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 into VA and renovation loans; industry urges quick roll‑out
Congress has approved and the President has signed legislation that restores a partial claim option for loans guaranteed by the Department of Veterans Affairs. The change is intended to help veterans and active service members avoid foreclosure by allowing the VA to buy part of a troubled mortgage and defer that portion to the end of the loan. Industry leaders say the measure is an important safety net, but warn that speedy and sensible implementation is essential so the relief reaches borrowers before foreclosure actions progress.
Top-line program changes
- Partial claim cap: up to 25 percent of the unpaid principal balance at the time the claim is made; up to 30 percent is allowed for borrowers who missed payments during the March 1, 2020 to May 1, 2025 period.
- One-time use: generally one partial claim per loan, with a limited exception after presidentially declared major disasters.
- Repayment structure: the deferred portion is secured by a non‑interest‑bearing subordinate lien and can be placed at the end of the mortgage term.
- Guarantee preserved: use of a partial claim will not reduce the VA guarantee on the loan.
Why implementation timing is critical
Servicers and vendors must update systems, adjust policies, and retrain call centers to make the program operational. Some vendors estimate technology changes may take only weeks, while servicer policy and operational shifts typically require months. Industry stakeholders emphasize that informal program guidance and streamlined documentation will speed rollout and reduce administrative burden compared with lengthy formal rulemaking.
The program returns as many VA borrowers face elevated delinquency risk. Tens of thousands of VA borrowers are months behind on payments, and foreclosure starts and completed foreclosures have risen sharply in recent periods. A previous VA purchase program that allowed the agency to buy loans at low rates was wound down earlier, leaving servicers with higher delinquent inventories. That experience underscores the need to design a new partial claim pathway that serves borrowers without unduly burdening servicers.
How this fits into a changing mortgage market
The mortgage industry has shifted away from a post‑2008 era when a narrow set of loan types dominated origination channels. Lenders now must offer a diverse set of products and act more like financial advisors, using technology to match borrower needs to loan features. Two product groups standing out are VA loans and renovation loans. VA loans remain attractive for eligible borrowers because of low or no down payment options, flexible credit considerations, competitive rates, and no private mortgage insurance in many cases. Renovation mortgages are gaining traction as housing supply is tight and construction costs stay high, allowing buyers to purchase and immediately finance improvements or refinance existing mortgages to include upgrades.
Operational challenges and policy choices
Key operational items include defining one‑time use, compensating servicers for administrative costs, and establishing clear documentation standards. The absence of a centralized database to show whether a borrower previously received partial assistance complicates eligibility checks. Industry analysis suggests a rollout that relies on clear guidance, minimal preapprovals, and streamlined paperwork will reach more borrowers quickly and avoid the pitfalls of earlier, costly programs.
What lenders and borrowers should expect
In the near term, servicers will prioritize updating systems and training staff while regulators and the VA issue implementation guidance. Lenders actively expanding VA and renovation offerings see the restored partial claim as a stabilizing measure for veteran homeowners. At the same time, broader market forces remain in play: high interest rates have muted refinance volume but a potential rate decline could trigger a refinance surge later. Lenders that invest in personalized product design, digital workflows, and data analytics will be better positioned to serve borrowers during that transition.
Bottom line
The reinstatement of the VA partial claim adds a tool to prevent foreclosures among eligible borrowers and aligns the VA’s loss‑mitigation mix more closely with other federal programs. The ultimate benefit to veterans will depend on how quickly and efficiently the VA and servicers translate the law into practice, how operational issues are addressed, and whether rollout uses streamlined guidance that reduces friction for both borrowers and servicers.
Frequently Asked Questions
What is a VA partial claim?
A VA partial claim is a loss‑mitigation tool that lets the VA purchase and defer a portion of a delinquent home loan to help prevent or resolve default. The deferred amount becomes a subordinate, non‑interest‑bearing lien due later in the mortgage term.
How much can the VA defer under a partial claim?
Under the new law, the VA can defer up to 25 percent of the unpaid principal balance at the time of the partial claim. For borrowers who missed payments during the March 1, 2020 to May 1, 2025 window, a 30 percent cap may apply.
How many partial claims are allowed per loan?
Generally one partial claim is allowed per loan, with an additional allowance if the borrower missed payments during a presidentially declared major disaster.
Will a partial claim change the VA guarantee?
No. Use of a partial claim does not reduce the VA guarantee on the loan.
When will the program start operating?
The VA is working to implement the law as soon as possible. Servicers and vendors will need time to update systems and procedures, so practical availability will depend on the pace of guidance issuance and operational readiness.
Are there alternative options for struggling borrowers?
Yes. Other loss‑mitigation paths include amortization changes such as extended terms, loan modifications, and renovation refinancing in some cases. Servicers will consider the best option for each borrower based on eligibility and program rules.
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Key features at a glance
| Feature | Details |
|---|---|
| Partial claim cap | Up to 25% of unpaid principal; 30% cap applies for missed payments in the COVID-era window |
| Use limits | Generally one per loan; an extra claim allowed after major disasters in some cases |
| Security | Non-interest-bearing subordinate lien, subordinate to the first-lien VA-guaranteed loan |
| Effect on guarantee | VA guarantee amount is not reduced by a partial claim |
| Operational needs | System updates, policy changes, staff training, servicer compensation, streamlined guidance preferred |
| Market impact | Supports veterans at risk of foreclosure and complements lender focus on VA and renovation products |
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 CA News
CALIFORNIA STAFF WRITER The CALIFORNIA STAFF WRITER represents the experienced team at constructioncanews.com, your go-to source for actionable local news and information in California 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 Rose Parade, Coachella, Comic-Con, and the California State Fair. Our coverage extends to key organizations like the California Building Industry Association and Associated General Contractors of California, plus leading businesses in technology and entertainment that power the local economy such as Apple and Alphabet. As part of the broader network, including constructionnynews.com, constructiontxnews.com, and constructionflnews.com, we provide comprehensive, credible insights into the dynamic landscape across multiple states.
