VA Loan Reform Act Signed Into Law, Bringing Major Relief for Delinquent Borrowers and Greater Flexibility for Veteran Homebuyers

In a significant win for veteran homeowners and homebuyers, the VA Loan Reform Act (H.R. 1815) has officially become law following President Trump’s signature today. The bipartisan legislation marks a major shift in how the Department of Veterans Affairs (VA) supports veterans through mortgage hardship and aims to modernize parts of the VA loan program to keep pace with today’s housing market.

Key Takeaway: Permanent Partial Claim Program Now Available for Delinquent VA Loans

Perhaps the most impactful part of the new law is the creation of a permanent partial claim program, which allows the VA to assist seriously delinquent borrowers without requiring a loan modification or full refinance. Under this option, the VA can advance funds to cover missed mortgage payments, which are then repaid over time as a second lien a method already used by other federal agencies like the FHA and USDA.

This change provides a critical lifeline for borrowers facing long-term hardship, allowing them to catch up on payments without changing their interest rate or loan terms. The move brings the VA in line with industry standards and gives servicers a clear path to support borrowers while avoiding foreclosure.

The timing couldn’t be more urgent. Since the May 1, 2025, shutdown of the VA Servicing Purchase (VASP) program, which had offered temporary relief for tens of thousands of struggling homeowners, delinquency rates have surged. As of June, more than 43,000 VA-backed mortgages were reported to be six or more months behind, with few viable options for resolution.

Foreclosures largely stalled during the pandemic and the VASP period have started to climb once again, raising concerns among housing advocates and mortgage professionals. The partial claim program is expected to significantly ease this pressure and offer borrowers a smoother, less disruptive recovery path.

Codifying Buyer Agent Commission Flexibility

The new law also permanently resolves an issue that had long hampered VA buyers in competitive markets: the VA’s previous ban on buyer-paid real estate agent commissions.

While the Department had suspended this restriction temporarily in 2023, the change is now written into federal law, ensuring long-term flexibility for how agent fees are handled in real estate transactions involving VA loans.

This change is particularly important in multiple-offer situations, where sellers are less likely to agree to pay buyer agent commissions putting VA buyers at a disadvantage. The new rule ensures veterans using their benefits won’t be sidelined during bidding wars simply because of outdated policies.

Additional Support for Veterans Facing Housing Insecurity

Beyond homeownership and loan servicing reforms, the legislation also boosts resources for transitional housing and veteran homelessness programs. Specifically, it expands funding for the VA’s Grant and Per Diem (GPD) program, which helps veterans find and maintain stable housing as they transition out of homelessness or unstable living conditions.

These enhancements build on prior legislative efforts to combat veteran homelessness, creating a more coordinated and better-funded response to one of the country’s most persistent housing challenges.

For Lenders and Servicers: Streamlined Solutions and Greater Alignment

The partial claim option will also be a welcome tool for mortgage servicers, who now have a structured, government-approved pathway to assist delinquent VA borrowers. This aligns VA-backed loans with other government-backed programs, reducing confusion and improving loan performance across the board.

For lenders, the buyer agent compensation flexibility brings clarity to what had been a gray area in VA transactions and allows loan officers to guide veterans through more competitive homebuying scenarios with confidence.

What This Means Moving Forward

With this new law, the VA loan program becomes more adaptable, more responsive, and more competitive. Borrowers facing financial hardship now have a clear avenue for staying in their homes, and buyers entering the market with VA financing can now do so on more equal footing.

As the VA implements these changes, housing advocates and mortgage professionals alike are optimistic that more veterans will be able to secure and retain the housing stability they’ve earned whether through homeownership or transitional support. For direct financing consultations or mortgage options for you visit 👉 Nadlan Capital Group.