The statute and the guidance
The VA Partial Claim Program rests on the VA Home Loan Program Reform Act, enacted as Public Law 119-31 on July 30, 2025 and codified at 38 U.S.C. § 3737. The Department of Veterans Affairs implemented it through transmittals to its servicer handbook, VA Manual M26-4, dated June 1, 2026, which added a new Chapter 22 on partial claims and revised the loss mitigation waterfall in Chapter 5.
It is worth being precise about the legal form: the VA implemented the 2026 program through handbook transmittals under its statutory authority rather than through notice-and-comment rulemaking, so there is no Federal Register rule number for it, unlike the COVID-era partial claim program which was issued as a regulation.
The VA announced the launch on June 15, 2026 and began accepting trial payment plan submissions from that date. Servicers were given 180 days from June 1 to implement, making November 28, 2026 the full compliance deadline.
How the mechanism works, and what it caps
Under the statute, the VA purchases a portion of the indebtedness on a defaulted VA-guaranteed loan and secures it with a subordinate lien on the property. The partial claim amount may not exceed 25 percent of the unpaid principal balance on the date the claim is made. Borrowers who missed a payment between March 1, 2020 and May 1, 2025 — the COVID-era hardship carve-out written into the statute — face a 30 percent cap instead.
Only one partial claim per loan is generally permitted. The VA charges no interest on the advanced amount, and repayment is triggered when the loan is paid in full, refinanced, or the property is sold.
Operationally the sequence runs: a three-month trial payment plan, then the servicer advances the arrears to bring the loan current, then the VA reimburses the servicer.
Why a partial claim suits this rate environment
A loan modification changes the terms of the existing mortgage — rate, term or principal balance — to produce an affordable payment. With market rates well above what most existing borrowers hold, modification can raise the interest rate on the entire balance, which works poorly for a borrower whose original loan is cheap.
A partial claim does the opposite. The arrears move into a separate subordinate obligation owed to the government and the original mortgage continues untouched at its original rate.
Analysis: that structure is well matched to the current market precisely because so many borrowers hold below-market first mortgages. A veteran who fell behind after a job loss, but whose existing payment remains affordable, needs the arrears removed rather than the loan repriced. The 25 percent cap defines the limit of that repair — a borrower whose arrears exceed a quarter of the balance is beyond what this tool can fix.
One provision dropped, and what is not yet known
Trade reporting on the final policy notes that the VA removed a proposed provision that would have allowed a loan modification tied to a partial claim to increase a borrower's monthly payment by up to 15 percent, following industry objection.
Implementation across the servicing industry has been staged rather than simultaneous. LoanCare, a national subservicer, said on September 17, 2026 that it had completed its preparations ahead of the deadline. A single servicer's readiness statement is a company claim about itself and indicates nothing about the rest of the market.
No outcome data exists yet. Take-up, completion rates for the three-month trial, and foreclosures averted will not be measurable until well into 2027. The VA's servicer FAQ page remains the operative public reference for eligibility questions in the interim.