The House of Representatives has passed legislation that could permanently reshape the way veteran homeowners are protected from foreclosure. The bill would authorize the Department of Veterans Affairs (VA) to offer partial claims—a loan modification tool already used by FHA and GSEs—to help struggling borrowers bring their loans current without resorting to foreclosure.
The Mortgage Bankers Association (MBA) is applauding the move, and for good reason: this bill isn’t just about aligning servicing tools. It’s about giving loan servicers a reliable, government-backed option to keep veteran homeowners in their homes—and avoiding costly, inefficient foreclosures.
What’s a Partial Claim?
A partial claim allows a borrower to defer missed mortgage payments by having the government advance those funds on their behalf. The borrower repays this advance when the loan is refinanced, paid off, or the property is sold.
This tool has proven successful under FHA programs, especially during COVID-19 recovery efforts. Extending it to VA loans gives servicers a similar path to help veterans get back on track without creating a new loan or increasing their monthly payments.
Why This Matters for Your Business
For loan servicers, the bill—if enacted into law—represents a major operational shift. VA servicing has historically lacked some of the tools available in FHA and GSE frameworks, making loss mitigation harder and often less predictable. With partial claims now on the table, VA servicers will need to:
a) Revamp their loss mitigation processes
b) Train teams on VA-specific partial claim procedures
c) Align policies with Ginnie Mae and investor expectations
Failing to do so not only increases the risk of non-compliance but may result in losing VA servicing rights altogether.
Compliance and Competitive Pressure
Here’s the bottom line: adapt or get left behind.
If your servicing operations can’t support the new framework quickly, you risk delays, defaults, and possibly reputational hits from mishandling veteran borrower accounts.
Non-compliance could also lead to:
a) Penalties or scrutiny from VA and Ginnie Mae
b) Investor dissatisfaction
c) A spike in unnecessary foreclosures
This isn’t just a government policy shift—it’s a performance benchmark. Lenders and servicers that move fast to implement these tools will be in a stronger position to retain VA portfolios and improve borrower outcomes.
The Broader Implications
Beyond regulatory alignment, this move reflects a broader trend: the institutionalization of pandemic-era relief tools.
Partial claims were used widely during COVID-19 as part of temporary relief packages. Making them permanent for VA loans marks a shift toward codifying those crisis-response mechanisms as standard practice.
It’s not just about this one bill. It’s about being ready for a servicing landscape that assumes:
a) Greater borrower flexibility
b) Quicker interventions
c) More accountability from servicers
If this bill becomes law—and signs point to strong Senate support—expect further policy modernization across VA, FHA, and GSE portfolios.
What to Do Next
If you service VA loans or operate in adjacent spaces, now is the time to act:
a) Get Ahead of Implementation: Review your current VA loss mitigation playbook. Where would partial claims fit in? Where are the gaps?
b) Invest in Staff Training: This isn’t just a legal update. It’s a new operational tool—and your teams need to know how to use it effectively.
c) Monitor Final Passage and Rulemaking: The Senate still needs to approve the bill, and the VA will issue guidance after it’s signed into law. Track this closely.
d) Coordinate with Ginnie Mae: Make sure your processes will align with investor and securitization expectations for partial claim treatment.
Final Thought
The VA partial claims bill is more than a policy tweak—it’s a pivotal step toward stronger protections for veteran homeowners and a clear signal that the bar for effective servicing is rising. For businesses in the mortgage space, this is your moment to prepare, adapt, and lead.