Major Steps Forward: Understanding the VA Home Loan Program Reform Act of 2025

What is the VA Home Loan Program Reform Act of 2025?

At its core, the VA Home Loan Program Reform Act of 2025 is a bipartisan effort to strengthen and modernize the VA’s home loan guarantee program. It addresses several key areas, with a primary focus on:

• Foreclosure Prevention: Creating a permanent, robust safety net for Veterans who fall behind on their mortgage payments.
• Market Competitiveness: Ensuring VA homebuyers can compete effectively in fast-moving real estate markets.
• Homelessness Prevention: Boosting funding and services aimed at reducing Veteran homelessness.

This act comes at a critical time, especially following the termination of previous COVID-era foreclosure relief measures and the VA Servicing Purchase (VASP) program in May 2025, which left many Veterans without clear pathways to avoid default. The new law aims to fill these gaps with proven, sustainable solutions.

Key Benefits of the VA Home Loan Program Reform Act

The reforms introduced by H.R. 1815 offer tangible benefits to current and future VA loan holders. Here’s a closer look at the most impactful changes:

1. Establishment of a Permanent Partial Claim Program

This is arguably the most significant benefit of the new act, providing a vital lifeline for Veterans facing mortgage delinquency.

• What it is: A partial claim program allows the VA to pay a portion of a Veteran’s overdue mortgage payments (arrearages) directly to the loan servicer. These missed payments are then set aside as a subordinate, interest-free lien on the property.
• How it works:
  • If a Veteran falls behind on their VA loan, they can work with their loan servicer to determine eligibility for a partial claim.
  • The VA can purchase up to 25% of the unpaid principal balance of the loan (or up to 30% for loans impacted between March 2020 and May 2025 due to COVID-19 related hardship).
  • This payment brings the Veteran’s primary mortgage current, allowing them to resume their regular monthly payments without having to catch up on a large lump sum.
  • The subordinate lien (the amount paid by the VA) does not accrue interest and typically only needs to be repaid when the first mortgage is fully satisfied (e.g., through a sale of the home or a refinance).
• Why it matters:
  • Foreclosure Prevention: This program directly prevents thousands of Veterans from losing their homes due to temporary financial hardship. It offers a structured solution akin to those available for FHA and USDA loans, which previously VA loans lacked in a permanent capacity.
  • Financial Relief: It provides immediate relief by making the primary mortgage current, allowing Veterans to stabilize their finances.
  • Maintains Original Loan Terms: Unlike some loan modifications that might change your interest rate or loan term, a partial claim allows you to keep your original VA loan’s favorable terms (like a low interest rate if you secured it years ago).
  • Replaces VASP: This permanent program replaces the temporary and controversial VA Servicing Purchase (VASP) program, which was terminated earlier in 2025. It provides a more transparent and congressionally approved solution for loan servicing.

This program is a crucial safety net, ensuring that Veterans facing unforeseen challenges like job loss, medical emergencies, or natural disasters have a clear path to maintain homeownership. If you are struggling with your VA loan payments, reaching out to your loan servicer and the VA is more important than ever. The VA can be contacted at 1-877-827-3702 (TTY: 711) for direct assistance.

2. Permanent Authorization for Buyer-Paid Real Estate Agent Commissions

This change is critical for VA homebuyers operating in the modern real estate market.

• The Previous Challenge: Historically, the VA had restrictions on who could pay certain real estate commissions, specifically often prohibiting VA loan borrowers from directly paying their buyer’s agent commissions. In a market where some sellers were no longer willing to cover buyer agent fees (especially with recent changes in real estate industry commission rules), this put VA buyers at a significant disadvantage. They might have been excluded from certain properties or faced additional out-of-pocket costs.
• How it works now: The Act makes permanent a temporary policy suspension that allows VA loan borrowers to directly pay their real estate agents.
• Why it matters:
  • Increased Competitiveness: VA homebuyers can now more effectively compete with conventional buyers, especially in markets where buyer-paid commissions are becoming the norm. This opens up more housing inventory to Veterans.
  • Greater Flexibility: It provides greater flexibility in real estate transactions, ensuring VA borrowers aren’t limited in their choice of properties or agents due to payment restrictions.
  • Clarity for All Parties: This change provides long-term clarity for Veterans, real estate agents, and lenders, streamlining the home buying process for VA loans.

