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MBA, HPC urge VA to extend partial claim program

MBA and HPC say that "action is needed now" from the VA in pushing the expiration of its COVID-19 assistance partial claim program

The Mortgage Bankers Association and the Housing Policy Council sent a letter to the Department of Veterans Affairs urging the department to delay the expiration of its COVID-19 assistance partial claim program. If it doesn’t heed the letter, the VAs partial claim program will sunset in late October.

In the joint letter, the MBA and HPC called on the department to accept partial claim requests for at least 15 months after termination of the COVID-19 national emergency. In February, the Biden administration announced the national emergency will be in effect beyond March 2022.

The MBA and HPC stressed “action is needed now” from the VA. The letter said thousands of VA loans will be exiting forbearance status throughout the year and an amended partial claims process is a necessity to ensure “veterans have access to the help they need.”

The VA did not immediately respond to a request for comment.

As of May 17, 645,000 mortgages remain in active forbearance, with 234,000 loans of the loans insured by the FHA and VA, according to data vendor Black Knight. Close to 20,000 of these plans are expected to expire every month, throughout 2022, the MBA and HPC said.

If the sunset date remains unchanged, servicers will have to stop enrolling veterans in July to provide sufficient time to complete the partial claim submission process, which means some veterans will be at risk of losing their homes, the letter said.

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The VAs temporary partial claim program, implemented in July 2021, bundles a borrower’s missed monthly principal, interest and escrow payments into a subordinate lien. The partial claim amount does not require payment until the last mortgage payment is made.

The letter also suggested ways of improving the program if it receives an extension.

One suggestion: The VA should allow borrowers who have not previously been in forbearance to qualify for the partial claim program if they have been affeced by the pandemic.

The trade groups also said the VA should consider making its partial claim program a permanent part of standard loss mitigation. Housing agencies such as the Federal Housing Administration and the Department of Agriculture have permanent partial claim programs in place.

Veterans exiting forbearance and veterans who may enter a forbearance “deserve access to the partial claim as much as FHA and USDA borrowers,” the joint letter said.

A partial claim option can be added to the VAs loss mitigation waterfall through a rule making process, which the trade groups say will, “provide the opportunity for stakeholders to submit to the VA recommendations to improve and streamline the partial claim program process for VA staff, reimburse servicers for bearing the cost of the program and encourage wider adoption of the program.”

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