Washington, D.C., October 6, 2025
News Summary
A new federal law restores a partial claim option for VA-guaranteed home loans, allowing the VA to cover up to 25% (30% for certain COVID-era missed payments) of unpaid principal to prevent foreclosures. The move aims to help delinquent veterans, but servicers face urgent operational work: system changes, policy updates, staff training and clarification on documentation and compensation. Industry groups urge rapid, streamlined guidance to speed rollout. Lenders are also repositioning toward VA and renovation lending as part of broader product diversification and technology-driven borrower support.
New law restores VA partial claims as lenders push toward VA and renovation loans
Congress has reauthorized a key tool to help veterans avoid foreclosure by restoring a partial claim option for VA-guaranteed home loans, and the law was signed by the President in late July. Industry groups and loan servicers want the program put into place quickly, saying timely implementation is critical as many VA borrowers are already behind on payments and foreclosures have risen sharply. At the same time, mortgage lenders are shifting product mixes away from one-size-fits-all loans and toward VA mortgages and renovation financing, reflecting changes in borrower needs, technology and the housing market.
What the new law does
The new statute adds a partial claim option to the VA’s loss-mitigation tools. Under the law the VA can buy a portion of a delinquent loan’s balance and pay the loan holder the amount needed to prevent or resolve a default. The VA would take a non-interest-bearing secured interest in the home that is subordinate to the first-lien VA-guaranteed loan. In most cases the partial claim amount is capped at 25% of the unpaid principal balance on the date the claim is made. For borrowers who missed a payment between March 1, 2020, and May 1, 2025, that cap rises to 30%. Generally, the law allows one partial claim per loan, with an extra claim permitted if missed payments occurred during a presidentially declared major disaster.
Why the timing matters
The partial claim option replaces a program that had expired and follows the winding down of the Veterans Affairs Servicing Purchase program earlier this year. When that program was suspended, tens of thousands of VA loans were delinquent: more than 73,000 borrowers were 30+ days delinquent, and roughly 40,000 were over 90 days behind. Separate tallies show more than 43,000 veterans are now six months or more delinquent, and industry reports indicate VA foreclosures have surged. With those backlogs and recent loan purchases paused, lenders and servicers say the speed and clarity of implementation will determine how many struggling borrowers get relief.
Operational hurdles and industry guidance
Servicers and vendors note that systems, policies and staff processes must be updated for the partial claim option to work. One vendor estimated needing about 60 days to adapt its platform; another compliance executive said technology itself is not the main barrier but that policy updates and call-center training typically take months. Industry analysts and policy researchers have urged a rollout through clear guidance and streamlined documentation, limited preapprovals, reasonable servicer compensation for admin costs, and a simple definition of one-time use to avoid confusion. Many stakeholders also warned against lengthy formal rulemaking that could delay help.
How this compares to the prior VASP approach
The predecessor program allowed the VA to buy loans and reissue them at reduced rates, which helped some borrowers but presented transfer and cost challenges for servicers. The new partial claim structure is more focused on keeping troubled loans out of foreclosure by deferring a portion of the balance rather than repurchasing whole loans. The partial claim does not reduce the VA guarantee on the loan.
Market context: lenders adapt and borrowers change
The mortgage market has evolved a lot since the years following the 2008 crash. The old era of a few dominant “workhorse” mortgages, especially FHA and VA loans, is giving way to a wider array of products plus more consultative advice from lenders. Borrowers now have access to digital tools, clearer information and comparison shopping, so lenders are moving toward personalization, using data and automation to tailor offerings. Two product types gaining renewed attention are VA mortgages—seen as a strategic channel that suits a large military-affiliated population—and renovation loans, which let buyers or homeowners finance repairs and upgrades inside the mortgage.
Renovation financing is becoming more attractive because inventory is limited and construction costs are high. These loans let borrowers buy homes that need work and fix them right away, or refinance to include improvement costs. Lenders that expand flexible renovation options and pair them with digital tools can better meet buyer needs in tight markets.