This is a huge win for market access and fairness for our military homebuyers. You can learn more about working with a real estate agent and how the VA loan interacts with the home buying process on our blog.

3. Enhanced Homelessness Prevention Efforts

Beyond direct mortgage assistance, the Act also boosts funding for programs vital to preventing Veteran homelessness.

• Grant and Per Diem (GPD) Program: The Act increases funding for the VA’s GPD program, which provides grants and per diem payments to community-based organizations that offer transitional housing and supportive services to homeless Veterans.
• Increased Funding: The annual limit for the GPD program is raised from $258 million to $344 million for 2025 and 2026.
• Why it matters: This provides critical resources to community agencies, directly supporting transitional housing and services that help Veterans get back on their feet and secure stable housing. It underscores the VA’s commitment not just to homeownership but to ensuring all Veterans have a safe place to live.

How the Act Will Work in Practice for Veterans

The implementation of the VA Home Loan Program Reform Act of 2025 means several practical changes for Veterans:

• Proactive Engagement if Facing Hardship: If you are a Veteran with a VA loan and find yourself struggling to make payments, the new partial claim program is a defined pathway for assistance. Your first step should always be to contact your loan servicer, and concurrently, reach out to the VA directly (1-877-827-3702). The VA will work with your servicer to explore options, including the partial claim.
• Greater Confidence in Competitive Markets: When searching for a home, you can now do so with increased confidence that your VA loan offer will not be disadvantaged by commission payment structures. This allows you to focus on finding the right home, not worrying about payment logistics.
• Continued Access to VA Benefits: The core benefits of the VA loan remain intact – no down payment (for eligible Veterans with full entitlement), no PMI, and competitive rates. These reforms enhance the program, making it even stronger and more resilient.
• Support for the Most Vulnerable: The increased funding for homelessness prevention programs reinforces the VA’s holistic approach to Veteran well-being, acknowledging that housing stability is fundamental.

Important Note on VA Loan Limits (for 2025):

While the VA Home Loan Program Reform Act of 2025 focuses on foreclosure prevention and market competitiveness, it’s worth noting that VA loan limits are adjusted annually based on conforming loan limits set by the Federal Housing Finance Agency (FHFA). For most of the U.S., the standard VA loan limit for 2025 is $806,500, a 5.2% increase from 2024. In high-cost areas, this limit can be significantly higher, reaching up to $1,209,750. For eligible Veterans with full entitlement, these limits generally do not apply, meaning you can purchase a home at any price the lender approves based on your financial qualifications. You can check the specific VA loan limits for your county for 2025 to understand what applies to your situation.

Understanding the VA Funding Fee in 2025:

The VA Funding Fee, a one-time fee paid by most VA borrowers to help sustain the program, remains an important aspect of your loan. For 2025, the fee for first-time VA loan users with no down payment is 2.15%, while for subsequent users with no down payment, it is 3.3%. Lower fees apply with a down payment. Veterans receiving VA compensation for a service-connected disability, as well as certain surviving spouses, continue to be exempt from this fee, which can result in significant savings.

The Future of the VA Home Loan Program

The VA Home Loan Program Reform Act of 2025 is a testament to the ongoing commitment to Veterans’ housing security. By making essential loss mitigation tools permanent and addressing key market challenges, the Act ensures that the VA loan remains a robust and reliable benefit for generations to come. These reforms are about more than just numbers on a balance sheet; they are about giving Veterans the security and stability they deserve, honoring their service by protecting their most significant investment – their home.

Ready to Unlock Your VA Home Loan Benefits?

Whether you’re looking to purchase your first home, wondering about your eligibility, or seeking to understand the latest changes to the VA loan program, VeteransLoans.com is your trusted resource. Our team of VA loan specialists is deeply knowledgeable about all aspects of the VA loan and is ready to guide you through every step of the process. Take advantage of the enhanced benefits and protections offered by the new VA Home Loan Program Reform Act. Don’t let questions hold you back from achieving your homeownership dreams.

• Get Pre-Qualified Online: Start your VA loan journey today by getting pre-qualified at veteransloans.com/prequalify. It’s a quick and secure way to understand your options.
• Speak with a VA Loan Specialist: For personalized advice and answers to all your questions about the VA loan and the recent reforms, call us directly at 1 (888) 232-1428.

We are proud to serve those who have served our nation, helping you navigate the path to secure and lasting homeownership.