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 remembers 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 other half, 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 assisted veterans like him buy homes through its VA loan program, run by the Department of Veterans Affairs.

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

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

Like millions of other Americans, the Queens took advantage of what's called a COVID mortgage forbearance, which permitted property owners to avoid mortgage payments. It was established by Congress after the pandemic hit for people who lost income.

But an NPR investigation has found that countless 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 method to repair the problem, for lots of it might be too late.

After NPR initially 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 unclear if the VA will do that.

For the Queens, this all begun in September of 2021, when Becky's mother died of COVID-19. She needed to take an extended leave from work and lost her job.

So last year, with their cost savings decreasing, the couple states they called the company that handles their mortgage, Mr. Cooper, and were informed they might skip 6 months of payments. And when they returned on their feet and could begin paying once again, the couple says they were told, they wouldn't owe the missed payments in a big swelling 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 payments would be transferred 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 worked out.

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 warned the VA not to end the program, stating countless homeowners required to catch up on missed payments. Rate of interest had increased a lot that many could not manage to re-finance or get back on track any other method.

Ray Queen says nobody informed him about any of this.

"How does that happen?" Queen asked. "This is expected to be a program that you all need to assist people in times of crisis, so you do not 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 once again. But they faced hold-ups with the mortgage company.

Then, in September, the couple states 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 company, Mr. Cooper, said in a declaration it "checked out every possible opportunity to overcome a service for this consumer." But it said the VA needs much better loss-mitigation choices and referred NPR to a letter from advocates, industry and veteran groups urging the VA to reboot the PCP program.

The VA "has truly let individuals down"

"The Department of Veterans Affairs has really let people down," states Kristi Kelly, a consumer attorney in Virginia who states she is hearing from a great deal of other veterans in the very same scenario as Ray and Becky Queen.

"The homeowners participated in COVID forbearances, they were made sure guarantees, and there were specific representations that were made," says Kelly. "And the VA essentially pulled the rug out from under everybody."

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

"A number of these people have 2 or 3% rate of interest loans," Kelly states. With the PCP program they could keep that interest rate. Today, she says, the only method they'll be able to save their home is to participate in a loan adjustment where the rates 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 chosen to end the partial claim program."

Many house owners can't pay for such a substantial increase in their regular monthly payment.

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

Kelly states most other property owners in America - individuals with FHA loans, for circumstances, 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 house owners with VA loans don't, since the VA ended that program. So veterans are being dealt with worse than the majority of other homeowners, Kelly said.

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

VA has a strategy to help, but it could be far too late

The Department of Veterans Affairs states it had no option but to end the program.

"We had a short-term authority for that particular program during 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 market think the VA did, in fact, have the authority to extend the program. But either method, it ended it.

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

NPR has learned that the VA is dealing with a brand-new program to change the old one. It will work in a different way however to comparable effect, to save people from foreclosure. Bell says it's going to take four to 5 months to get it up and running.

That's too long for many of those 6,000 VA house owners currently in the foreclosure procedure. Not to discuss the numerous more who are overdue.

Already, information reveals that more VA property owners have actually been heading into foreclosure given that the VA ended its PCP program. The exact 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 numerous property owners at threat, there's growing pressure on the VA to stop foreclosing on veterans until it gets its fix up and running.

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

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

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

"Let us keep paying towards our routine mortgage between from time to time," he says. "Then once the VA has that repaired we can return and deal with the scenario. That appears like the adult, mature thing to do, not put a household 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 point in time."

"We owe it to our veterans to ensure that we're offering them every chance 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 hold on any more foreclosures.

"Without this pause, thousands of veterans and servicemembers could unnecessarily 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 Congress."

Tester, of Montana, chairs the Veterans' Affairs Committee, and Brown, of Ohio, chairs the Banking Committee. They asked the VA "to implement an instant time out on all VA loan foreclosures where debtors are most likely to be qualified for VA's brand-new ... program until it is available and debtors can be evaluated to see if they qualify."

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

Transcript

LEILA FADEL, HOST: An NPR investigation has actually found that thousands of 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 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 home, he states that he was wounded by an improvised explosive gadget, or IED.RAY QUEEN: And simply so you know, I have mental retardation from my time in Iraq. So there's a lot of different things that do not work the method they're supposed to anymore. 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. Today the VA has actually put this household on the brink of losing their house.B QUEEN: This is the letter that my other half and I got the other day stating that they're beginning 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 set up by Congress after the pandemic hit for individuals who lost income. When Becky's mother passed away of COVID, she needed to take an extended 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 got back on their feet and then simply start paying their mortgage again.B QUEEN: I extremely 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 transfer to the back end of their loan term so they might resume their regular 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 made it possible for homeowners to do that, although housing supporters and the mortgage industry and veterans groups all cautioned them not to end the program since thousands of property owners required to catch up on missed out on payments. Rate of interest, too, had risen so much that numerous couldn't afford to re-finance or get back 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 help individuals in times of crisis so you do not take their house from them.ARNOLD: The couple says in September, they were informed that they required to come up with a huge payment - upwards of $22,000, which they do not have - or offer 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 really let people down.ARNOLD: Kristi Kelly is a customer lawyer in Virginia who's hearing from a lot of veterans who are in the exact same boat.KELLY: The property owners participated in COVID forbearances. They were ensured pledges, and the VA basically pulled the rug out from under everybody.ARNOLD: Kelly says for the majority of other homeowners in America, there are still methods 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 states veterans are being treated even worse than the majority 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, are in their homes.ARNOLD: For its part, the Department of Veterans Affairs states it had no choice but to end the program. John Bell heads up 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, though, NPR has learned that the VA is working on a brand-new program to change the old one, but that's still 4 or 5 months away - too long for many of the 6,000 property owners 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 time out on foreclosures while it gets that program running. John Bell states the VA is, quote, "considering all options."BELL: We owe it to our veterans to make certain that we're providing every opportunity to be able to stay in the home.ARNOLD: Ray and Becky Queen are hoping that the VA does put a pause on foreclosures, because if the fire engine reveals up after your home burns down, it's not going to do much great for the countless veterans who need assistance now.Chris Arnold, NPR News.