Veteran Foreclosure Assistance Program Slashes Mortgage Payments to 2.5%
A new program has been launched by the United States Department of Veterans Affairs to help veterans facing mortgage foreclosure. The new program is the Veterans Affairs Servicing Purchase (VASP) program. Keep reading to learn more about the mortgage foreclosure process, including your options if you are facing foreclosure and the VASP program such as mortgage deferment and mortgage forbearance options.
Updated on February 11, 2025.
Key Points:
- Contact your lender immediately if you believe financial hardship will lead to foreclosure.
- Consider options to avoid foreclosure, such as a mortgage forbearance or deferment.
- If you are a Veteran, learn more about the Veterans Affairs Servicing Purchase (VASP) Program.
What is a Foreclosure?
A foreclosure is the legal process a mortgage lender takes to get the property repossessed. Clients like to ask me how many mortgage payments must be missed before the foreclosure process begins, but honestly, it depends.
There is no law requiring lenders to foreclose after one payment or thirty. It is truly at the discretion of the mortgage lender. However, in my experience in handling bankruptcy and mortgage foreclosure defense cases, after three missed mortgage payments, the mortgage lender will likely file a foreclosure lawsuit
How Long Does the Foreclosure Process Take?
Again, the answer is that it depends. For example, a large metropolitan city like Miami might have a large backlog of cases delaying the foreclosure process. I lived for a while in Middleburg, Florida, which is the county next to Duval County and the city of Jacksonville. In Clay County, foreclosure cases likely move along much quicker because the number of cases was minimal.
It also depends if lenders offer mortgage assistance programs that could cause further delays. For example, after the subprime mortgage foreclosure crisis of 2008, lenders learned the hard lesson of foreclosing instead of offering homeowners options.
A mortgage lender will likely delay foreclosure for a few months with a mortgage forbearance or deferment.
What is a Mortgage Forbearance or Deferment, and How Does it Work?
A mortgage lender may grant a forbearance, meaning the payments are paused for x amount of months. Typically, three months. The mortgage forbearance allows a homeowner to avoid foreclosure if payments resume after that time. Generally, if facing a short-term financial crisis, such as reduced income at work or health issues, forbearance could help you get through these difficult times.
With a mortgage deferment, typically after the mortgage forbearance period, missed payments are added to the end of the loan. For example, if you have fifteen years left on your mortgage and the lender agreed to a deferment of three months, now you have fifteen years and three months left on your mortgage.
So it’s important to know that any mortgage payments, whether in forbearance or deferment, are not wiped out or eliminated. You will have to pay back those missed payments. The only question is when.
How to Apply for Mortgage Forbearance of Deferment
It’s surprising if more than three mortgage payments are missed before lenders begin the mortgage foreclosure process. So, it’s essential that if you realize you are likely to fall behind on your monthly mortgage payments, you start working with the lender as soon as possible.
Your mortgage lender will likely have information on their website regarding the mortgage forbearance and deferment process.
Mortgage Refinance to Avoid Foreclosure
Depending on your situation and the amount of equity your home has, a refinance of the mortgage is possible. The upside to a mortgage refinance is that the monthly mortgage payments are lower because your mortgage payments are extended.
For example, suppose you had a mortgage balance of $100,000 with ten years remaining, with an interest rate of six percent. Without taxes and insurance, your monthly mortgage payments would be $1,110.21.
If that same loan were refinanced for fifteen years, the monthly mortgage payments would be $843.66. This would save you $266.55 per month or $3,198.60 per year.
If the mortgage is extended for twenty years, the monthly payments are reduced to $716.43, $393.78 per month, or $4,725.36 annually. As you can see, this results in substantial savings.
What’s the downside? You pay more in the long run!
Using the same figures above, the $100,000 mortgage balance equals $133,224.60 paid because of interest. The fifteen-year mortgage refinance ends with a total of $151,894.23. That ends up equaling $18,669.63 more paid throughout the mortgage. With the twenty-year mortgage refinance, $171,943.45 is paid back, or $71,943.45 more.
Of course, once you get back on track financially, you can always pay more to pay off the mortgage faster. My current mortgage is approximately $1,000 per month, but I make payments of $1,550 each month (the amount of my rent payment before I bought my home). So my mortgage will be paid off in less than years versus twenty.
The Veterans Affairs Mortgage Foreclosure Program
Through the U.S. Department of Veterans Affairs, the Veterans Affairs Servicing Program ( VASP) was initiated to help more than 40,000 Veterans facing foreclosure.
VASP applies to active-duty Service members and their surviving spouses. The way VASP works is simple enough.
Veterans Affairs (VA) buys back defaulted VA loans from mortgage servicers. The mortgage is then modified to lower the monthly payments to a fixed 2.5 interest rate.
How much can that result in savings? Using the same $100,000 mortgage balance as before, with a ten-year mortgage, the monthly payments are $942.70. With a fifteen-year mortgage, the payments are reduced to $666.79; with a twenty-year mortgage, the monthly payments are $529.90.
What to Do if You Are a Veteran Facing Foreclosure
Beginning on May 31st, mortgage servicers will identify qualified borrowers and submit the information to Veterans Affairs. Veterans do not have to apply directly for VASP, but should contact their mortgage servicers directly.
If you are a veteran facing foreclosure, contact Veterans Affairs at 877-827-3702 and press option 4.
You can also learn more about the VASP program via this link. If you are a veteran seeking remote work, please try this link for available opportunities posted on wizecase.com. A special thanks to Robert from safenetexperts.com for providing me with this information.
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