"Let me be clear, VASP is a last resort option that may be available when it is the most appropriate home retention option under VA's home retention waterfall," Jacobs said.

Since the VA began backing home loans in 1944, it has helped active-duty troops, veterans and survivors purchase more than 28 million homes. Currently, more than 3.7 million veterans have a VA-guaranteed home loan, with the VA backing nearly 401,000 home loans in 2023 alone.

The department announced in November that it would ask mortgage service providers with VA-backed loans to pause foreclosures and extend a modification program instituted during the COVID-19 pandemic through the end of this year.

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The move followed a report by NPR that found veterans who used the COVID-19 Refund Modification program, which allowed them to defer their payments, were at risk of losing their homes after the VA ended a program it had in place that allowed them to make partial payments.

Instead, when the VA ended the Partial Claim Payment program, veterans and their families received bills from their mortgage companies for the total payments missed, facing large amounts of debt to either keep existing low-interest mortgages or refinancing under rates that rose significantly in 2023.

According to the NPR report, roughly 6,000 VA homeowners were in the foreclosure process at the time, while another 34,000 were delinquent.

VASP will allow the department to purchase defaulted VA loans from mortgage companies, modify them, and then put them in the VA's direct loan portfolio.

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"This new program will help more than 40,000 veterans and their families stay in their homes, and there's nothing more important than that," VA Secretary Denis McDonough said in a release Wednesday.

Most loans described as "VA home loans" are VA-backed loans, in which the department guarantees a portion of the loan, ensuring that if a veteran homeowner goes into foreclosure, the lender will recoup some or all of its losses.

The VA has a number of programs to help veterans who need assistance in covering payments. In addition to asking mortgage services to pause foreclosures, it extended its COVID Refund Modification program that helped veterans obtain a second mortgage at 0% interest and modified existing loans to ensure that payments were affordable.

The VA also provides counseling and other types of assistance for homeowners.

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Veterans will not apply directly to the program, which will begin on May 31. Instead, mortgage holders will identify borrowers in need and submit requests for the program on behalf of the veterans, VA officials said.

VA officials stressed that the program is only for those "facing seriously delinquent and serious default situations."

"If you are not in default, this program is not for you. You have to be in default and you have to be in default a certain amount of time," said John Bell, executive director for the home loan guarantee program at the VA.

Veterans who do not qualify but are facing financial hardship should work with their mortgage services to explore other options, officials said.

According to Jacobs, the new program is projected to be "net revenue positive" for the federal government, resulting in a benefits reduction of $1.5 billion over 10 years. That's because the savings associated with foreclosure outweighs the cost of purchasing the loans, he said.

In 2023, the VA helped 145,000 veterans avoid foreclosure and stay in their homes, according to the department.

VA officials said any veteran struggling with making their mortgage payments should check out the department's housing assistance website or call 877-827-3702.