The Department of Veterans Affairs has finalized its new partial claim program and broader loss mitigation updates, which will be live and accessible beginning June 15. Servicers must have fully compliant systems in place by Nov. 28, which is 180 days from the June 1 effective date of the updated VA Servicer Handbook.
Overall, the final policy reflects a significant improvement from the March 2026 draft; however, several technical issues remain and will require additional clarity from VA, according to American Bankers Association staff.
The final partial claim policy, adopted in Chapter 22 of the manual, maintains the core “servicer advance” model under which servicers advance funds to bring a loan current and establish a non-interest-bearing balance that is repaid at payoff. Within the broader loss mitigation waterfall, VA moved the partial claim option up to Step 5, adopting ABA’s recommendation to prioritize payment-neutral options earlier in the waterfall.
Other major changes to the partial claim framework, include: (1) moving the trial payment deadline from the 15th of the month to the end of the month; (2) permitting verbal attestation for occupancy verification; (3) extending documentation and remittance deadlines for servicers; and (4) revising the attestation language to function more as a reflection of the borrower’s acknowledgement and agreement of the partial claim and less as a formal debt instrument.
Chapter 5 of the manual, which governs the broader loss mitigation framework, includes fewer substantive changes. While the VA did not fully adopt a structure consistent with the government-sponsored enterprise and Federal Housing Administration waterfalls, it did simplify the framework from eight to six steps by removing the first two steps listed in the March draft.
One of the biggest changes was the partial claim option was moved up in the waterfall ahead of the 40-year loan modification option. Another notable change, which does not update the steps of the formal waterfall, is the creation of a standard forbearance option. This pre-waterfall informal forbearance and repayment plan option is available to borrowers experiencing a temporary hardship who are not yet ready to resume payments, addressing ABA’s concern that the draft framework lacked a meaningful temporary hardship tool for borrowers whose financial difficulties were ongoing but likely to resolve in the near future.
VA is currently conducting training sessions on the revised handbook. The first session was held on June 4. However, an encore presentation is scheduled for June 15 at 10 a.am. ET. Register for the encore session.
