The VA Home Loan Reform Act of 2025 marks a major shift in how Veterans access and protect homeownership.
Officially passed by Congress as H.R. 1815, this bipartisan law addresses critical gaps in the VA Home Loan Program by introducing flexible new tools and protections.
From allowing Veterans to directly pay their real estate agents to launching a foreclosure-prevention mechanism through partial claims, the Act gives Veterans a stronger footing in the housing market. It also boosts funding to help homeless Veterans transition into safe housing.
Here’s what you need to know about this landmark legislation and how it may impact you.
Key Takeaways
- The Reform Act aligns VA loan servicing with FHA and USDA standards, modernizing the VA’s loss mitigation process.
- Veterans can now compete more fairly in high-demand housing markets where buyer-paid commissions are expected.
- Funding increases for homeless Veterans are partly supported by the Toxic Exposures Fund to ease the budget impact.
- The partial claim relief applies retroactively to loans affected during the COVID-19 period (March 2020–May 2025).
- Lenders benefit from reduced foreclosure risk and clearer guidance when working with VA-backed loans.
- The Act was passed unanimously in both the House and Senate, showing strong bipartisan support for Veterans’ housing stability.
What Is the VA Home Loan Reform Act?
The VA Home Loan Reform Act is a game-changer for veterans and active-duty service members. Passed by Congress in July 2025, the bill addresses longstanding barriers in the VA Home Loan Program. It makes permanent a temporary policy allowing veterans to pay their real estate agents directly, a move that ensures they can compete with other buyers. Additionally, it introduces a partial claim program to help veterans avoid foreclosure, aligning VA loans with other federal programs like those from the FHA and USDA.
Why does this matter? For years, veterans faced challenges in the housing market due to restrictive policies. The Act removes these hurdles, offering clarity for lenders and more opportunities for veterans to achieve the American Dream of homeownership. According to the U.S. Department of Veterans Affairs, the VA Home Loan Program has helped over 25 million veterans become homeowners since its inception.
💡 Key Insight
The VA Home Loan Reform Act permanently eliminates a key disadvantage Veterans faced in competitive markets by allowing them to pay buyer agents directly—removing a major barrier that often cost them deals in hot markets like Florida and California.
Key Provisions of the VA Home Loan Reform Act
The Act introduces several critical updates to the VA Home Loan Program. Let’s break down the main components:
- Permanent Buyer Agent Compensation: Veterans can now directly pay their real estate agents, a policy previously restricted. This change, made permanent, ensures veterans can compete in markets where buyer-paid commissions are common.
- Partial Claim Program: A five-year program allows the VA to purchase a portion of a delinquent loan (up to 25% of the unpaid principal, or 30% for loans impacted by the COVID-19 period) to prevent foreclosure.
- Foreclosure Prevention Tools: The VA must prescribe loss mitigation procedures, ensuring veterans have structured options before facing foreclosure.
- Increased Funding for Homeless Veterans: The Act boosts funding for the Grant and Per Diem Program, raising the annual limit from $258 million to $344 million for 2025 and 2026 to support transitional housing.
These provisions aim to make the VA Home Loan Program more flexible and supportive, especially for veterans facing financial hardship. The partial claim program, for instance, is modeled after successful FHA and USDA programs, offering a safety net for over 20,000 seriously delinquent borrowers.
Why the VA Home Loan Reform Act Matters for Veterans
Imagine you’re a veteran trying to buy a home in a hot market. You find the perfect place, but the seller prefers buyers who can cover agent commissions. Previously, VA loan restrictions might’ve put you at a disadvantage. Now, with the Act’s passage, you can compete on equal footing. This is a big deal in places like California or Florida, where bidding wars are common.
On the flip side, if you’re struggling to make mortgage payments—maybe due to a job loss or medical bills—the partial claim program could be a lifeline. Instead of losing your home, the VA can step in, cover part of the debt, and give you five years to catch up, interest-free. This kind of support can make all the difference.
Impact on Veteran Homeownership
The VA Home Loan Program is unique because it allows veterans to buy homes with no down payment and competitive interest rates. The Reform Act strengthens this by removing barriers and adding protections. According to a Congress.gov summary, the bill ensures veterans have access to the same tools as other borrowers, fostering equity in the housing market.
