MW Foreclosures are on the rise, and 60,000 veterans are suddenly much closer to losing their homes

By Aarthi Swaminathan

The end of the Veterans Affairs Servicing Program, a foreclosure-avoidance measure, puts tens of thousands of veterans at risk of losing their homes

Foreclosures are rising as more homeowners miss multiple mortgage payments - and with the end of a federal foreclosure-assistance program for veterans and service members this week, homeowners who have served in the military in particular face a sudden and acute risk of losing their homes.

Home buyers, sellers and owners are navigating a challenging economic environment. Mortgage rates remain high, making it expensive to buy. Increasing inventory has made buyers more selective, making it difficult for owners to sell. And homeowners are struggling with the rising costs of insurance and property taxes.

Now, increasingly, homeowners are also finding it difficult to make their monthly mortgage payment.

More homeowners had missed multiple mortgage payments as of March, newly released data show. The share of mortgages that were seriously delinquent - a status that typically means a homeowner hasn't made a payment for 90 days or more - rose 14% year over year in March, according to data from Intercontinental Exchange $(ICE)$.

That has led to an increased number of homes for sale through the foreclosure process. After a homeowner misses multiple payments, the lender typically sends a default notice and then starts the foreclosure process with the intention of selling the home to recoup the money it loaned to the homeowner. Foreclosure inventory and sales saw a "modest bump" in March, ICE said, rising on an annual basis for the first time in nearly two years.

Foreclosure filings were still below historical averages, but they were rising fast. Attom, a property-data company, said that in March, foreclosure filings were up 9% from the same month a year earlier. Over the first three months of the year, foreclosure filings were up 11% compared with the preceding quarter, the company said. "Some homeowners may be starting to feel the pressure of ongoing economic challenges," said Rich Barber, chief executive of Attom.

Veterans in particular are at risk of foreclosure right now. For nearly a year, tens of thousands of veteran and active-duty homeowners who missed payments were able to access a mortgage-assistance program that helped make payments more affordable by reducing their interest rate to 2.5%.

The program, called the Veterans Affairs Servicing Program, was a last-resort option that helped delinquent borrowers lower their mortgage rate, making their monthly payments much more affordable, by having the Department of Veterans Affairs buy their mortgage from the servicer. But as of Thursday, the VA was no longer accepting VASP submissions from loan servicers.

Read more: A VA program helped thousands of struggling veterans keep their homes. The Trump administration is ending it.

The termination of VASP leaves up to 58,000 veterans facing the possibility of foreclosure, the National Consumer Law Center said. As of April 1, some 75,000 veteran homeowners with a mortgage had missed three or more payments on their VA loan, and of those, 17,000 had been accepted for VASP, the organization said.

"The men and women who wore our nation's cloth have faced adversity and challenges while defending our freedoms around the world," said Raul "Danny" Vargas, the founder, chair and CEO of the American Latino Veterans Association. "The last thing we should do is turn our backs on them when they need help staying in their homes."

Before VASP existed, a now-defunct hardship-assistance program called the partial-claim approach allowed struggling veteran homeowners to defer mortgage payments. The VA would pay an amount to the mortgage loan servicer to bring the loan current, and the homeowner would pay the loan in the future. The VA ended the program in 2022 and replaced it with VASP. With VASP now at an end, Congress is considering restarting the partial-claim program.

Bob Broeksmit, president and chief executive of the Mortgage Bankers Association, an industry group, warned recently that pulling the plug on VASP without a backup option would increase the number of veterans facing foreclosure.

"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," he added.

The VA told MarketWatch that it had stopped accepting new applications for VASP because the agency was "not set up or intended to be a mortgage loan restructuring service."

"This change will not impact VA's loan guaranty services for Veterans," agency press secretary Peter Kasperowicz told MarketWatch.

The end of the program will not affect veterans who are already enrolled in it or those who completed enrollment before Thursday, he said. Since the VASP program started on May 31, 2024, the VA has bought more than 17,000 loans from mortgage servicers worth more than $5.48 billion, he said, adding that "this number is expected to increase in the closing days of the program" as the final applications are processed.

-Aarthi Swaminathan

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

May 02, 2025 14:29 ET (18:29 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.