H.R. 1815, VA Home Loan Program Reform Act

Bill Summary

H.R. 1815 would temporarily increase the amounts authorized for the Grant and Per Diem Program through which The Department of Veterans Affairs (VA) awards funding to organizations to provide transitional housing for veterans. The bill also would establish a Partial Claim Program through which VA would pay lenders amounts to prevent foreclosure on guaranteed loans that are delinquent or in default.

Estimated Federal Cost

The estimated budgetary effects of H.R. 1815 are shown in Table 1. The bill would decrease net direct spending by $147 million and increase spending subject to appropriation by $146 million over the 2025-2035 period. The costs of the legislation fall within budget function 700 (veterans benefits and services).

Basis of Estimate

For this estimate, CBO assumes that H.R. 1815 will be enacted in fiscal year 2025 and that provisions will take effect upon or soon after enactment. CBO also estimates that outlays will follow historical spending patterns for affected programs.

Provisions That Affect Spending Subject to Appropriation and Direct Spending

Section 5 would temporarily increase the amounts authorized for the Grant and Per Diem Program through which VA pays a daily rate to public and nonprofit entities that provide housing and supportive services to homeless veterans.

Current law limits the total amount that VA can award for those grants to $258 million each year; section 5 would raise that limit to $344 million for 2025 and 2026. Using information on past grant payments and historical spending patterns, CBO estimates that the amounts paid for grants would increase by a total of $169 million over the 2025-2035 period.

Some of the homeless veterans who would obtain services under section 5 would be veterans who have been exposed to environmental hazards; thus, CBO expects that some of the costs of implementing the bill would be paid from the Toxic Exposures Fund (TEF) established by Public Law 117-168, the Honoring our PACT Act. The TEF is a mandatory appropriation that VA uses to pay for health care, disability claims processing, medical research, and information technology modernization that benefit veterans who were exposed to environmental hazards. Additional spending from the TEF occurs if legislation increases the costs of similar activities that benefit veterans with such exposure. Thus, in addition to increasing spending subject to appropriation, enacting section 5 would increase amounts paid from the TEF, which are classified as direct spending.

CBO projects that the proportion of costs paid by the TEF will grow over time based on the amount of formerly discretionary appropriations that CBO expects will be provided through the mandatory appropriation as specified in the Honoring our PACT Act.[1] CBO estimates that over the 2025-2035 period, implementing section 5 would increase outlays for spending subject to appropriation by $146 million and direct spending by $23 million.

Direct Spending

The discussion above in “Provisions That Affect Spending Subject to Appropriation and Direct Spending” describes the increased authorizations for the Grant and Per Diem Program that would increase direct spending from the TEF under section 5. Section 3 of the bill would establish a Partial Claim Program described below, which would decrease direct spending. In total, the bill would decrease net direct spending outlays by $147 million over the 2025‑2035 period (see Table 2).

Partial Claim Program.VA provides loan guarantees to lenders that allow eligible borrowers to obtain better loan terms—such as lower interest rates or smaller down payments—to purchase, construct, improve, or refinance a home. VA typically pays lenders up to 25 percent of the outstanding mortgage balance if a borrower’s home is foreclosed upon. Those payments, net of fees paid by borrowers and recoveries by lenders, constitute the subsidy cost for the loan guarantees.^[2] Such costs are paid from mandatory appropriations and, thus, are reflected in the budget as direct spending.

Section 3 would establish a Partial Claim Program through which VA would pay lenders amounts to prevent foreclosure on guaranteed loans that are in or at risk of default. That amount would cover a portion of indebtedness sufficient to prevent or resolve the default, not to exceed 25 percent of the outstanding mortgage balance (or 30 percent if the borrower became delinquent before May 1, 2025). The partial claim payment would be classified as a direct loan from VA to the delinquent borrower. Those direct loans would be secured by a government lien on the property and would not accrue interest. The bill would authorize one partial claim on a loan guaranteed by the department, unless subsequent delinquencies occur within 120 days following a major disaster declared by the President. A partial claim would not reduce the amount of VA’s guarantee on the existing loan. The authority for the program would expire five years after the enactment of H.R. 1815. In CBO’s estimation, that program also would reduce costs of the loan guarantees the VA provides.

Using its projection of loan volume based on data provided by VA, CBO expects that VA will pay roughly 12,200 partial claims on behalf of borrowers at an average amount of $27,200 over the course of the program. In addition, CBO estimates that some of those loans would not be repaid by the borrowers. The combination of defaults and lack of interest income result in a subsidy rate of 37 percent and total subsidy costs of $124 million over the 2025-2035 period, CBO estimates.

Other Loan Effects. In addition to the costs described above, CBO expects that the partial claims payments under section 3 would reduce the number of foreclosures on guaranteed loans. As a result, they would reduce the net amount that VA pays related to defaults on those guaranteed loans by an estimated $294 million over the 2025-2035 period.

Taken together, CBO estimates that enacting section 3 would decrease net direct spending by $170 million over the 2025-2035 period.

Spending Subject to Appropriation

The discussion above in “Provisions That Affect Spending Subject to Appropriation and Direct Spending” describes the increased authorizations for the Grant and Per Diem Program that would increase spending subject to appropriation under section 5, totaling $146 million over the 2025-2035 period (see Table 3).

Pay-As-You-Go Considerations

The Statutory Pay-As-You-Go Act of 2010 establishes budget-reporting and enforcement procedures for legislation affecting direct spending or revenues. The net changes in outlays that are subject to those pay-as-you-go procedures are shown in Table 2.

Increase in Long-Term Net Direct Spending and Deficits

CBO estimates that enacting H.R. 1815 would not increase net direct spending or on-budget deficits in any of the four consecutive 10-year periods beginning in 2036.

Mandates

H.R. 1815 contains an intergovernmental and private-sector mandate, as defined in the Unfunded Mandates Reform Act (UMRA). By not allowing judicial review of the Department of Veterans Affairs decision to obtain secured interest in a veteran’s defaulted home loan, the bill would eliminate an existing right of action for any public or private entity that would otherwise be able to seek judicial review. There is no cost associated with this mandate because judicial review does not result in monetary damages; the cost is therefore well below the thresholds established in UMRA for intergovernmental and private-sector mandates ($103 million and $206 million in 2025, respectively, adjusted annually for inflation).

Federal Costs: Paul B.A. Holland

Mandates: Grace Watson

Estimate Reviewed By

David Newman
Chief, Defense, International Affairs, and Veterans’ Affairs Cost Estimates Unit

Kathleen FitzGerald
Chief, Public and Private Mandates Unit

Christina Hawley Anthony
Deputy Director of Budget Analysis