The VA Home Loan Program has been a lifeline for Veterans since 1944, offering no-down-payment mortgages to over 25 million service members.
In July 2026, President Trump signed the VA Home Loan Reform Act (H.R. 1815), a bipartisan effort to modernize this program.
This legislation introduces a partial claim program to prevent foreclosures, allows Veterans to pay real estate agents directly, and boosts funding for homeless Veterans.
These changes aim to make homeownership more accessible and secure for Veterans facing financial challenges in today’s housing market. Let’s dive into what this means for Veterans, lenders, and the future of the program.
Key Takeaways
- The VA Home Loan Reform Act modernizes lending rules to match FHA and USDA standards, streamlining processes for Veterans and lenders.
- Partial claim option offers targeted relief for delinquent loans, preserving homeownership without altering original mortgage terms.
- Permanent buyer agent payment rules eliminate a major barrier to using VA loans in competitive housing markets.
- Homelessness prevention funding rises significantly, expanding transitional housing and community support programs for Veterans in need.
- Loss mitigation guidance will now be standardized, ensuring more consistent servicing experiences for all VA borrowers.
- The Act replaces the VASP program with a more cost-effective, focused foreclosure prevention tool for long-term stability.
Understanding the VA Home Loan Reform Act
The VA Home Loan Reform Act of 2026 addresses critical gaps in the VA Home Loan Program. It aligns VA loans with FHA and USDA standards, introduces foreclosure prevention tools, and enhances Veteran competitiveness in housing markets. This section breaks down the key provisions and their significance.
- Permanent Buyer Agent Compensation: Veterans can now directly pay their real estate agents, a policy previously restricted, leveling the playing field in competitive markets like California and Florida.
- Partial Claim Program: A five-year initiative allows the VA to cover up to 25% of a delinquent loan’s principal (30% for COVID-19-affected loans), helping Veterans avoid foreclosure.
- Homelessness Prevention Funding: The Act increases funding for the Grant and Per Diem Program to $344 million annually for 2026–2026, supporting transitional housing for homeless Veterans.
- Loss Mitigation Guidelines: The VA is required to prescribe structured loss mitigation procedures, ensuring consistent support for struggling borrowers.
Why the Reform Act Matters for Veterans
This legislation is a game-changer for Veterans navigating a tough housing market. By removing barriers like agent compensation restrictions and offering foreclosure relief, it empowers Veterans to achieve and maintain homeownership. Here’s why these changes are critical for Veterans today.
- Competitive Edge in Bidding Wars: Paying buyer agents directly lets Veterans compete in hot markets where sellers expect commission coverage, a huge win in places like Florida.
- Foreclosure Safety Net: The partial claim program helps Veterans facing job loss or medical bills keep their homes by deferring missed payments interest-free for five years.
- Support for Homeless Veterans: Increased funding for transitional housing addresses Veteran homelessness, especially for those impacted by environmental hazards.
How the Partial Claim Program Works
The partial claim program is the cornerstone of the Reform Act, replacing the controversial Veterans Affairs Servicing Purchase (VASP) program. It’s designed to help Veterans in default avoid foreclosure by restructuring their debt. Here’s a closer look at its mechanics and impact.
- Eligibility Criteria: Veterans with VA loans for primary residences in default or at imminent risk of default qualify, with one claim per loan (exceptions for major disasters).
- Debt Restructuring: The VA can purchase up to 25% of the unpaid principal (30% for COVID-19-era loans), moving it to the loan’s end as an interest-free subordinate lien.
- Repayment Terms: Veterans have five years to repay the partial claim, providing breathing room without altering original loan terms.
- Comparison to VASP: Unlike VASP, which bought entire loans, this program is more targeted, reducing costs while preserving Veteran homeownership.
Comparison: Partial Claim Program vs. VASP
| Feature | Partial Claim Program | VASP Program |
|---|---|---|
| Purpose | Cover part of delinquent loan to prevent foreclosure | Purchase and modify entire delinquent loans |
| Cost to VA | Up to 25% (or 30%) of unpaid principal | Full loan purchase |
| Repayment | Interest-free, five-year term | Modified loan terms |
| Availability | Permanent (five-year program) | Ended May 2026 |
Impact on Lenders and Realtors
Lenders and real estate professionals gain clarity and flexibility from the Reform Act. The partial claim program aligns VA loans with other federal programs, reducing foreclosure risks, while permanent agent compensation rules streamline transactions. This section explores the benefits for industry stakeholders.
- Reduced Foreclosure Risk: The partial claim program gives lenders a structured way to manage delinquent loans, minimizing losses while keeping Veterans in their homes.
- Clearer Transaction Rules: Codifying buyer agent compensation eliminates uncertainty, making VA loans more attractive in competitive markets.
