Key Takeaways
- •Patrick Zondervan (Executive Director, Loan Guaranty Service, U.S. Department of Veterans Affairs) announced the VA will launch its new partial claims program in June 2026 to prevent veteran foreclosures.
- •Kurt Thompson (Executive Committee Member, National Association of Realtors) testified that a five million home shortage and restrictive appraisal requirements are the primary barriers preventing veterans from achieving homeownership.
- •Rep. Van Orden (R, WI-3) pressed Zondervan on why VA appraiser certification takes five years when medical residencies take three, urging the agency to immediately reduce these experience requirements.
- •Rep. Hamadeh (R, AZ-8) advocated for aligning VA seller concessions with FHA standards, while Rep. Pappas (D, NH-1) cautioned against lowering VA protections just to match other federal programs.
- •Congress will monitor the VA's implementation of the partial claims "waterfall" to ensure veterans are not forced into unaffordable 15 percent monthly payment increases during financial hardships.
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Hearing Analysis
Overview
This hearing examined the current state of the Department of Veterans Affairs (VA) home loan guarantee program, focusing on affordability challenges, modernization efforts, and the transition to new foreclosure prevention tools. As the United States faces a significant housing supply shortage and elevated interest rates, the subcommittee explored how the VA can streamline its processes to ensure veterans remain competitive in a "red-hot" real estate market. A central theme was the implementation of the VA Home Loan Program Reform Act (H.R. 1815) and the upcoming rollout of a permanent partial claim program to replace the recently ended Veterans Affairs Servicing Purchase (VASP) program.
Key Testimony & Policy
Patrick Zondervan, Executive Director of the VA Loan Guaranty Service, testified that the VA home loan remains a premier benefit, noting that the agency guaranteed over 500,000 loans in fiscal year 2025. He addressed common "myths" regarding VA appraisals, stating they currently average seven business days—on par with conventional loans. Zondervan and Terry Rouch, Assistant Director for Loan Policy and Valuation, detailed ongoing efforts to modernize the program, including the removal of certain "cosmetic" minimum property requirements (MPRs) such as chipped paint or handrail specifications that often deter sellers from accepting VA offers.
Industry witnesses emphasized the need for better alignment between the VA and other federal agencies. Owen Lee, representing the Mortgage Bankers Association (MBA), urged the VA to align its MPRs with those of Fannie Mae and Freddie Mac. He also raised concerns regarding the VA’s draft "waterfall" proposal for the new partial claim program, arguing that veterans should not be forced to accept a monthly payment increase before other home retention options are exhausted. Kurt Thompson of the National Association of Realtors (NAR) highlighted the national shortage of nearly five million homes and advocated for the passage of the 21st Century Road to Housing Act (H.R. 6644) and the More Homes on the Market Act (H.R. 1340) to unlock inventory. Thompson specifically called for raising the cap on seller concessions from 4% to 6% to match Federal Housing Administration (FHA) and U.S. Department of Agriculture (USDA) standards.
Alys Cohen, Director of Federal Housing Advocacy at the National Consumer Law Center (NCLC), focused on the "gap" period between the end of the VASP program and the June rollout of the partial claim program. She testified that the VA’s current proposal might require delinquent veterans to accept up to a 15% increase in their monthly payments to qualify for assistance, which she argued would lead to avoidable foreclosures. Cohen proposed "full pay forbearance" as a stopgap measure to protect veterans until the new system is fully operational.
Notable Exchanges & Partisan Dynamics
Chairman Derrick Van Orden (R, WI-3) expressed sharp criticism regarding the VA’s requirement for appraisers to have five years of experience, comparing it unfavorably to the three-year residency required for family practice physicians. He characterized the lengthy requirement as a "VA jobs program" and urged Zondervan to use his administrative authority to reduce this timeframe to increase the appraiser pool. Zondervan agreed that the five-year requirement could be significantly reduced.
Ranking Member Chris Pappas (D, NH-1) focused on the rising foreclosure rates following the termination of the VASP program. He pressed the VA witnesses for a firm commitment on the rollout of the partial claim program, which Zondervan confirmed is targeted for June 2026. Pappas and Cohen discussed the "waterfall" of loss mitigation options, with Pappas emphasizing that the most affordable home for a veteran is the one they already occupy.
Rep. Abraham Hamadeh (R, AZ-8) challenged the VA on "fee stacking," where lenders charge a 1% origination fee plus additional itemized administrative charges. He also pushed for the VA to align its seller concession caps with the FHA to prevent veterans from being "squeezed out" of competitive markets like Phoenix. Rep. Kimberlyn King-Hinds (R-MP) highlighted the unique challenges in the Northern Mariana Islands, advocating for the HOME Act to improve outreach to veterans in territories with high enlistment rates but limited housing access.
Organizations Mentioned
- **Department of Veterans Affairs (VA):** The primary agency under oversight, criticized for its slow rollout of the partial claim program and its five-year appraiser experience requirement. - **Mortgage Bankers Association (MBA):** Represented by Owen Lee; advocated for aligning VA standards with the GSEs and expressed concerns over the draft loss mitigation waterfall. - **National Association of Realtors (NAR):** Represented by Kurt Thompson; emphasized the 5-million-home inventory shortage and supported raising seller concessions to 6%. - **National Consumer Law Center (NCLC):** Represented by Alys Cohen; advocated for "full pay forbearance" and criticized the potential 15% payment increase in the VA's new foreclosure prevention proposal. - **Federal Housing Administration (FHA):** Frequently cited as the benchmark for seller concessions (6%) and appraiser experience requirements (12-18 months) that the VA should emulate. - **Fannie Mae / Freddie Mac:** Mentioned by industry witnesses as the standard for modernizing minimum property requirements to make VA loans more competitive. - **Success Mortgage Partners (SMP):** The firm led by witness Owen Lee, cited as a top 100 VA lender.
What's Next
The VA is expected to launch its new partial claim program and updated loss mitigation waterfall in June 2026. Chairman Van Orden indicated that the subcommittee would work closely with the VA to review the "waterfall" rules to ensure they align with congressional intent and do not mandate unaffordable payment increases for veterans. Legislative focus will likely remain on the 21st Century Road to Housing Act and potential adjustments to the HOME Act regarding territorial outreach. The VA also committed to reviewing and potentially reducing the five-year experience requirement for certified appraisers.
Transcript
...ownership. And I want today's discussion to be meaningful, respectful obviously, and with the end state of keeping housing affordable for our veterans, service members, and their families. And with that, I'd like to yield to my very good friend, Ranking Member Pappas.
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