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The Department of Veterans Affairs is proposing a temporary partial claims program to help borrowers exit forbearance tied to the coronavirus. The VA said the program will help provide a “soft landing” for mortgagors while reducing the financial burden on servicers that are required to make MBS payments to Ginnie Mae bondholders.

Under the proposal, the VA would act as a mortgage investor of last resort by purchasing the amount of indebtedness necessary to bring a borrower’s loan current following forbearance. The borrower would have up to five years to defer repayment to VA and up to10 years to repay the new loan in full, with the interest rate fixed at 1% per year.

The proposal is modeled after a similar program for FHA mortgages. However, while the FHA provides payment to the servicer for up to 30% of the unpaid principal balance at the time of initial default, VA’s proposed program would only pay the servicer up to 15% of the unpaid principal balance of the guaranteed loan as of the date the borrower entered forbearance.

The proposal is scheduled to be published in the Federal Register on Wednesday. It was first mentioned in November by Jeffrey London, director of the loan guaranty service at the VA.