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Thousands of veterans deal with foreclosure and it's not their fault. The VA could assist

By Chris Arnold, Robert Benincasa

Updated Thursday, November 16, 2023 • 9:53 AM EST

Heard on Morning Edition

Becky Queen remembers opening the letter with the foreclosure notice.

"My heart dropped," she stated, "and my hands were shaking."

Queen survives on a little farm in rural Oklahoma with her husband, Ray, and their 2 young kids. Ray is a U.S. Army veteran who was wounded in Iraq. Since the 1940s, the federal government has actually assisted veterans like him buy homes through its VA loan program, run by the Department of Veterans Affairs.

Now the VA has actually put this household on the edge of losing their home.

"I didn't do anything incorrect," says Ray Queen. "The only thing I did was trust a company that I'm supposed to rely on with my mortgage."

Like countless other Americans, the Queens made the most of what's called a COVID mortgage forbearance, which permitted property owners to avoid mortgage payments. It was established by Congress after the pandemic hit for people who lost earnings.

But an NPR investigation has actually found that countless veterans who took a forbearance are now at danger of losing their homes through no fault of their own. And while the VA is working on a way to repair the issue, for numerous it might be too late.

After NPR initially released this story, a group of 4 U.S. Senators sent a letter to the VA asking it to immediately stop foreclosing on the homes of veterans and servicemembers. It's unclear if the VA will do that.

For the Queens, this all started in September of 2021, when Becky's mom died of COVID-19. She had to take a prolonged leave from work and lost her task.

So last year, with their cost savings decreasing, the couple states they called the company that manages their mortgage, Mr. Cooper, and were informed they could avoid 6 months of payments. And once they got back on their feet and might begin paying once again, the couple says they were informed, they wouldn't owe the missed payments in a big swelling sum.

"I very particularly asked 'how does this work?'" says Becky Queen. "They said we're taking all of your payments, we're bundling them, and we're putting them at the end."

That is, the missed payments would be moved to the back end of their loan term so they might simply start making their typical mortgage payment once again.

But that's not how it worked out.

In October 2022, the Department of Veterans Affairs ended the so-called Partial Claim Payment program, or PCP, that allowed house owners to do that. This took place although the mortgage market, housing supporters and veterans groups all cautioned the VA not to end the program, stating countless property owners needed to capture up on missed payments. Rates of interest had actually risen a lot that many could not manage to re-finance or return on track any other method.

Ray Queen states nobody informed him about any of this.

"How does that occur?" Queen asked. "This is expected to be a program that you all have to assist individuals in times of crisis, so you don't take their home from them."

The Queens say they tried to come off their forbearance in February of this year and resume paying their mortgage. They were both working again. But they faced delays with the mortgage company.

Then, in September, the couple says they were informed they required to come up with more than $22,000, which they don't have, or either offer their house or get foreclosed on.

Their mortgage servicing company, Mr. Cooper, said in a declaration it "explored every possible opportunity to overcome a service for this client." But it said the VA needs much better loss-mitigation alternatives and referred NPR to a letter from supporters, industry and veteran groups prompting the VA to restart the PCP program.

The VA "has actually let people down"

"The Department of Veterans Affairs has actually let individuals down," says Kristi Kelly, a consumer legal representative in Virginia who says she is speaking with a lot of other veterans in the very same circumstance as Ray and Becky Queen.

"The property owners participated in COVID forbearances, they were made certain guarantees, and there were particular representations that were made," states Kelly. "And the VA essentially pulled the carpet out from under everyone."

For some homeowners, ending the program might not indicate foreclosure, however it still means a monetary challenge.

"A lot of these individuals have 2 or 3% rate of interest loans," Kelly says. With the PCP program they could keep that interest rate. Now, she says, the only way they'll have the ability to conserve their home is to participate in a loan adjustment where the rates of interest will be around today's market rate of 7.5%.

"For the majority of people, their payments will increase by $600 or $700 a month, because the VA has chosen to end the partial claim program."

Many house owners can't pay for such a big increase in their monthly payment.

According to the information company ICE Mortgage Technology, 6,000 house owners with VA loans who had COVID forbearances are presently in the . And 34,000 more are overdue.

Kelly states most other property owners in America - individuals with FHA loans, for instance, or loans backed by Fannie Mae and Freddie Mac - still have ways to prevent foreclosure by moving missed out on payments to the back of the loan term.

But house owners with VA loans do not, because the VA ended that program. So veterans are being treated worse than the majority of other property owners, Kelly said.

"Service members are in a position where they're going to lose their home," she states. "And for many people, that's everything they work for - and all their wealth remains in their homes."

VA has a strategy to assist, however it could be far too late

The Department of Veterans Affairs states it had no choice but to end the program.

"We had a short-term authority for that specific program during COVID," states John Bell, executive director of the Veterans Benefits Administration's Loan Guaranty Service. "It wasn't part of our normal authority."

Some in the industry think the VA did, in truth, have the authority to extend the program. But in any case, it ended it.

Now, though, the VA is taking the circumstance seriously.

NPR has actually found out that the VA is working on a brand-new program to replace the old one. It will operate in a various way however to comparable impact, to save people from foreclosure. Bell says it's going to take four to five months to get it up and running.

That's too long for a lot of those 6,000 VA homeowners already in the foreclosure procedure. Not to discuss the many more who are overdue.

Already, information reveals that more VA homeowners have actually been heading into foreclosure since the VA ended its PCP program. The same is not real for FHA loans or loans backed by Fannie Mae or Freddie Mac.

Will the firetruck show up too late?

With a lot of homeowners at danger, there's growing pressure on the VA to stop foreclosing on veterans until it gets its repair up and running.