Support for Homeless Veterans
Beyond homeownership, the Act addresses veteran homelessness by increasing funding for the Grant and Per Diem Program. This program supports organizations providing housing and services to homeless veterans, particularly those exposed to environmental hazards. The Congressional Budget Office estimates this provision will increase spending by $146 million over 2025–2035, with some costs covered by the Toxic Exposures Fund.
How the Partial Claim Program Works
The partial claim program is a cornerstone of the VA Home Loan Reform Act. Here’s how it functions:
- Eligibility: Veterans with VA loans for primary residences that are in default or at imminent risk of default qualify.
- Process: The VA can purchase up to 25% of the unpaid loan balance (30% for loans affected between March 2020 and May 2025).
- Repayment: The purchased portion is moved to the end of the loan term, interest-free, giving veterans five years to repay.
- Limitations: Generally, one partial claim per loan is allowed, with exceptions for major disaster declarations.
This program replaces the Veterans Affairs Servicing Purchase (VASP) program, which ended in May 2025. Unlike VASP, which involved the VA buying delinquent loans outright, the partial claim program is more targeted, offering sustainable relief without compromising the broader VA loan program.
Comparison: Partial Claim Program vs. VASP
| Feature | Partial Claim Program | VASP Program |
|---|---|---|
| Purpose | Prevent foreclosure by covering part of the debt | Purchase and modify 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 2025 |
Budgetary Impact of the Act
The Congressional Budget Office projects the VA Home Loan Reform Act will have a mixed financial impact. Here’s a breakdown:
| Category | Estimated Impact (2025–2035) |
|---|---|
| Direct Spending | Decrease by $147 million |
| Spending Subject to Appropriation | Increase by $146 million |
| Grant and Per Diem Program | $169 million increase in grants |
The decrease in direct spending comes from the partial claim program, which is more cost-effective than VASP. However, increased funding for homeless veteran programs will require additional appropriations, partially offset by the Toxic Exposures Fund.
How Lenders and Realtors Benefit
For mortgage lenders and real estate agents, the Act brings much-needed clarity. The permanent allowance for veterans to pay buyer agents removes friction in transactions, as noted by the National Association of Realtors. Lenders also gain flexibility with the partial claim program, which aligns VA loan servicing with FHA and USDA standards, reducing the risk of foreclosure-related losses.
“The VA Home Loan Guaranty is a unique program,” says Shannon McGahn, NAR’s chief advocacy officer. “This legislation ensures veterans have the same advantages as other buyers.”
What’s Next for Veterans?
With the bill awaiting the President’s signature, veterans and lenders should prepare for its implementation. The VA will need to roll out the partial claim program and update loss mitigation guidelines. Veterans should:
- Contact their loan servicer if facing payment difficulties.
- Work with VA-approved lenders to understand new options.
- Stay informed through VA.gov for updates on the program.
The Act’s passage is a win for veterans, but its success depends on effective execution by the VA and collaboration with mortgage servicers.
Frequently Asked Questions
1. What is the VA Home Loan Reform Act?
The VA Home Loan Reform Act (H.R. 1815) is a 2025 law that 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. When was the VA Home Loan Reform Act passed?
The Act was passed by the House in May 2025 and the Senate in July 2025. It awaits the President’s signature to become law.
3. 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-affected loans), moving it to the loan’s end, interest-free, for five years.
4. Who qualifies for the partial claim program?
Veterans with VA loans for primary residences that are in default or at risk of default are eligible, with one claim per loan (exceptions for major disasters).
5. How does the Act help homeless veterans?
It increases funding for the Grant and Per Diem Program, raising the annual limit to $344 million for 2025–2026 to support transitional housing.
6. Can veterans now pay real estate agents directly?
Yes, the Act makes permanent a policy allowing veterans to compensate their real estate agents, helping them compete in the housing market.
7. How does the Act affect lenders?
Lenders gain clarity with aligned servicing standards and flexibility through the partial claim program, reducing foreclosure risks for VA loans.
8. What replaced the VASP program?
The partial claim program replaces VASP, offering a more targeted approach to help veterans avoid foreclosure without the VA purchasing entire loans.
9. How much will the Act cost?
The CBO estimates a $147 million decrease in direct spending and a $146 million increase in discretionary spending over 2025–2035.
10. Where can veterans learn more?
Veterans can visit VA.gov or contact their loan servicer for details on the partial claim program and other benefits under the Act.
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.
