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 keeps in mind opening the letter with the foreclosure notification.

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

Queen lives on a little farm in rural Oklahoma with her husband, Ray, and their two 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.

Today the VA has actually put this household on the verge of losing their home.

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

Like countless other Americans, the Queens benefited from what's called a COVID mortgage forbearance, which permitted house owners to skip mortgage payments. It was set up by Congress after the pandemic hit for individuals who lost income.

But an NPR investigation has found that thousands of veterans who took a forbearance are now at threat of losing their homes through no fault of their own. And while the VA is dealing with a method to repair the issue, for lots of it might 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 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 job.

So in 2015, with their cost savings diminishing, the couple says they called the business that handles their mortgage, Mr. Cooper, and were told they might avoid six months of payments. And once they returned on their feet and might begin paying again, the couple says they were informed, they wouldn't owe the missed out on payments in a huge lump amount.

"I really 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 just begin making their normal mortgage payment 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 occurred despite the fact that the mortgage market, housing supporters and veterans groups all alerted the VA not to end the program, saying countless property owners needed to catch up on missed payments. Interest rates had increased a lot that numerous couldn't manage to refinance or return on track any other method.

Ray Queen states nobody told him about any of this.

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

The Queens state 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 hold-ups with the mortgage business.

Then, in September, the couple says they were informed they needed 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 company, Mr. Cooper, said in a statement it "checked out every possible opportunity to overcome a service for this customer." But it said the VA requires better loss-mitigation options and referred NPR to a letter from advocates, industry and veteran groups advising the VA to reboot the PCP program.

The VA "has actually let individuals down"

"The Department of Veterans Affairs has really let individuals down," says Kristi Kelly, a customer lawyer in Virginia who states she is speaking with a great deal of other veterans in the exact same scenario as Ray and Becky Queen.

"The homeowners got in into COVID forbearances, they were made sure guarantees, and there were certain representations that were made," states Kelly. "And the VA essentially pulled the carpet out from under everybody."

For some house owners, ending the program may not suggest foreclosure, however it still indicates a monetary hardship.

"Much of these people have 2 or 3% rates of interest loans," Kelly states. With the PCP program they could keep that rates of interest. Now, she states, the only way they'll be able to conserve their home is to participate in a loan adjustment where the rate 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 property owners can't afford such a huge boost in their monthly payment.

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

Kelly states most other homeowners in America - individuals with FHA loans, for instance, 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 do not, because the VA ended that program. So veterans are being dealt with worse than most other property owners, Kelly said.

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

VA has a plan to help, 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," says John Bell, executive director of the Veterans Benefits Administration's Loan Guaranty Service. "It wasn't part of our typical authority."

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

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

NPR has actually found out that the VA is dealing with a brand-new program to replace the old one. It will work in a various way but to similar result, to save individuals from foreclosure. Bell states it's going to take four to five months to get it up and running.

That's too long for numerous of those 6,000 VA property owners currently in the foreclosure process. Not to discuss the numerous more who are delinquent.

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

Will the firetruck arrive far too late?

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

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

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

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

"Let us keep paying towards our regular mortgage in between from time to time," he says. "Then when the VA has that fixed we can come back and attend to the scenario. That appears like the adult, mature 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 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 stay 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 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 carry out an instant time out on all VA loan foreclosures where customers are likely to be qualified for VA's brand-new ... program till it is available and debtors can be examined to see if they qualify."

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

Transcript

LEILA FADEL, HOST: An NPR examination 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 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 two young kids. Ray served in Iraq in the Army. Inside their house, he says that he was wounded by an improvised explosive gadget, or IED.RAY QUEEN: And just so you're aware, I have brain damage from my time in Iraq. So there's a great deal of different things that don't work the method they're expected to any longer. And my memory is not great.ARNOLD: For years, the federal government's assisted veterans like Queen to buy homes through its VA loan program. And now the VA has actually put this household on the verge of losing their house.B QUEEN: This is the letter that my spouse and I got the other day specifying that they're starting foreclosure proceedings.ARNOLD: What's happening is that like millions of other Americans, the Queens benefited from what's called a COVID mortgage forbearance. It was established by Congress after the pandemic hit for individuals who lost earnings. When Becky's mother passed away of COVID, she needed to take an extended leave from work and lost her job. Last year, the couple says their mortgage business informed them that they could avoid 6 months of payments while they got back on their feet and then just begin paying their mortgage again.B QUEEN: I very 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 payments would relocate to the back end of their loan term so they could resume their normal 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 house owners to do that, despite the fact that housing supporters and the mortgage market and veterans groups all cautioned them not to end the program because thousands of house owners needed to catch up on missed payments. Rate of interest, too, had actually 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.R QUEEN: How does that occur? This is supposed to be a program that y' all have to help people in times of crisis so you do not take their house from them.ARNOLD: The couple says in September, they were informed that they needed to come up with a huge payment - upwards of $22,000, which they do not 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 truly let people down.ARNOLD: Kristi Kelly is a customer lawyer in Virginia who's hearing from a great deal of veterans who are in the exact same boat.KELLY: The property owners entered into COVID forbearances. They were made sure guarantees, and the VA essentially pulled the carpet out from under everybody.ARNOLD: Kelly says 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, but not if you have a VA loan. So she says veterans are being treated even worse than a lot of other homeowners.KELLY: Service members are going to lose their home, and for the majority of 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 but to end the program. John Bell heads up the VA's home loaning division.JOHN BELL: We had a short-term authority for that specific program throughout COVID.ARNOLD: Some in the market think the VA did really have the authority to extend the program. Now, however, NPR has learned that the VA is working on a new program to change the old one, however that's still 4 or 5 months away - too long for many of the 6,000 homeowners 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 time out on foreclosures while it gets that program running. John Bell states the VA is, quote, "considering all choices."BELL: We owe it to our veterans to make sure 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 pause on foreclosures, because if the fire engine appears after your house burns down, it's not going to do much great for the countless veterans who need help now.Chris Arnold, NPR News.