Veterans Affairs (VA) Loan Foreclosure: How it works and how to avoid it

Veterans Affairs (VA) loans were designed to help eligible veterans and active-duty military achieve the dream of homeownership, and they have been effective in doing so. Currently, 3.7 million veterans are served by the VA Home Loan program. But for the nearly 70,000 veteran homeowners who are over 90 days late on their mortgage payments, that dream is teetering toward a nightmare.  

VA loan foreclosures happen, just as any mortgage loan is susceptible to foreclosure. On July 30, 2025, legislation was signed into law seeking to help veteran homeowners avoid foreclosure. The VA Home Loan Program Reform Act, among other things, “authorizes the VA to pay the holder of a loan guaranteed by the VA an amount necessary to avoid the foreclosure of the loan, provided that the holder of the loan and the veteran obligated on the loan execute documents to ensure the VA obtains a secured interest in the property covered by the loan.” 

This will hopefully provide vulnerable veterans with some much-needed relief. However, if you are worried about experiencing a foreclosure on your VA home loan, there are steps you may be able to take to avoid that outcome. In this article, we will explain how VA home loan foreclosures work, how to avoid them, and where to get help if you’re a veteran in financial distress.

What is VA Loan Foreclosure?

VA loan foreclosure happens when a veteran borrower falls behind on their mortgage payments. When that happens, the mortgage servicer can take the veteran’s home to cover the money owed.  

Foreclosures typically come in two forms, judicial and non-judicial. A judicial foreclosure requires the lender to file a lawsuit and get a court order to sell the home. Until that time, the borrower is legally able to live in the home. Lenders usually prefer to avoid these because they can take a long time, can cost money, and are more complicated than the alternative.  

That alternative would be a non-judicial foreclosure. In this case, there would be no lawsuit or court order. Non-judicial foreclosures are usually the fastest and simplest way to foreclose.  

Foreclosures can happen for a variety of reasons. VA loan borrowers may face job loss, outstanding debts, natural disaster, economic crises, or any number of other reasons. Should you find yourself affected by circumstances that make it hard to pay your mortgage, it’s important to be proactive in seeking help.

How Can I Avoid Foreclosure?

Veteran borrowers who are struggling to pay their mortgage should speak with their loan servicers as soon as possible. Though this may feel intimidating or embarrassing, the loan servicers don’t want you to face foreclosure either.  

It is in both of your best interests to discern whether there are options to help you avoid foreclosure. Below are some of the main ways that goal could be achieved, depending on your circumstances and your lender:  

1. Repayment plans

You may be able to negotiate a repayment plan with your VA loan servicer if you’ve missed a few payments. This will likely result in higher payments until you repay the amount you missed. Once you’ve repaid the delinquent amount, you will be able to resume your regular payments. It is best to speak with your lender as soon as you know you’ll miss a payment to try to establish this.  

2. Special loan forbearance  

Some lenders may be willing to afford you a forbearance period in which you pause or lower the amount of your mortgage payments while you get your finances in order. Once this period ends, though, you will need to pay back any payments missed during your pause, potentially with interest. If you are expecting an influx of money, such as a new job, freelance contract or a tax refund, this may be a plausible way out of foreclosure.  

3. Reinstatement

Reinstatement may be challenging for borrowers who are already defaulting on their mortgage payments. Essentially, a mortgage reinstatement allows the borrower to pay back the total amount due in one lump sum. So, similar to the forbearance, this option may be best for borrowers who know they have money coming in or some degree of certainty that they’ve resolved their financial troubles for the time being.  

4. Loan modification

VA loan modifications can be used to change loan terms, such as the length of the loan, the interest rate, and the monthly payment. If your loan servicer were to agree to a modification, they would likely add your past due payments into the modified mortgage, hopefully making it easier to make payments and keep your home.  

5. Foreclosure delay for private sale

VA loan borrowers may be able to negotiate a delay in foreclosure with their loan servicer, so they can sell their home. Then, those funds can be used to pay off the rest of the existing mortgage. If there is any money left over after that, you can use it for things like paying off other debts, finding a rental, or potentially attempting another down payment. 

6. Short sale

Some lenders may help you organize a short sale in which you sell your home for less than the amount owed on your mortgage. The lender would receive that money, releasing you from your debt. Of course, this option leaves you without a home, but it can be palatable if, for example, you can afford to rent or have a support system nearby to stay with.  

7. Deed in lieu of foreclosure

VA loan borrowers can avoid foreclosure by voluntarily signing the deed to their home over to the loan service provider. The borrower would have to vacate the property at an agreed upon date, but this would help avoid some consequences of foreclosure. This option would stay on your credit report for years, but a foreclosure has an even worse impact on your credit.

Watch Out for Scams

Unfortunately, scammers will often attempt to prey upon vulnerable veteran borrowers. If you are facing financial distress and looking for help, do not accept unsolicited offers without first speaking to a VA representative or your mortgage servicer. Scammers can be incredibly convincing in their tactics. In general, be sure you are working with an organization you trust. If something sounds too good to be true, it probably is. Be vigilant!

FAQ

Can VA counseling help me avoid foreclosure?

VA counseling is available to any veteran or surviving spouse of a veteran, even if they don’t have a VA-guaranteed loan. If your VA loan is 61 days past due, the VA will automatically assign a VA loan technician to review your loan. These technicians are located in eight regional loan centers. They will work with your servicer to explore all of your options to avoid foreclosure.  

Do I have to pay back my VA loan if it falls into foreclosure?

If the loan closed before January 1, 1990, and the Department of Veteran Affairs has to repay the amount of your loan to the servicer, you may be responsible for paying back that amount to the government. In some cases, you might be able to get a waiver for VA debt, though.  

If the loan closed after January 1, 1990, and the VA repays the loan to your servicer, you would need to pay that amount back to the government if there is evidence of fraud, misrepresentation, or bad faith on your part.  

Can I access my VA loan benefit again after foreclosure?

To restore your full future benefit, you must repay the amount lost on your loan to the VA. When you attempt to use your VA loan again in the future, know that a foreclosure will not disqualify you on its own from getting approved for a loan. If a foreclosure happened more than two years from the date of closing, it can be disregarded by lenders, but if it happened within one or two years of closing, other criteria would have to be met.

Final Thoughts

VA loan foreclosure and the circumstances surrounding it can be incredibly painful for veteran borrowers and their families. Sometimes, those circumstances are completely out of your control. If you are struggling to make your mortgage payments, do not hesitate to work with your loan servicer to determine your options. You can reach out to the VA for additional guidance, too.