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Countless 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 remembers opening the letter with the foreclosure notification.

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

Queen lives on a small farm in rural Oklahoma with her partner, 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.

And now the VA has 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 company that I'm expected to trust with my mortgage."

Like countless other Americans, the Queens made the most of what's called a COVID mortgage forbearance, which enabled house 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 found 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 dealing with a way to fix the problem, for numerous it might be too late.

After NPR at first released this story, a group of four U.S. Senators sent 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 last year, with their savings diminishing, the couple states they called the company that handles their mortgage, Mr. Cooper, and were told they might skip 6 months of payments. And once they returned on their feet and could start paying again, the couple says they were informed, they would not owe the missed payments in a huge lump amount.

"I extremely particularly asked 'how does this work?'" states 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 out on payments would be relocated to the back end of their loan term so they might simply begin making their regular 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 allowed house owners to do that. This occurred although the mortgage market, housing advocates and veterans groups all alerted the VA not to end the program, saying thousands of property owners needed to catch up on missed out on payments. Rate of interest had increased a lot that numerous could not afford to refinance or return on track any other way.

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

"How does that happen?" 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 house 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 ran into delays with the mortgage company.

Then, in September, the couple states they were informed they needed 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 company, Mr. Cooper, said in a declaration it "checked out every possible avenue to overcome a service for this customer." But it said the VA needs better loss-mitigation alternatives and referred NPR to a letter from supporters, industry and veteran groups advising the VA to restart the PCP program.

The VA "has truly let people down"

"The Department of Veterans Affairs has actually let people down," says Kristi Kelly, a customer lawyer in Virginia who states she is hearing from a lot of other veterans in the very same circumstance as Ray and Becky Queen.

"The homeowners participated in COVID forbearances, they were made particular guarantees, and there were specific representations that were made," says Kelly. "And the VA essentially pulled the rug out from under everyone."
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For some homeowners, ending the program may not suggest foreclosure, but it still a monetary difficulty.

"Much of these people have 2 or 3% interest rate loans," Kelly states. With the PCP program they might keep that interest rate. Today, she says, the only way they'll have the ability to save their home is to enter into a loan modification 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, because the VA has actually decided to end the partial claim program."

Many house owners can't pay for such a huge increase in their month-to-month payment.

According to the data firm ICE Mortgage Technology, 6,000 property 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 homeowners in America - people with FHA loans, for example, or loans backed by Fannie Mae and Freddie Mac - still have ways to prevent foreclosure by moving missed 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 even worse than a lot of other house owners, Kelly said.

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

VA has a strategy to assist, however it could be far too late

The Department of Veterans Affairs states it had no choice however 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 market think the VA did, in truth, have the authority to extend the program. But in either case, it ended it.

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

NPR has actually found out that the VA is working on a brand-new program to change the old one. It will work in a various method but to comparable impact, to save individuals from foreclosure. Bell says it's going to take four to five months to get it up and running.

That's too long for a number of those 6,000 VA property owners currently in the foreclosure procedure. Not to point out the many more who are delinquent.

Already, data shows that more VA property owners have actually been heading into foreclosure considering 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 show up far too late?

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

"There ought to be a pause on foreclosures," states Steve Sharpe, a senior lawyer at the National Consumer Law Center. "Veterans must really be able to have an ability 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 could likewise reboot the PCP program that it closed down. "They have the authority to do both," he says.

Pausing foreclosures seems like a great concept to veteran Ray Queen in Oklahoma.

"Let us keep paying towards our routine mortgage between once in a while," he states. "Then when the VA has actually that repaired we can return and deal with the scenario. That looks like the adult, mature thing to do, not put a family through hell."

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

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

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, thousands of veterans and servicemembers could needlessly 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 ever 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 pause on all VA loan foreclosures where customers are likely to be eligible for VA's brand-new ... program until it is available and customers can be evaluated to see if they qualify."

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

Transcript

LEILA FADEL, HOST: An NPR examination has found 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 working on a repair. 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 states that he was injured by an improvised explosive gadget, or IED.RAY QUEEN: And simply so you understand, I have brain damage from my time in Iraq. So there's a great deal of various things that don't work the method they're expected to anymore. And my memory is not great.ARNOLD: For years, the federal government's assisted veterans like Queen to purchase homes through its VA loan program. And now the VA has put this household on the edge of losing their house.B QUEEN: This is the letter that my hubby and I received yesterday specifying that they're starting foreclosure proceedings.ARNOLD: What's taking place 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 income. When Becky's mom passed away of COVID, she had to take an extended leave from work and lost her task. In 2015, the couple states their mortgage company told them that they could avoid 6 months of payments while they returned on their feet and after that just begin paying their mortgage again.B QUEEN: I very 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 regular mortgage payment. But that is not how it exercised, because a year ago in October, the Department of Veterans Affairs ended the program that enabled homeowners to do that, even though housing supporters and the mortgage market and veterans groups all cautioned them not to end the program due to the fact that countless property owners needed to catch up on missed payments. Rate of interest, too, had actually risen so much that numerous couldn't afford to refinance or return on track any other way. Ray Queen states nobody informed him about any of this.R QUEEN: How does that happen? This is expected to be a program that y' all have 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 offer 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 consumer lawyer in Virginia who's hearing from a lot of veterans who remain in the same boat.KELLY: The property owners participated in COVID forbearances. They were made sure pledges, 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 avoid getting foreclosed on, but not if you have a VA loan. So she states veterans are being treated worse than a lot of other homeowners.KELLY: Service members are going to lose their home, and for a lot of people, that's everything they work for and all their wealth, remain in their homes.ARNOLD: For its part, the Department of Veterans Affairs says it had no choice however to end the program. John Bell heads up the VA's home loaning division.JOHN BELL: We had a short-term authority for that particular program throughout COVID.ARNOLD: Some in the market believe the VA did in fact have the authority to extend the program. Now, however, NPR has found out that the VA is working on a new program to change the old one, but that's still four or 5 months away - too long for many of the 6,000 homeowners with VA loans who remain in the foreclosure process. 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 choices."BELL: We owe it to our veterans to make sure that we're providing them every opportunity to be able to stay in the home.ARNOLD: Ray and Becky Queen are hoping that the VA does put a time out on foreclosures, because if the fire engine appears after the house burns down, it's not going to do much helpful for the thousands of veterans who require aid now.Chris Arnold, NPR News.