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

By Chris Arnold, Robert Benincasa
wikipedia.org
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 spouse, Ray, and their two young kids. Ray is a U.S. Army veteran who was wounded in Iraq. Since the 1940s, the federal government has assisted veterans like him purchase homes through its VA loan program, run by the Department of Veterans Affairs.

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

"I didn't do anything wrong," says Ray Queen. "The only thing I did was trust a business that I'm expected to trust with my mortgage."

Like millions of other Americans, the Queens took advantage of what's called a COVID mortgage forbearance, which enabled property owners to skip mortgage payments. It was set up by Congress after the pandemic hit for individuals who lost earnings.

But an NPR investigation has discovered that countless veterans who took a forbearance are now at risk of losing their homes through no fault of their own. And while the VA is dealing with a method to repair the problem, for many it could be far too late.

After NPR at first published this story, a group of 4 U.S. Senators sent out a letter to the VA asking it to instantly 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 mother died of COVID-19. She had to take an extended leave from work and lost her task.

So last year, with their savings diminishing, the couple states they called the business that manages their mortgage, Mr. Cooper, and were told they might skip six months of payments. And once they returned on their feet and could begin paying once again, the couple states they were told, they would not owe the missed out on payments in a huge lump amount.

"I extremely specifically asked 'how does this work?'" says Becky Queen. "They stated 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 relocated to the back end of their loan term so they might just begin making their typical mortgage payment once again.

But that's not how it exercised.

In October 2022, the Department of Veterans Affairs ended the so-called Partial Claim Payment program, or PCP, that enabled homeowners to do that. This took place despite the fact that the mortgage market, housing advocates and veterans groups all alerted the VA not to end the program, saying countless homeowners required to catch up on missed payments. Rate of interest had risen a lot that lots of could not manage to refinance or get back on track any other way.

Ray Queen states no one informed him about any of this.

"How does that occur?" Queen asked. "This is supposed to be a program that you all have to assist people in times of crisis, so you do not take their house from them."

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

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

Their mortgage servicing business, Mr. Cooper, stated in a declaration it "explored every possible opportunity to resolve a solution for this customer." But it stated the VA needs much better loss-mitigation alternatives and referred NPR to a letter from advocates, industry and veteran groups urging the VA to reboot the PCP program.

The VA "has actually let individuals down"

"The Department of Veterans Affairs has actually let individuals down," says Kristi Kelly, a consumer attorney in Virginia who says she is speaking with a great deal of other veterans in the same situation as Ray and Becky Queen.

"The homeowners participated in COVID forbearances, they were made specific promises, and there were certain representations that were made," states Kelly. "And the VA essentially pulled the rug out from under everybody."

For some homeowners, ending the program may not imply foreclosure, but it still means a financial difficulty.

"A number of these individuals have 2 or 3% rate of interest loans," Kelly states. With the PCP program they might keep that rate of interest. But now, she says, the only way they'll have the ability to conserve their home is to get in into a loan modification where the rates of interest will be around today's market rate of 7.5%.

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

Many property owners can't manage such a huge boost in their regular monthly payment.

According to the data firm ICE Mortgage Technology, 6,000 house owners with VA loans who had actually COVID forbearances are presently in the foreclosure process. And 34,000 more are overdue.

Kelly says most other house owners in America - people with FHA loans, for circumstances, or loans backed by Fannie Mae and Freddie Mac - still have ways to avoid foreclosure by moving missed payments to the back of the loan term.

But property owners with VA loans do not, due to the fact that the VA ended that program. So veterans are being treated worse than a lot of other homeowners, Kelly stated.

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

VA has a plan to assist, but it could be far too late

The Department of Veterans Affairs says it had no choice however to end the program.

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

Some in the market 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 learned that the VA is dealing with a brand-new program to change the old one. It will operate in a various method but to similar effect, to conserve people from foreclosure. Bell states it's going to take 4 to 5 months to get it up and running.

That's too long for much of those 6,000 VA property owners currently in the foreclosure procedure. Not to mention the many more who are overdue.

