Top Five Things Practitioners Need to Know About the VA’s New Partial Claim Program

Department of Veterans Affairs (VA) guidance offers new opportunities for homeowners with VA loans to avoid foreclosure without increasing their interest rates through the VA’s new partial claim program. While the VA released program guidance for the new partial claim on June 1, 2026, servicers are just now starting to offer the option. 

Practitioners working with homeowners with VA loans should immediately become familiar with the new VA Partial Claim.

The VA Home Loan Program Reform Act, enacted into law on July 30, 2025, provides the VA with authority to create a partial claim program to help VA-guaranteed borrowers avoid foreclosure. The VA Partial Claim brings a defaulted mortgage current without changing its interest rate, which is particularly important in this high-interest rate environment. The VA Partial Claim will help fill the gap in assistance created by the VA’s abrupt May 2025 cancellation of the Veterans Affairs Servicing Purchase (VASP).

1. VA Partial Claims Can Help Bring Loans Current with an Interest-Free VA Loan 

VA’s Partial Claim involves a 0% interest loan from the agency to VA-guaranteed borrowers who are behind on their mortgages to bring the mortgage current. See 38 U.S.C. § 3737. The borrower does not make monthly payments on a VA Partial Claim loan. Instead, the partial claim balance generally becomes due in full when the mortgage matures or is paid off. The VA Partial Claim loan is secured by the borrower’s property.

Under this program, the VA limits the amount of a partial claim loan to 25% of the mortgage’s unpaid principal balance. Borrowers who fell behind between March 1, 2020, and May 1, 2025, have a 30% cap. The VA’s authority to offer partial claim loans through this program runs through 2030.

A borrower does not specifically apply for a partial claim. Instead, the partial claim is one item in a menu of foreclosure alternatives a servicer considers when a VA-guaranteed borrower in default requests assistance. The system for identifying assistance is called a “waterfall.” The VA’s June 2026 guidance included a revised waterfall found in Chapter 5 of its Handbook. 

The VA’s waterfall includes several types of loan modifications, all of which bring the mortgage current through changes in the mortgage’s terms. However, because these modifications adjust the borrower’s interest rate to the market rate, the modifications often significantly increase the borrower’s monthly payment whenever the market rate is higher than the borrower’s interest rate. Evaluations using the VA’s waterfall should often lead to a partial claim loan in today’s high-interest rate environment.

2. Servicers Must Be Ready to Offer the VA Partial Claim Option by the End of November

According to the VA’s website, the agency was prepared to pay partial claims on June 15, 2026. However, the VA also stated “VA recognizes servicers will need time to implement the program, internally. Servicers have 180 days to implement, from the date the final policy was published on June 1, 2026.” Under this guidance, servicers must be ready to offer the VA Partial Claim option no later than November 30, 2026.

3. The VA Provides Only One Bite of the Apple; Many Borrowers Have Already Taken Their Bite

Under the VA Home Loan Reform Act, a borrower is allowed only one standard partial claim during the life of their guaranteed loan. 

The law does provide borrowers with an additional partial claim for natural disasters. However, the VA has not provided guidance for the natural disaster partial claim.

Unfortunately, the VA’s Handbook took an expansive view of what counts as a VA Partial Claim for the purposes of the “one bite of the apple” rule. In Chapter 22.02(10), VA states a borrower is not eligible to receive a VA Partial Claim if they have received “(a) a VA Partial Claim under 38 U.S.C. § 3737; (b) a COVID-19 Veterans Assistance Partial Claim Payment under subpart F, part 36, title 38, C.F.R.; or (c) a COVID-19 Refund Modification.” 

Under this provision, borrowers who received assistance under previous pandemic-era relief programs may lose their eligibility for a VA Partial Claim. Practitioners must investigate whether borrowers have previously received assistance under these programs.

4. The VA Partial Claim Eligibility Requirements Include a Restrictive “Heirs” Provision 

The VA Partial Claim eligibility requirements are found in Chapter 22.02 of VA’s Handbook. The Handbook provides very limited access to the partial claim for non-borrowers who acquire title to the property after the original borrower passes away, even when the non-borrower seeking assistance is a surviving spouse. 

The Handbook states that “If the surviving spouse is not obligated on the note, the surviving spouse does not qualify for a [partial claim] unless the surviving spouse completed a loan assumption before the default.” Such pre-default assumption is rare, and the VA’s rule does not account for the challenges heirs face after the death of a borrower. Advocates continue to push the VA to change this policy.

5. The VA Partial Claim Brings Loans Current but Does Not Reduce Monthly Payments

The VA’s Partial Claim program restores the borrower’s pre-hardship mortgage payment by bringing the loan current. It cannot be used in combination with a loan modification to reduce a borrower’s mortgage payment, unlike the FHA’s Partial Claim program. As a result, the VA’s system may be of limited help to borrowers who truly need payment relief to avoid foreclosure. 

Practitioners can ask the VA to purchase the loan through its traditional VA Purchase authority (tVAP) discussed in Chapter 9.02 of its Handbook; however, VA has not widely used this authority, especially since it cancelled VASP.

Conclusion

The VA’s Partial Claim will prevent unnecessary foreclosures for VA-guaranteed borrowers who have recovered from financial hardships. However, the partial claim program will be of limited help to borrowers who cannot afford their pre-default payment.  The VA-guaranteed borrowers still have substantially worse options than other borrowers with federally backed mortgage loans.