- Alignment with Federal Standards: The Act mirrors FHA and USDA loss mitigation tools, simplifying processes for servicers familiar with those programs.
Addressing Veteran Homelessness
Beyond homeownership, the Reform Act tackles Veteran homelessness by increasing funding for the Grant and Per Diem Program. This initiative supports community organizations providing transitional housing, a critical step for Veterans in need. Here’s how it strengthens homelessness prevention efforts.
- Increased Funding: The program’s budget rises from $258 million to $344 million annually for 2026–2026, aiding more Veterans in finding stable housing.
- Toxic Exposure Support: Some costs are offset by the Toxic Exposures Fund, easing the budgetary burden while prioritizing Veterans exposed to environmental hazards.
- Community Support: Grants fund organizations offering services like counseling and job training, helping Veterans transition to permanent housing.
Budgetary Impact of the Reform Act (2026–2035)
| Category | Estimated Impact |
|---|---|
| Direct Spending | Decrease by $147 million |
| Spending Subject to Appropriation | Increase by $146 million |
| Grant and Per Diem Program | $169 million increase in grants |
Challenges and Criticisms of the Reform Act
While the Reform Act has broad support, some concerns linger. Mortgage experts worry about potential limitations on lending options and repayment burdens for Veterans. Personally, I think the Act strikes a good balance, but implementation will be key to its success. Let’s explore the challenges.
- Repayment Concerns: Some experts argue the three-year repayment start for partial claims, with a 0.5% interest rate after, could strain Veterans financially.
- Lender Risks: Reducing the VA guaranty after a partial claim could make VA loans less appealing to lenders, potentially limiting Veteran access.
- Program Sunset: The partial claim program ends in 2027, which some argue is too short to provide lasting relief for Veterans.
What’s Next for Veterans and Lenders?
The VA now faces the task of implementing the partial claim program and updating guidelines. Veterans should stay proactive, contacting servicers if they’re struggling and monitoring VA.gov for updates. Lenders will need to adapt to new loss mitigation rules to support Veterans effectively.
- Stay Informed: Veterans should check VA Home Loans for program updates and eligibility details.
- Contact Servicers: If facing payment issues, reach out to your loan servicer immediately to explore partial claim options.
- Lender Collaboration: Lenders must work with the VA to ensure smooth implementation, minimizing disruptions for borrowers.
The Bottom Line
The VA Home Loan Reform Act is a significant step toward ensuring Veterans can achieve and maintain homeownership.
By addressing foreclosure risks, enhancing market competitiveness, and supporting homelessness prevention, it strengthens a program that’s been vital for decades.
Veterans should stay engaged with their servicers and the VA to make the most of these new tools. For more details, check out Congress.gov or Mortgage Bankers Association for industry perspectives.
Frequently Asked Questions
1. What is the VA Home Loan Reform Act?
The VA Home Loan Reform Act (H.R. 1815), signed into law in July 2026, enhances the VA Home Loan Program by allowing Veterans to pay real estate agents directly and establishing a partial claim program to prevent foreclosures.
2. How does the partial claim program work?
The VA can purchase up to 25% of a delinquent loan’s unpaid principal (30% for COVID-19-era loans), moving it to the loan’s end as an interest-free lien, repayable over five years.
3. Who qualifies for the partial claim program?
Veterans with VA loans for primary residences in default or at imminent risk of default are eligible, typically limited to one claim per loan unless impacted by a major disaster.
4. Can Veterans now pay real estate agents directly?
Yes, the Act permanently allows Veterans to compensate their real estate agents, helping them compete in markets where buyer-paid commissions are standard.
5. How does the Act help homeless Veterans?
It increases funding for the Grant and Per Diem Program to $344 million annually for 2026–2026, supporting transitional housing and services for homeless Veterans.
6. What replaced the VASP program?
The partial claim program replaces VASP, offering a more targeted approach by covering part of delinquent loans rather than purchasing them outright, reducing costs.
7. When was the VA Home Loan Reform Act passed?
The Act passed the House in May 2026, the Senate in July 2026, and was signed into law by President Trump on July 30, 2026.
8. How does the Act affect lenders?
It provides clearer loss mitigation guidelines and a partial claim program, reducing foreclosure risks and aligning VA loans with FHA and USDA standards for easier servicing.
9. What are the concerns about the Reform Act?
Some worry the partial claim repayment terms and potential guaranty reductions could burden Veterans or make VA loans less attractive to lenders.
10. Where can Veterans find more information?
Veterans can visit VA.gov or contact their loan servicer for updates on the partial claim program and eligibility details.
The VA Loan Network Editorial Team is comprised of dedicated mortgage specialists and financial writers committed to providing veterans and service members with accurate, up-to-date information on VA loan benefits, eligibility, and the home-buying process.