In a move that formalizes and further explains statements the department has made in asking servicers to provide leeway in the transition to a new "last resort" foreclosure relief program, the VA said Wednesday it would be extending its call for a ban for some loans until year-end.

"When a Veteran falls on hard times, we work with them and their loan servicers every step of the way to help prevent foreclosure, including offering repayment plans, loan modifications, and more," said Josh Jacobs, the VA's under secretary for benefits, in a press release.

"We're calling on mortgage servicers to follow a targeted foreclosure moratorium so we can make sure that Veterans get the support they need," he added.

The VA is now asking servicers to keep holding off on foreclosures until Dec. 31 unless one or more of four situations applies to a particular borrower.

The ban extension doesn't apply if there's documented borrower readiness to proceed, a determination a veteran doesn't qualify for new or existing relief, there's a vacant or abandoned property or if payments are late over 210 days and a borrower is nonresponsive to outreach.

Mortgage trade groups have asked for more time to implement the new VA Servicing Purchase program that serves as a successor to a temporary pandemic program. VASP is set to start after May 31 and that mortgage companies will have until Oct. 1 to implement.

The VA reasserted the Oct. 1 deadline for servicer implementation in the extension.

Tens of thousands of veterans have been affected by the discontinuation of a partial claim program the department previously had during the pandemic and may be helped by VASP. The new program only comes into play when a borrower qualifies for it and not other VA relief.

The department helped prevent a total of 145,000 foreclosures through other programs in 2023.

Borrowers don't apply directly for VASP but must rely upon their servicers to submit requests for participation in the program. 

"Veterans who are having difficulty reaching a resolution with their mortgage servicer can contact VA at 877-827-3702, option 4," the department said in its press release, reiterating a hotline number it's made available previously.

While the mortgage industry generally preferred the temporary partial claim program to VASP, the department has cited budgetary constraints and other challenges in continuing the former on a more permanent or long-term basis.

VASP aims to address difficulty modifying loans for affordability purposes given differences in current and originated mortgage rates.

The mechanism the department will use to lower rates to 2.5% through VASP involves buying them from servicers, and modifying them. It will hold the mortgages in a VA-owned portfolio as direct loans, something that's only been done through smaller scale transfers in the past.

In contrast to VASP, the department's partial claim involved setting some borrower obligations aside in a second lien that generally comes due when the first mortgage is refinanced or the home gets sold.