Already, data reveals that more VA property owners have been heading into foreclosure because 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 far too late?

With so many house owners at threat, there's growing pressure on the VA to stop on veterans up until it gets its fix up and running.

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

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

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

"Let us keep paying towards our routine mortgage between once in a while," he says. "Then as soon as the VA has that fixed we can come back and resolve the situation. That appears 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 said the VA is "checking out all options at this point in time."

"We owe it to our veterans to make sure that we're offering them every opportunity to be able to stay in the home," Bell stated.

Wednesday, a group of U.S. Senators sent out a letter to the VA advising them to put a hold on anymore foreclosures.

"Without this pause, countless veterans and servicemembers could needlessly lose their homes," Sens. Sherrod Brown, Jon Tester, Jack Reed, and Tim Kaine, all Democrats, composed 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 pause on all VA loan foreclosures where customers are likely to be qualified for VA's brand-new ... program till it is readily available and debtors can be assessed to see if they qualify."

Ray and Becky Queen are hoping the VA does let individuals keep their homes until the new program can use them a method to get present on their mortgages. Because if the firetruck shows up after your home has actually burned down, it's not going to do much great for the countless veterans and service members who require assistance now.

Transcript

LEILA FADEL, HOST: An NPR examination 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 2 young kids. Ray served in Iraq in the Army. Inside their home, he says that he was injured by an improvised explosive gadget, or IED.RAY QUEEN: And simply so you're aware, I have mental retardation from my time in Iraq. So there's a great deal of different things that do not work the way they're supposed to any longer. And my memory is not great.ARNOLD: For decades, the federal government's assisted veterans like Queen to purchase homes through its VA loan program. And now the VA has actually put this household on the brink of losing their house.B QUEEN: This is the letter that my husband and I received the other day mentioning 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 established by Congress after the pandemic hit for people who lost income. When Becky's mommy passed away of COVID, she had to take a prolonged leave from work and lost her job. Last year, the couple states their mortgage business informed them that they could skip 6 months of payments while they got back on their feet and then just start paying their mortgage again.B QUEEN: I extremely particularly asked, how does this work? And they stated, we're taking all of your payments. We're bundling them, and we're putting them at the end.ARNOLD: That is, the missed payments would transfer to the back end of their loan term so they could resume their regular mortgage payment. But that is not how it worked out, because a year ago in October, the Department of Veterans Affairs ended the program that made it possible for property owners to do that, even though housing advocates and the mortgage industry and veterans groups all warned them not to end the program due to the fact that countless property owners needed to capture up on missed payments. Interest rates, too, had risen a lot that lots of could not pay for to re-finance or get back on track any other method. Ray Queen states nobody told him about any of this.R QUEEN: How does that occur? This is expected to be a program that y' all need to assist people in times of crisis so you don't take their home from them.ARNOLD: The couple says in September, they were told that they needed to come up with a big payment - upwards of $22,000, which they don't 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 consumer lawyer in Virginia who's hearing from a great deal of veterans who are in the exact same boat.KELLY: The homeowners participated in COVID forbearances. They were made sure guarantees, and the VA basically pulled the carpet out from under everybody.ARNOLD: Kelly states for most other property owners in America, there are still methods to move your missed out on 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 says veterans are being dealt with worse than many 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 option but 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 think the VA did in fact have the authority to extend the program. Now, though, NPR has actually discovered that the VA is working on a brand-new program to change the old one, but that's still 4 or five months away - too long for a number of the 6,000 house owners with VA loans who are in the foreclosure procedure. Not to point out there's 34,000 more who were delinquent. Right now there's pressure on the VA to put a time out on foreclosures while it gets that program running. John Bell states the VA is, quote, "thinking about all alternatives."BELL: We owe it to our veterans to make sure that we're providing every chance to be able to stay in the home.ARNOLD: Ray and Becky Queen are hoping that the VA does put a pause on foreclosures, due to the fact that if the fire engine reveals up after your home burns down, it's not going to do much excellent for the countless veterans who require assistance now.Chris Arnold, NPR News.
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