Thousands of veterans face foreclosure and it's not their fault. The VA might 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 said, "and my hands were shaking."
Queen resides on a small 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 assisted veterans like him buy homes through its VA loan program, run by the Department of Veterans Affairs.
And now the VA has put this family on the brink of losing their home.
"I didn't do anything incorrect," says 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 made the most of what's called a COVID mortgage forbearance, which permitted property owners to skip 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 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 working on a way to fix the issue, for numerous it could be too late.
After NPR at first released this story, a group of 4 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 mother passed away of COVID-19. She needed to take an extended leave from work and lost her job.
So in 2015, with their cost savings dwindling, the couple states they called the business that manages their mortgage, Mr. Cooper, and were told they could skip six months of payments. And as soon as they returned on their feet and could start paying once again, the couple states they were told, they wouldn't owe the missed out on payments in a big swelling amount.
"I extremely specifically 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 might just 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 enabled property owners to do that. This occurred despite the fact that the mortgage industry, housing advocates and veterans groups all alerted the VA not to end the program, saying countless homeowners required to catch up on missed out on payments. Rates of interest had actually risen a lot that many couldn't manage to re-finance or get back on track any other way.
Ray Queen states no one told him about any of this.
"How does that take place?" Queen asked. "This is expected to be a program that you all need to help individuals in times of crisis, so you do not 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 hold-ups with the mortgage company.
Then, in September, the couple says they were told they required to come up with more than $22,000, which they don't have, or either sell their house or get foreclosed on.
Their mortgage servicing company, Mr. Cooper, said in a declaration it "explored every possible opportunity to resolve an option for this customer." But it said the VA needs better loss-mitigation options and referred NPR to a letter from advocates, market and veteran groups urging the VA to restart the PCP program.
The VA "has actually let people down"
"The Department of Veterans Affairs has truly let individuals down," states Kristi Kelly, a consumer legal representative in Virginia who says she is hearing from a lot of other veterans in the same scenario as Ray and Becky Queen.
"The property owners entered into COVID forbearances, they were made sure pledges, and there were certain representations that were made," says Kelly. "And the VA basically pulled the carpet out from under everyone."
For some property owners, ending the program might not suggest foreclosure, however it still implies a financial difficulty.
"A lot of these people have 2 or 3% rates of interest loans," Kelly says. With the PCP program they might keep that rates of interest. But now, she says, the only way they'll have the ability to save 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, due to the fact that the VA has chosen to end the partial claim program."
Many property owners can't manage 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 actually COVID forbearances are currently in the foreclosure process. And 34,000 more are delinquent.
Kelly says most other house owners in America - individuals with FHA loans, for instance, or loans backed by Fannie Mae and Freddie Mac - still have methods to avoid foreclosure by moving missed payments to the back of the loan term.
But house owners with VA loans do not, since the VA ended that program. So veterans are being treated worse than most other homeowners, Kelly said.
"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 remains in their homes."
VA has a strategy to assist, but 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 throughout COVID," says John Bell, executive director of the Veterans Benefits Administration's Loan Guaranty Service. "It wasn't part of our regular authority."
Some in the industry believe the VA did, in fact, have the authority to extend the program. But either way, it ended it.
Now, however, the VA is taking the scenario seriously.
NPR has learned that the VA is dealing with a new program to replace the old one. It will work in a various way however to comparable result, to conserve individuals from foreclosure. Bell says it's going to take 4 to 5 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 mention the numerous more who are overdue.
Already, information shows that more VA property owners have been heading into foreclosure because 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 too late?
With a lot of property owners at danger, there's growing pressure on the VA to stop foreclosing on veterans up until it gets its fix up and running.
"There need to be a time out on foreclosures," states Steve Sharpe, a senior attorney at the National Consumer Law Center. "Veterans should actually have the ability to have a capability to gain access to this program when it comes online due to the fact that it's been so long considering that they've had something that will genuinely work.
Sharpe states the VA might likewise reboot the PCP program that it shut down. "They have the authority to do both," he states.
Pausing foreclosures seems like a great concept to veteran Ray Queen in Oklahoma.
"Let us keep paying towards our routine mortgage between from time to time," he states. "Then when the VA has that repaired we can return and resolve the situation. That appears 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 "exploring all choices at this point in time."
"We owe it to our veterans to ensure that we're providing 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 urging them to put a hang on any more 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 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 immediate pause on all VA loan foreclosures where customers are likely to be eligible for VA's new ... program up until it is readily available and customers can be assessed to see if they certify."
Ray and Becky Queen are hoping the VA does let individuals keep their homes up until the brand-new program can use them a way to get present on their mortgages. Because if the firetruck shows up after the home has burned down, it's not going to do much helpful for the countless veterans and service members who need help now.
Transcript
LEILA FADEL, HOST: An NPR investigation has discovered that countless U.S. military service members and veterans might 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 two young kids. Ray served in Iraq in the Army. Inside their home, he states that he was wounded by an improvised explosive device, or IED.RAY QUEEN: And so you know, 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 supposed to anymore. And my memory is not great.ARNOLD: For decades, the federal government's helped veterans like Queen to purchase homes through its VA loan program. But now the VA has actually put this household on the verge of losing their house.B QUEEN: This is the letter that my other half and I received the other day stating that they're starting foreclosure proceedings.ARNOLD: What's happening is that like countless other Americans, the Queens benefited from 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 mama died of COVID, she had to take an extended leave from work and lost her job. Last year, the couple states their mortgage company told them that they could avoid 6 months of payments while they got back on their feet and then just start 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 transfer to the back end of their loan term so they could resume their normal mortgage payment. But that is not how it exercised, since a year ago in October, the Department of Veterans Affairs ended the program that made it possible for house owners to do that, although housing supporters and the mortgage industry and veterans groups all alerted them not to end the program because countless property owners required to catch up on missed payments. Interest rates, too, had increased so much that many could not manage to re-finance or return on track any other method. Ray Queen states nobody informed him about any of this.R QUEEN: How does that occur? This is expected to be a program that y' all need to help people in times of crisis so you don't take their home from them.ARNOLD: The couple states in September, they were told that they required to come up with a big payment - upwards of $22,000, which they don't have - or sell 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 people down.ARNOLD: Kristi Kelly is a consumer attorney in Virginia who's hearing from a great deal of veterans who are in the exact same boat.KELLY: The house owners participated in COVID forbearances. They were made specific guarantees, and the VA essentially pulled the rug out from under everybody.ARNOLD: Kelly says for the majority of other property owners in America, there are still ways to move your missed out on 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 whatever they work for and all their wealth, remain in their homes.ARNOLD: For its part, the Department of Veterans Affairs says it had no option but to end the program. John Bell directs the VA's home financing 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 found out that the VA is dealing with a new program to replace the old one, however that's still 4 or five months away - too long for a lot of the 6,000 house owners with VA loans who are in the foreclosure procedure. Not to mention there's 34,000 more who were overdue. Right now there's pressure on the VA to put a time out on foreclosures while it gets that program running. John Bell says the VA is, quote, "thinking about all choices."BELL: We owe it to our veterans to make sure that we're offering them every chance 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 your home burns down, it's not going to do much helpful for the thousands of veterans who need assistance now.Chris Arnold, NPR News.
