgage balances to be added to the end of the loan—to a one-time use. However, the proposed three-year window for the program is far too generous. A more responsible approach would sunset the initiative after one year or once the existing backlog of today’s seriously delinquent borrowers is resolved. Extending it further invites future administrations to expand or revive the program, perpetuating a cycle of ultimately misguided policy overreach that could eventually turn into another student loan disaster.

If Congress truly wants to support veterans, it must start by addressing the root cause of the problem: weak underwriting. Many of the veterans facing serious delinquency aren’t just experiencing temporary hardship—they are grappling with fundamental financial instability. The VA’s current credit policies allow high debt burdens, low credit scores, and minimal reserves, leaving many borrowers poorly equipped to weather even minor financial shocks.

The numbers bear this out. Today, the average seriously delinquent VA borrower has a FICO score of just 650, spends more than 43% of their income on debt, and has little to no savings. In contrast, non-delinquent borrowers average a credit score near 720. These metrics matter. Borrowers with similar profiles as those delinquent today saw default rates exceed 40% in the aftermath of the Global Financial Crisis.

Congress should prioritize policies that promote long-term financial stability—not temporary relief that risks deeper losses. Borrowers who lack staying power are likely to fall behind again, even after receiving a partial claim. Data from the FHA and GSEs show that roughly one in four such borrowers re-default. What begins as a short-term fix often becomes long-term harm: borrowers lose home equity, and the VA’s 25% guarantee transforms into a 40–50% loss, putting taxpayers and the program’s future at risk.

Meanwhile, a growing body of evidence indicates that many delinquent borrowers are unaware of how much home equity they’ve accumulated. Instead of continuing to struggle with unsustainable mortgages, they could sell their homes, repay their debts—including arrearages—and walk away with significant cash. The VA should make this option clear. As I noted in my recent testimony, approximately 84% of seriously delinquent VA borrowers could sell their homes today and still net on average around $100,000—thanks to a 50% rise in home prices over the past five years. That’s not failure; it’s a dignified financial reset. And it’s the kind of outcome the VA should elevate to the top of its loss mitigation toolkit.

There is also real concern that the partial claim program could be exploited. We’ve seen this before: when some lenders marketed refinancing offers that allowed veterans to “skip” a payment by rolling it into a new loan, Congress in 2018 had to intervene and impose a net tangible benefits test to stop serial refinances. The partial claim program could open the door to similar abuses. This time, third-party actors may target vulnerable veterans with promises of months of skipped payments—framed as government-backed relief. It’s far better to prevent another round of predatory practices than to enable them under the guise of support.

At its core, Congress’s proposed approach is misguided. The VA’s loan guarantee program is not meant to mirror FHA—it was built around a fundamentally different mission that places the veteran’s long-term well-being at the center. That difference is reflected in its success: Historically, VA loans have had about 50% lower default rates than FHA loans. Rather than reshaping the VA program to resemble its less effective counterparts, Congress should be encouraging FHA, USDA, and the GSEs to adopt the VA’s more disciplined approach. That’s how to create a truly level playing field—by elevating performance, not lowering the bar.