Veterans Housing Stability Act of 2025

This bill amends the U.S. Code to modify how the Department of Veterans Affairs (VA) administers housing loans to prevent or resolve defaults. It creates a new Partial Claim Program, adds civil penalties for false statements by loan holders, updates default procedures, and encourages a foreclosure moratorium until the new program is operational.

Sec. 2, Modification of administration of housing loans to prevent or resolve default: This section adds a new section 3723 to establish the Partial Claim Program. Under this program, the VA Secretary may buy a portion of a guaranteed loan's debt (a "partial claim") to prevent or resolve default. The borrower repays that portion without interest at loan maturity. The partial claim amount is capped at 25% of the unpaid principal balance, or 30% for borrowers delinquent when the bill was enacted or after a major disaster. The payment must first cover arrearages. The loan holder must apply the payment to arrearages and may be required to service the claim as the Secretary's agent. The Secretary sets compensation for the holder. If the borrower defaults on the partial claim, they are liable for the Secretary's loss, and their remaining loan guaranty entitlement is reduced until the partial claim is repaid. Foreclosure of the VA's lien follows state or local law. All decisions by the Secretary are final and not subject to judicial review. The Secretary may implement the program through administrative guidance for up to three years, with possible extension.

Sec. 2(b), Civil penalties: This adds a new section 3724. Any loan holder who knowingly and materially makes a false statement under the partial claim or default procedures is liable for a civil penalty equal to the greater of twice the Secretary's loss or another amount up to $27,894. The Secretary may also charge administrative costs, fees, and interest.

Sec. 2(c), Procedure on default: This amends section 3732 of title 38. It updates language, replacing "obligation" with "loan" or "housing loan." It expands the Secretary's authority to pay a holder to avoid foreclosure, require documents to secure the VA's interest or a repayment agreement, and require the holder to place the loan in forbearance. Decisions under this authority are final and not subject to judicial review. The Secretary must establish loss mitigation procedures, including a mandatory sequence of options for veterans.

Sec. 2(d), Foreclosure guidance: The VA Secretary must strongly encourage loan holders to implement a moratorium on foreclosures until the Partial Claim Program is fully operational.

Sec. 2(e), Clerical amendment: The table of sections for chapter 37 is updated to include the new sections 3723 and 3724.