A VA partial claim is a zero-interest loan from the Department of Veterans Affairs that pays your servicer, in one lump sum, the full amount needed to bring a VA-guaranteed mortgage current after a period of missed payments. The advance becomes a second lien on your home, carries no monthly payment, and is not repaid until you sell, refinance, or pay off the first mortgage.1Congress.gov. S.1921 – Veterans Housing Stability Act of 2025 The amount is capped at 25 percent of your unpaid principal balance in most cases. Your original loan terms, interest rate, and monthly payment stay exactly the same.
What the Partial Claim Pays For
When the VA approves the claim, it wires money directly to your loan servicer to cover the reinstatement amount. Your first mortgage returns to current status immediately, and you go back to making your regular monthly payment as if you never fell behind. A partial claim is not a loan modification. It does not touch your rate, your term, or your payment.
The reinstatement figure includes every missed payment of principal and interest, plus any escrow shortfalls for property taxes and homeowners insurance that piled up during the delinquency.2Federal Register. Loan Guaranty COVID-19 Veterans Assistance Partial Claim Payment Program It is calculated as though you had paid on time, so no extra interest is added.
It does not include late fees, insufficient-funds charges, or homeowner association dues that were not already part of your regular monthly payment.3Veterans Benefits Administration. VA Servicer Handbook M26-4 Chapter 22 VA Partial Claims Draft Late fees charged during the delinquency get waived rather than rolled into the new lien.
The 25 Percent Cap
The partial claim cannot exceed 25 percent of your loan’s unpaid principal balance on the date the claim is made. Two situations raise the ceiling to 30 percent: borrowers who were already delinquent when the Veterans Housing Stability Act of 2025 took effect, and borrowers affected by a major disaster declared by the President under the Stafford Act.1Congress.gov. S.1921 – Veterans Housing Stability Act of 2025 If your arrearage is larger than the cap, the partial claim alone cannot cure the default, and your servicer will need to look at other options.
Who Qualifies
A partial claim is aimed at borrowers who had a temporary hardship and have recovered. To be eligible, you generally need to meet all of the following:
- Your mortgage is guaranteed by the VA. Conventional, FHA, and USDA loans have their own loss mitigation programs.
- The home is your primary residence. Investment properties and second homes are out.
- The event that caused you to fall behind is resolved or on a clear path to being resolved.
- You can resume your full regular payment immediately once the arrears are cleared.
- Your total past-due amount fits within the 25 percent cap (or 30 percent, if an exception applies).
If your income has permanently dropped and you cannot sustain the payment going forward, the partial claim is not the right tool. Your servicer should evaluate you for a loan modification or another option instead.
Where It Fits in the Servicer’s Options
Servicers cannot go straight to a partial claim. The VA requires them to work through a mandatory sequence called the loss mitigation waterfall, and the partial claim sits at Step 7.4Veterans Benefits Administration. VA Servicer Handbook M26-4 Chapter 5 Loss Mitigation Draft Earlier steps include repayment plans, special forbearance, and loan modifications. The idea is to try simpler fixes first. If a repayment plan can get you caught up, there is no need to attach a second lien to your home. Your loan generally needs to be at least three full months past due before the servicer can consider options at Step 6 and beyond.
Short sales and deeds in lieu of foreclosure sit further down the waterfall, for borrowers who cannot keep the house.5Veterans Affairs. VA Help To Avoid Foreclosure The partial claim exists specifically to help you keep it.
