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

By Chris Arnold, Robert Benincasa
jessicadewell.com
Updated Thursday, November 16, 2023 • 9:53 AM EST

Heard on Morning Edition

Becky Queen remembers opening the letter with the foreclosure notification.

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

Queen resides on a little farm in rural Oklahoma with her other half, 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 put this family on the verge of losing their house.

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

Like millions of other Americans, the Queens made the most of what's called a COVID mortgage forbearance, which allowed homeowners to avoid mortgage payments. It was set up by Congress after the pandemic hit for people 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 way to repair the problem, for numerous it could be far too late.

After NPR initially released this story, a group of four U.S. Senators sent out 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 begun in September of 2021, when Becky's mom died of COVID-19. She needed to take a prolonged leave from work and lost her job.

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

"I very particularly 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 transferred to the back end of their loan term so they could simply begin making their normal 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 allowed homeowners to do that. This took place despite the fact that the mortgage market, housing advocates and veterans groups all cautioned the VA not to end the program, stating thousands of homeowners needed to catch up on missed payments. Rate of interest had increased so much that numerous could not pay for to refinance or return on track any other way.

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

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

The Queens say they attempted 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 says they were told they required to come up with more than $22,000, which they do not have, or either offer their house or get foreclosed on.

Their mortgage servicing business, Mr. Cooper, said in a statement it "explored every possible opportunity to resolve a solution for this client." But it stated the VA needs better loss-mitigation options and referred NPR to a letter from supporters, market and veteran groups prompting the VA to restart the PCP program.

The VA "has really let individuals down"

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

"The house owners entered into COVID forbearances, they were ensured pledges, and there were certain representations that were made," says Kelly. "And the VA essentially pulled the rug out from under everybody."

For some homeowners, ending the program might not imply foreclosure, however it still indicates a monetary difficulty.

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

"For the majority of 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 property owners can't pay for such a big boost in their month-to-month payment.

According to the data company ICE Mortgage Technology, 6,000 property owners with VA loans who had COVID forbearances are presently in the foreclosure procedure. And 34,000 more are delinquent.

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

But homeowners with VA loans do not, since the VA ended that program. So veterans are being treated even worse than many other house owners, Kelly stated.

"Service members remain 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 might be 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 particular program throughout COVID," says 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 fact, have the authority to extend the program. But in any case, it ended it.

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

NPR has learned that the VA is dealing with a new program to change the old one. It will work in a different way however to similar impact, 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 wish for a number of those 6,000 VA property owners already in the foreclosure process. Not to mention the many more who are delinquent.

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 far too late?

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

"There need to be a pause on foreclosures," says Steve Sharpe, a senior attorney at the National Consumer Law Center. "Veterans must truly have the ability to have a capability to gain access to this program when it comes online since it's been so long considering that they have actually had something that will truly work.

Sharpe says the VA could also restart the PCP program that it closed down. "They have the authority to do both," he says.

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

"Let us keep paying towards our routine mortgage in between now and then," he states. "Then as soon as the VA has actually that repaired we can return and attend to the situation. That appears like the adult, fully grown thing to do, not put a family through hell."

NPR repeated Ray Queen's plea to John Bell at the VA directly. Bell said the VA is "exploring all choices at this moment in time."

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

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

"Without this pause, countless veterans and servicemembers might 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 ever the intent of ."

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 eligible for VA's 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 till the brand-new program can use them a method to get current on their mortgages. Because if the firetruck shows up after the house has burned down, it's not going to do much excellent for the thousands of veterans and service members who need aid now.

Transcript

LEILA FADEL, HOST: An NPR investigation has discovered that countless 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 working on a repair. But it might 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 home, he states that he was injured by an improvised explosive gadget, or IED.RAY QUEEN: And simply so you're mindful, I have mental retardation from my time in Iraq. So there's a lot of various things that do not work the method they're expected to anymore. And my memory is not great.ARNOLD: For decades, the federal government's helped veterans like Queen to buy homes through its VA loan program. Today the VA has actually put this family on the brink of losing their house.B QUEEN: This is the letter that my husband and I received yesterday specifying that they're starting foreclosure proceedings.ARNOLD: What's happening is that like countless other Americans, the Queens took advantage of what's called a COVID mortgage forbearance. It was established by Congress after the pandemic hit for people who lost income. When Becky's mama passed away of COVID, she needed to take an extended leave from work and lost her job. In 2015, the couple says their mortgage business informed them that they could skip 6 months of payments while they returned on their feet and then just start paying their mortgage again.B QUEEN: I really 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 move to the back end of their loan term so they might resume their typical mortgage payment. But that is not how it exercised, due to the fact that a year ago in October, the Department of Veterans Affairs ended the program that made it possible for property owners to do that, although housing advocates and the mortgage market and veterans groups all warned them not to end the program since thousands of house owners needed to capture up on missed out on payments. Rates of interest, too, had actually risen so much that numerous could not manage to re-finance or return on track any other way. Ray Queen states no one informed him about any of this.R QUEEN: How does that happen? This is expected to be a program that y' all need to assist people in times of crisis so you don't take their house from them.ARNOLD: The couple states in September, they were informed that they required to come up with a huge payment - upwards of $22,000, which they don't have - or sell their house 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 people 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 homeowners entered into COVID forbearances. They were ensured pledges, and the VA essentially pulled the rug out from under everybody.ARNOLD: Kelly states for the majority of other property owners in America, there are still ways to move your missed 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 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, remain in their homes.ARNOLD: For its part, the Department of Veterans Affairs states it had no option however to end the program. John Bell directs 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 actually have the authority to extend the program. Now, however, NPR has found out that the VA is working on a brand-new program to change the old one, however that's still 4 or 5 months away - too wish for a number of the 6,000 homeowners with VA loans who are 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 states the VA is, quote, "thinking about all alternatives."BELL: We owe it to our veterans to ensure that we're providing every chance to be able to remain 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 truck shows up after your house burns down, it's not going to do much helpful for the thousands of veterans who require aid now.Chris Arnold, NPR News.
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