Big-picture implications
The law gives lenders another option to help veterans in distress, but implementation speed and clarity will determine its real-world impact. Industry groups called the move an important step for housing stability among veterans, while servicers prepare systems and staff. At the same time, lenders are positioning themselves as financial advisors and broadening product lines to include more VA and renovation products, supported by analytics, machine learning and faster online processes. Many expect refinancing to pick up once rates fall, so lenders see product innovation and customer-centric servicing as ways to stand out ahead of any future refinance wave.
Frequently Asked Questions
What is a partial claim under the new law?
A partial claim lets the VA buy a portion of a delinquent VA loan and pay the loan holder to prevent or resolve a default. The VA gets a non-interest-bearing, subordinate secured interest in the home and the partial claim amount is usually capped at 25% of the unpaid principal balance (30% for certain COVID-era missed payments).
Who can get a partial claim?
The option is designed for VA-guaranteed loans on a borrower’s primary residence that are in default or at imminent risk of default. Rules will define specific qualifications and documentation requirements during implementation.
How many partial claims are allowed per loan?
Generally one partial claim is allowed per loan. An additional claim can be allowed if the borrower missed payments during a presidentially declared major disaster. Certain prior partial claims tied to the COVID period may be treated differently under the new rules.
When will the program start?
The law is in effect, but servicers must wait for the VA’s implementing guidance and then update systems, policies and training. Industry participants cautioned that meaningful access depends on how quickly the VA issues operational guidance and how long servicers need to adapt.
How does this help borrowers right now?
If implemented quickly and simply, the partial claim can keep many veterans in their homes by deferring part of the loan balance rather than pushing loans into foreclosure. The actual relief depends on rollout speed, documentation rules, and servicer capacity.
What else are lenders doing?
Lenders are diversifying beyond traditional workhorse products. More are offering VA products and renovation mortgages that let buyers finance repairs, reflecting tighter inventories and high construction costs. Lenders are also using technology and data to personalize loan options.
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Key features at a glance
| Feature | What it means |
|---|---|
| Partial claim cap | 25% of unpaid principal balance standard; 30% for certain COVID-era missed payments. |
| Use limit | One partial claim per loan, with a limited exception for major disasters. |
| VA interest | VA receives a non-interest-bearing secured interest subordinate to the first lien. |
| Servicer work | Systems, policies and training must be updated; vendors estimate weeks to months of work. |
| Market trends | Lenders shifting toward personalized products, expanded VA lending, and renovation loans. |
| Policy advice | Experts recommend guidance-based rollout, streamlined docs, and servicer compensation for admin costs. |
Deeper Dive: News & Info About This Topic
Additional Resources
- Consumer Finance Monitor: Congress Passes Legislation to Help Protect Veterans from Foreclosure
- Wikipedia: VA home loan program
- HousingWire: VA mortgage partial claim program uncertainty
- Google Search: VA partial claim program implementation
- CBS News: Government shutdown could affect mortgage loans and flood insurance
- Google Scholar: VA partial claim
- Bankrate: Best VA mortgage lenders
- Encyclopedia Britannica: VA home loan
- Forbes Advisor: Best VA mortgage lenders
- Google News: VA home loan partial claim
Author: Construction TX News
TEXAS STAFF WRITER The TEXAS STAFF WRITER represents the experienced team at constructiontxnews.com, your go-to source for actionable local news and information in Texas and beyond. Specializing in "news you can use," we cover essential topics like product reviews for personal and business needs, local business directories, politics, real estate trends, neighborhood insights, and state news affecting the area—with deep expertise drawn from years of dedicated reporting and strong community input, including local press releases and business updates. We deliver top reporting on high-value events such as the Texas Construction Expo, major infrastructure unveilings, and advancements in construction technology showcases. Our coverage extends to key organizations like the Associated General Contractors of Texas and the Texas Building Branch, plus leading businesses in construction and real estate that power the local economy such as Austin Commercial and CMiC Global. As part of the broader network, including constructioncanews.com, constructionnynews.com, and constructionflnews.com, we provide comprehensive, credible insights into the dynamic construction landscape across multiple states.
