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

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

Queen lives on a little farm in rural Oklahoma with her hubby, 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 assisted veterans like him purchase homes through its VA loan program, run by the Department of Veterans Affairs.

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

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

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

But an NPR investigation has discovered that thousands of 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 many it might be too late.

After NPR initially published this story, a group of 4 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 uncertain 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 an extended leave from work and lost her job.

So in 2015, with their savings diminishing, the couple states they called the company that handles their mortgage, Mr. Cooper, and were told they might avoid 6 months of payments. And when they returned on their feet and might begin paying once again, the couple states they were informed, they would not owe the missed payments in a huge swelling 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 relocated to the back end of their loan term so they could simply start 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 owners to do that. This took place despite the fact that the mortgage market, housing supporters and veterans groups all warned the VA not to end the program, saying thousands of house owners required to catch up on missed payments. Rate of interest had risen so much that lots of couldn't manage to re-finance or return on track any other method.

Ray Queen says nobody told him about any of this.

"How does that take place?" Queen asked. "This is supposed to be a program that you all need to help people in times of crisis, so you don't take their home 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 faced hold-ups with the mortgage company.

Then, in September, the couple says they were told they needed to come up with more than $22,000, which they do not have, or either sell their house or get foreclosed on.

Their mortgage servicing business, Mr. Cooper, stated in a statement it "explored every possible avenue to resolve an option for this client." But it said the VA needs better loss-mitigation options 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 individuals down"

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

"The house owners got in into COVID forbearances, they were made sure pledges, and there were specific representations that were made," says Kelly. "And the VA basically pulled the carpet out from under everyone."

For some homeowners, ending the program may not suggest foreclosure, however it still means a monetary difficulty.

"Much of these people have 2 or 3% interest rate loans," Kelly says. With the PCP program they might keep that interest rate. Today, she states, the only method they'll have the ability 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 many people, 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 increase in their 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 states most other homeowners in America - individuals with FHA loans, for circumstances, 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 property owners with VA loans don't, since the VA ended that program. So veterans are being treated worse than the majority of 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 whatever they work for - and all their wealth is in their homes."

VA has a plan to assist, however it might be too late

The Department of Veterans Affairs says 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 typical authority."

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

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

NPR has actually learned that the VA is working on a brand-new program to replace the old one. It will operate in a different method however to similar 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 much of those 6,000 VA homeowners currently in the foreclosure process. Not to point out the lots of more who are overdue.

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

Will the firetruck arrive far too late?

With so numerous homeowners at risk, there's growing pressure on the VA to stop foreclosing on veterans till it gets its spruce up and running.

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

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

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

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

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

"We owe it to our veterans to make certain that we're providing them 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 hold on any more foreclosures.

"Without this time out, thousands of 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 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 instant time out on all VA loan foreclosures where customers are most likely to be eligible for VA's brand-new ... program until it is offered and borrowers can be assessed to see if they certify."

Ray and Becky Queen are hoping the VA does let people keep their homes up until the brand-new program can offer them a method to get current on their mortgages. Because if the firetruck appears after your home has burned down, it's not going to do much excellent for the countless veterans and service members who require help now.

Transcript

LEILA FADEL, HOST: An NPR examination has actually 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 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 wounded by an improvised explosive gadget, or IED.RAY QUEEN: And so you're aware, I have mental retardation from my time in Iraq. So there's a lot of various things that don't work the method 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. Today the VA has put this family on the edge of losing their house.B QUEEN: This is the letter that my partner and I received yesterday specifying 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 earnings. When Becky's mother passed away of COVID, she needed to take a prolonged leave from work and lost her task. In 2015, the couple says their mortgage company informed them that they could skip six months of payments while they returned on their feet and then just begin paying their mortgage again.B QUEEN: I really particularly 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 move to the back end of their loan term so they could resume their regular 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 allowed property owners to do that, despite the fact that housing supporters and the mortgage industry and veterans groups all alerted them not to end the program due to the fact that thousands of homeowners needed to catch up on missed out on payments. Interest rates, too, had actually increased so much that lots of couldn't manage to refinance or get back on track any other way. Ray Queen states nobody informed him about any of this.R QUEEN: How does that take place? This is supposed to be a program that y' all have to help people in times of crisis so you don't take their home 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 really let individuals down.ARNOLD: Kristi Kelly is a consumer legal representative in Virginia who's hearing from a lot of veterans who remain in the same boat.KELLY: The property owners got in into COVID forbearances. They were made sure pledges, and the VA basically pulled the carpet out from under everybody.ARNOLD: Kelly states for many other homeowners in America, there are still methods to move your missed out on payments to the back of the loan term so you can avoid getting foreclosed on, however not if you have a VA loan. So she says veterans are being dealt with even worse than many other homeowners.KELLY: Service members are going to lose their home, and for most 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 heads up the VA's home financing division.JOHN BELL: We had a short-term authority for that specific program during COVID.ARNOLD: Some in the market think the VA did in fact have the authority to extend the program. Now, though, NPR has learned that the VA is working on a new program to change the old one, but that's still four or five months away - too long for much of the 6,000 property owners with VA loans who are in the foreclosure process. Not to point out there's 34,000 more who were overdue. Right now 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 choices."BELL: We owe it to our veterans to ensure 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 appears after the house burns down, it's not going to do much good for the thousands of veterans who require assistance now.Chris Arnold, NPR News.
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