When a Safety Net Breaks
Thousands of military veterans holding VA-backed mortgages have faced steeper interest rates and surging monthly payments since the Trump administration terminated a low-interest financial relief program. Among borrowers who secured loan modifications following economic hardship, more than 15,000 experienced payment spikes of at least $150 each month, according to an investigation by NPR based on previously undisclosed data from the Department of Veterans Affairs. More than 700 of those veterans saw their monthly obligations climb by $1,000 or more.
Lenders typically offer loan modifications to help homeowners recover from missed payments by adjusting loan terms. For most civilian borrowers, these adjustments either decrease monthly payments or maintain them at an affordable level. Yet veterans encountered an entirely different outcome after the VA abruptly shuttered the Veterans Affairs Servicing Purchase (VASP) program on May 1, 2025.
Loan Modifications Cause Higher Payments for Veterans
NPR found that 63% of veterans who received a loan modification faced a payment increase. By comparison, only 2% of borrowers experienced payment increases under modifications for loans backed by Fannie Mae and Freddie Mac, the government-sponsored enterprises governing the broader U.S. mortgage market, as detailed in data compiled by the Federal Housing Finance Agency (FHFA).
Before its cancellation, VASP served as a crucial buffer for tens of thousands of veterans struggling to maintain their mortgages. The initiative rolled missed payments into a new mortgage featuring a fixed 2.5% interest rate. However, key Republicans on the House Veterans’ Affairs Committee sharply opposed the framework. During a congressional hearing on March 11, 2025, lawmakers argued that the Biden-era program placed taxpayers at risk by backing thousands of loans for borrowers experiencing financial distress.
If the Biden version of VASP was allowed to continue, I fear that the home loan will not exist in the future for my fellow veterans, said Rep. Derrick Van Orden during the March 11, 2025 hearing, according to records from the House Veterans’ Affairs Committee.
Housing policy advocates and mortgage industry representatives warned the administration against terminating VASP without an immediate replacement. Without a low-interest alternative in an environment where interest rates hover near 7%, experts predicted that struggling veterans would have access only to high-cost modified loans, driving up default and foreclosure rates.
Inside One Veteran’s Financial Crisis
Scott Boyd, an Army combat veteran who later worked in military intelligence, purchased a home near Columbus, Ohio, in 2021 using a VA home loan. After leaving military service, Boyd built a career in technology, but a subsequent mass layoff and struggles with post-traumatic stress disorder led him to check into the Dayton VA hospital for treatment.
Under the new terms, more than 90% of his monthly remittance goes toward interest rather than principal.
This is the height of insanity, said California Democratic Rep. Mark Takano, the ranking member of the House Veterans’ Affairs Committee, after reviewing the findings. These are veterans that are already financially distressed — they were already in trouble.
The Rollout of the Replacement Program
Following the termination of VASP, Congress passed bipartisan legislation directing the VA to establish a Partial Claim Program (PCP). The new framework allows veterans to move missed payments to the back of their loan terms, preserving their original mortgage structures. However, designing and launching the PCP required more than 13 months, and mortgage companies were given an additional 180 days to implement it.
Industry data indicates that foreclosures on VA loans climbed to a 10-year high following the dismantling of VASP.
Illinois Republican Rep. Mike Bost, chairman of the House Veterans’ Affairs Committee, and Wisconsin Republican Rep. Derrick Van Orden did not respond to repeated requests for comment regarding the rising foreclosure rates and payment increases.
