The Department of Veterans Affairs last week finalized a rule establishing a new COVID-19 Veterans Assistance Partial Claim Payment Program. The program is intended to help veterans return to making normal payments on VA-guaranteed loans after exiting COVID-related forbearance by setting the past-due balance aside as a separate loan. The rule—which takes effect July 27—was finalized with significant changes that resulted from advocacy by several groups, including the American Bankers Association.
At the request of ABA and others, the VA increased the partial claim maximum limit from 15% of the unpaid principal balance of the guaranteed loan as of the date the veteran entered into a COVID-19 forbearance to 30%. It also eliminated requirements for veterans to repay the partial claim within 120 months, for the VA to charge interest on the new loan and a requirement for servicers to complete financial evaluations of veterans in the program.
Finally, the VA increased the timeframe for servicers to submit a partial claim payment request to the VA from 90 to 120 days, and removed a requirement for the program to be an “option of last resort,” enabling servicers to use the partial claim payment option even if other home retention options are feasible, provided that the partial claim payment option is in the veteran’s financial interest.