"There should be a time out on foreclosures," says Steve Sharpe, a senior lawyer at the National Consumer Law Center. "Veterans ought to truly be able to have an ability to access this program when it comes online since it's been so long considering that they've had something that will really work.

Sharpe states the VA might likewise restart the PCP program that it shut down. "They have the authority to do both," he says.

Pausing foreclosures sounds like a great concept to veteran Ray Queen in Oklahoma.

"Let us keep paying towards our regular mortgage in between from time to time," he says. "Then as soon as the VA has actually that fixed we can return and deal with the circumstance. That looks like the adult, mature thing to do, not put a household through hell."

NPR repeated Ray Queen's plea to John Bell at the VA directly. Bell stated the VA is "checking out all options at this moment in time."

"We owe it to our veterans to make sure that we're providing every chance to be able to remain in the home," Bell stated.

Wednesday, a group of U.S. Senators sent a letter to the VA prompting them to put a hang on anymore foreclosures.

"Without this pause, thousands of veterans and servicemembers might unnecessarily lose their homes," Sens. Sherrod Brown, Jon Tester, Jack Reed, and Tim Kaine, all Democrats, wrote in a letter to VA Secretary Denis McDonough. "This was never the intent of Congress."

Tester, of Montana, chairs the Veterans' Affairs Committee, and Brown, of Ohio, chairs the Banking Committee. They asked the VA "to execute an immediate time out on all VA loan foreclosures where debtors are likely to be eligible for VA's new ... program till it is available and borrowers can be assessed to see if they certify."

Ray and Becky Queen are hoping the VA does let people keep their homes till the brand-new program can use them a way to get present on their mortgages. Because if the firetruck reveals up after your house has actually burned down, it's not going to do much helpful for the thousands of veterans and service members who require assistance now.

Transcript

LEILA FADEL, HOST: An NPR investigation has discovered that countless U.S. military service members and veterans might lose their homes through no fault of their own. As NPR's Chris Arnold reports, the Department of Veterans Affairs is dealing with a fix. But it could be too late.CHRIS ARNOLD, BYLINE: Ray and Becky Queen are showing us around their farm in Bartlesville, Okla.BECKY QUEEN: This is Cagney and Lacey, our ducks.ARNOLD: The couple lives here with their two young kids. Ray served in Iraq in the Army. Inside their house, he says that he was wounded by an improvised explosive device, or IED.RAY QUEEN: And just so you know, I have brain damage from my time in Iraq. So there's a great deal of different things that do not work the method they're supposed to any longer. And my memory is not great.ARNOLD: For years, the federal government's assisted veterans like Queen to purchase homes through its VA loan program. And now the VA has actually put this family on the edge of losing their house.B QUEEN: This is the letter that my spouse and I got yesterday stating that they're starting foreclosure proceedings.ARNOLD: What's occurring is that like countless other Americans, the Queens benefited from what's called a COVID mortgage forbearance. It was set up by Congress after the pandemic hit for individuals who lost earnings. When Becky's mother died of COVID, she needed to take a prolonged leave from work and lost her job. Last year, the couple says their mortgage company informed them that they could skip six months of payments while they returned on their feet and after that just begin paying their mortgage again.B QUEEN: I really specifically asked, how does this work? And they said, we're taking all of your payments. We're bundling them, and we're putting them at the end.ARNOLD: That is, the missed out on payments would transfer to the back end of their loan term so they might resume their regular mortgage payment. But that is not how it worked out, since a year ago in October, the Department of Veterans Affairs ended the program that enabled property owners to do that, despite the fact that housing supporters and the mortgage market and veterans groups all warned them not to end the program because countless property owners needed to capture up on missed out on payments. Rate of interest, too, had actually increased so much that lots of could not pay for to re-finance or get back on track any other way. Ray Queen states nobody informed him about any of this.R QUEEN: How does that occur? This is supposed to be a program that y' all have to help individuals in times of crisis so you don't take their house from them.ARNOLD: The couple says in September, they were informed that they required to come up with a substantial payment - upwards of $22,000, which they do not have - or sell their home or get foreclosed on.B QUEEN: My heart dropped, and, like, my hands were shaking.KRISTI KELLY: The Department of Veterans Affairs has really let individuals down.ARNOLD: Kristi Kelly is a customer lawyer in Virginia who's hearing from a lot of veterans who remain in the same boat.KELLY: The house owners entered into COVID forbearances. They were made specific guarantees, and the VA essentially pulled the carpet out from under everybody.ARNOLD: Kelly states for most other homeowners in America, there are still methods to move your missed payments to the back of the loan term so you can prevent getting foreclosed on, but not if you have a VA loan. So she states veterans are being treated worse than most other homeowners.KELLY: Service members are going to lose their home, and for many people, that's everything they work for and all their wealth, are in their homes.ARNOLD: For its part, the Department of Veterans Affairs says it had no choice however to end the program. John Bell heads up the VA's home financing division.JOHN BELL: We had a short-term authority for that particular program during COVID.ARNOLD: Some in the industry believe the VA did really have the authority to extend the program. Now, though, NPR has found out that the VA is working on a new program to change the old one, however that's still four or 5 months away - too wish for much of the 6,000 homeowners with VA loans who remain in the foreclosure procedure. Not to mention there's 34,000 more who were overdue. Today there's pressure on the VA to put a pause on foreclosures while it gets that program running. John Bell says the VA is, quote, "thinking about all options."BELL: We owe it to our veterans to make certain that we're providing them every opportunity to be able to stay in the home.ARNOLD: Ray and Becky Queen are hoping that the VA does put a time out on foreclosures, since if the fire engine shows up after your home burns down, it's not going to do much excellent for the countless veterans who need assistance now.Chris Arnold, NPR News.
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