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

By Chris Arnold, Robert Benincasa

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

Heard on Morning Edition

Becky Queen keeps in mind opening the letter with the foreclosure notification.

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

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

But now the VA has put this household on the edge of losing their house.

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

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

But an NPR examination has actually 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 working on a method to repair the problem, for many it might be far too late.

After NPR at first released this story, a group of four U.S. Senators sent out a letter to the VA asking it to right away stop foreclosing on the homes of veterans and servicemembers. It's unclear if the VA will do that.

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

So in 2015, with their savings dwindling, the couple states they called the company that handles their mortgage, Mr. Cooper, and were told they could skip 6 months of payments. And once they returned on their feet and might begin paying once again, the couple says they were told, they would not owe the missed payments in a big swelling sum.
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"I extremely specifically asked 'how does this work?'" states 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 relocated to the back end of their loan term so they could simply start making their regular 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 made it possible for homeowners to do that. This happened despite the fact that the mortgage market, housing supporters and veterans groups all alerted the VA not to end the program, saying thousands of property owners needed to capture up on missed payments. Rates of interest had actually risen a lot that lots of could not pay for to re-finance or return on track any other way.

Ray Queen says nobody informed him about any of this.

"How does that take place?" Queen asked. "This is expected to be a program that you all have to help people 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 hold-ups 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 sell their home or get foreclosed on.

Their mortgage servicing business, Mr. Cooper, said in a statement it "checked out every possible avenue to overcome a solution for this consumer." But it stated the VA requires better loss-mitigation alternatives and referred NPR to a letter from supporters, market and veteran groups prompting the VA to reboot the PCP program.

The VA "has truly let people down"

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

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

For some property owners, ending the program might not indicate foreclosure, but it still implies a monetary challenge.

"Much of these people have 2 or 3% rates of interest loans," Kelly states. With the PCP program they might keep that rates of interest. Now, she states, the only way they'll be able to save 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 most individuals, their payments will increase by $600 or $700 a month, due to the fact that the VA has actually chosen to end the partial claim program."

Many homeowners can't manage such a substantial boost in their monthly payment.

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

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

But homeowners with VA loans don't, since the VA ended that program. So veterans are being treated worse than many other 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 plan to assist, but it could be 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 particular program throughout 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 market believe the VA did, in fact, have the authority to extend the program. But either method, it ended it.

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

NPR has found out that the VA is dealing with a brand-new program to change the old one. It will operate in a various way but to comparable impact, to conserve people from foreclosure. Bell states 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 delinquent.

Already, data shows that more VA house owners have been heading into foreclosure considering that the VA ended its PCP program. The same is not true for FHA loans or loans backed by Fannie Mae or Freddie Mac.

Will the firetruck show up too late?

With numerous property owners at danger, there's growing pressure on the VA to stop foreclosing on veterans till it gets its fix up and running.

"There must be a pause on foreclosures," says Steve Sharpe, a senior attorney at the National Consumer Law Center. "Veterans must actually have the ability 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 genuinely work.

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

Pausing foreclosures seems like an excellent idea to veteran Ray Queen in Oklahoma.

"Let us keep paying towards our regular mortgage in between once in a while," he says. "Then as soon as the VA has actually that repaired we can return and attend to the circumstance. That looks like the adult, fully grown thing to do, not put a household through hell."

NPR duplicated Ray Queen's plea to John Bell at the VA straight. Bell stated the VA is "exploring all choices 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 said.

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

"Without this time out, thousands of veterans and servicemembers could 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 implement an immediate time out on all VA loan foreclosures where customers are likely to be qualified for VA's new ... program until it is offered and debtors can be assessed to see if they qualify."

Ray and Becky Queen are hoping the VA does let individuals keep their homes till the new program can offer them a method to get existing on their mortgages. Because if the firetruck shows up after the house has actually burned down, it's not going to do much great for the thousands of veterans and service members who need aid now.

Transcript

LEILA FADEL, HOST: An NPR investigation has actually discovered that thousands of U.S. military service members and veterans could 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 might be too late.CHRIS ARNOLD, BYLINE: Ray and Becky Queen are revealing 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 states that he was injured by an improvised explosive gadget, or IED.RAY QUEEN: And so you know, I have mental retardation from my time in Iraq. So there's a lot of different things that do not work the way they're supposed to anymore. And my memory is not great.ARNOLD: For years, the federal government's helped veterans like Queen to purchase homes through its VA loan program. Today the VA has put this household on the verge of losing their house.B QUEEN: This is the letter that my partner and I got yesterday mentioning that they're beginning foreclosure proceedings.ARNOLD: What's occurring is that like countless other Americans, the Queens made the most of 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 had to take a prolonged leave from work and lost her job. Last year, the couple states their mortgage company told them that they could avoid six months of payments while they got back on their feet and after that simply begin paying their mortgage again.B QUEEN: I extremely specifically 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 out on payments would relocate 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 allowed property owners to do that, despite the fact that housing supporters and the mortgage industry and veterans groups all warned them not to end the program because thousands of house owners needed to catch up on missed out on payments. Rate of interest, too, had increased a lot that lots of could not afford to refinance or get back on track any other way. Ray Queen states no one informed 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 do not take their home from them.ARNOLD: The couple says in September, they were told that they needed to come up with a substantial payment - upwards of $22,000, which they don't have - or offer 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 truly let individuals down.ARNOLD: Kristi Kelly is a consumer attorney in Virginia who's hearing from a lot of veterans who are in the very same boat.KELLY: The house owners participated in COVID forbearances. They were ensured pledges, and the VA essentially pulled the rug out from under everybody.ARNOLD: Kelly states for a lot of other house 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, however not if you have a VA loan. So she says veterans are being treated worse than the majority of other homeowners.KELLY: Service members are going to lose their home, and for the majority of people, that's whatever they work for and all their wealth, are in their homes.ARNOLD: For its part, the Department of Veterans Affairs states it had no choice but to end the program. John Bell heads up the VA's home lending division.JOHN BELL: We had a short-term authority for that specific program throughout COVID.ARNOLD: Some in the industry think the VA did really have the authority to extend the program. Now, though, NPR has actually discovered that the VA is working on a brand-new program to replace the old one, however that's still four or 5 months away - too long for a lot of the 6,000 property owners with VA loans who remain in the foreclosure procedure. Not to point out 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, "considering all options."BELL: We owe it to our veterans to make certain that we're providing every opportunity to be able to remain in the home.ARNOLD: Ray and Becky Queen are hoping that the VA does put a time out on foreclosures, because if the fire truck reveals up after the house burns down, it's not going to do much helpful for the thousands of veterans who require assistance now.Chris Arnold, NPR News.