How to Apply
Call your servicer as soon as you know a payment will be missed. Do not wait for the delinquency notice. If your loan reaches 61 days past due, the VA automatically assigns a loan technician to the account, but acting earlier gives you more room. You can also reach the VA directly at 877-827-3702.6Veterans Affairs. VA Help To Avoid Foreclosure
Documentation
The current process is designed to be light on paperwork. Servicers are prohibited from demanding financials the VA has not asked for, and most reviews consist of the servicer asking a series of questions and matching your answers to the right waterfall step.4Veterans Benefits Administration. VA Servicer Handbook M26-4 Chapter 5 Loss Mitigation Draft
There is one exception. If the servicer has already offered you three or more waterfall options that did not work out, additional documentation is required before anything new can be offered. Expect to provide income verification, a household expense summary, and an explanation of how your circumstances have changed.4Veterans Benefits Administration. VA Servicer Handbook M26-4 Chapter 5 Loss Mitigation Draft
Deadlines and Foreclosure Protection
Federal rules under Regulation X give your servicer firm deadlines once you submit a loss mitigation application. It must acknowledge receipt within five business days and tell you whether the application is complete. Once complete, it has 30 days to evaluate you for every available option and send a written determination.7eCFR. 12 CFR 1024.41 – Loss Mitigation Procedures
The same rules protect you from dual tracking. Foreclosure cannot start until your loan is more than 120 days delinquent, and if you submit a complete application before foreclosure is filed, the servicer must pause until it finishes evaluating you. Even after proceedings have begun, filing a complete application more than 37 days before a scheduled sale blocks the sale from going through.7eCFR. 12 CFR 1024.41 – Loss Mitigation Procedures
Trial Payment Plan
Before the partial claim is finalized, the servicer may ask you to complete a trial payment plan, making your regular monthly payment for a set number of months to prove you can sustain it. Successful completion clears the way for the servicer to submit the partial claim to the VA and for you to sign the documents creating the junior lien.4Veterans Benefits Administration. VA Servicer Handbook M26-4 Chapter 5 Loss Mitigation Draft Missing a trial payment can disqualify you and push you further down the waterfall.
How and When You Repay It
The partial claim lien is unusually borrower-friendly. Zero interest. No monthly payment. No amortization. You owe exactly what the VA advanced, and you can pay it down voluntarily at any time without penalty.2Federal Register. Loan Guaranty COVID-19 Veterans Assistance Partial Claim Payment Program
The full balance comes due when any of these happen:
- You sell the home. The partial claim is paid from sale proceeds at closing, and the servicer will not release the lien until the VA is repaid.
- You refinance. Replacing your first mortgage triggers full repayment through the new loan’s closing.
- You pay off the first mortgage, whether by reaching the end of the term or through a lump-sum payoff.
- The home goes to foreclosure sale. The outstanding balance is included in the total indebtedness and recovered from sale proceeds to the extent possible.3Veterans Benefits Administration. VA Servicer Handbook M26-4 Chapter 22 VA Partial Claims Draft
Taxes, Entitlement, and Credit
Receiving a partial claim is not a taxable event. The VA is lending you money, not forgiving debt or issuing a grant, and loans are not income. No Form 1099-C should be issued when the claim is created. IRS Publication 525 also confirms that veterans’ benefits paid under laws administered by the VA are excluded from gross income.8Internal Revenue Service. Publication 525, Taxable and Nontaxable Income
A partial claim does not reduce the guaranty percentage on your current loan and does not consume the VA entitlement you would use for a future home purchase.9Department of Veterans Affairs. COVID-19 Veterans Assistance Partial Claim Payment Program That is a real difference from a short sale or deed in lieu of foreclosure, both of which can reduce or eliminate your future VA home loan benefit.5Veterans Affairs. VA Help To Avoid Foreclosure
The missed payments that led to the claim will still show on your credit report. The partial claim cures the default, but it does not erase the delinquency history. How much your score is affected depends on how many payments you missed and how quickly you got back to current. If you plan to apply for other credit soon, expect to explain the gap.
How Long the Program Will Last
The current statutory partial claim was authorized for five years under the VA Home Loan Program Reform Act.10Congress.gov. H.R.1815 – VA Home Loan Program Reform Act It replaced both the temporary COVID-era partial claim program and the VA Servicing Purchase program, which the VA stopped accepting as of May 1, 2025.11Veterans Benefits Administration. VA Circular 26-25-02 Partial claims issued under the earlier COVID-era program remain in effect under their original terms.12Veterans Benefits Administration. VA Circular 26-25-09 Whether Congress renews the authority before the five-year window closes is an open question. For now, the program is active for eligible borrowers with VA-guaranteed loans who need to get current after a temporary setback.