Thousands of 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 notice.

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

Queen resides on a small 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 actually assisted veterans like him buy homes through its VA loan program, run by the Department of Veterans Affairs.

But now 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 trust with my mortgage."

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

But an NPR investigation has discovered that countless veterans who took a forbearance are now at risk of losing their homes through no fault of their own. And while the VA is working on a method to fix the problem, for lots of it might be far too late.

After NPR initially released this story, a group of four U.S. Senators sent a letter to the VA asking it to instantly stop foreclosing on the homes of veterans and servicemembers. It's uncertain if the VA will do that.

For the Queens, this all started in September of 2021, when Becky's mom passed away of COVID-19. She had to take a prolonged leave from work and lost her task.

So in 2015, with their savings diminishing, the couple says they called the company that manages their mortgage, Mr. Cooper, and were informed they could avoid 6 months of payments. And as soon as they returned on their feet and could begin paying once again, the couple states they were told, they wouldn't owe the missed out on payments in a big lump amount.

"I really specifically 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 moved to the back end of their loan term so they might simply begin making their normal mortgage payment 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 made it possible for homeowners to do that. This took place despite the fact that the mortgage industry, housing supporters and veterans groups all alerted the VA not to end the program, saying countless homeowners needed to capture up on missed payments. Rates of interest had actually risen so much that many could not manage to re-finance or get back on track any other method.

Ray Queen states no one informed him about any of this.

"How does that happen?" Queen asked. "This is supposed to be a program that you all have 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 ran into hold-ups with the mortgage business.

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 business, Mr. Cooper, stated in a declaration it "explored every possible opportunity to resolve a solution for this customer." But it said the VA requires much better loss-mitigation options and referred NPR to a letter from advocates, industry and veteran groups prompting the VA to reboot the PCP program.

The VA "has actually let people down"

"The Department of Veterans Affairs has really let people down," states Kristi Kelly, a consumer legal representative in Virginia who says she is speaking with a lot of other veterans in the exact same circumstance as Ray and Becky Queen.

"The house owners participated in 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 might not mean foreclosure, but it still means a monetary hardship.

"Many of these people have 2 or 3% interest rate loans," Kelly states. With the PCP program they could keep that rate of interest. Today, she says, the only method they'll have the ability to conserve their home is to participate in a loan modification where the rates 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 actually 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 firm ICE Mortgage Technology, 6,000 property owners with VA loans who had actually COVID forbearances are presently in the foreclosure procedure. And 34,000 more are delinquent.

Kelly states most other homeowners in America - people with FHA loans, for circumstances, or loans backed by Fannie Mae and Freddie Mac - still have methods to avoid foreclosure by moving missed out on payments to the back of the loan term.

But property owners with VA loans don't, because the VA ended that program. So veterans are being dealt with even worse than the majority of other house owners, Kelly stated.

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

VA has a plan to assist, but 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 particular program during COVID," states 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 believe the VA did, in fact, have the authority to extend the program. But either way, it ended it.

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

NPR has discovered that the VA is dealing with a new program to change the old one. It will operate in a various method however to similar result, to conserve 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 already in the foreclosure procedure. Not to point out the numerous more who are delinquent.

Already, data shows that more VA house 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 arrive too late?

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

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

Sharpe says the VA might likewise restart 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 in between now and then," he says. "Then when the VA has that repaired we can come back and attend to the circumstance. 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 straight. Bell said the VA is "exploring all alternatives at this point in time."

"We owe it to our veterans to make certain that we're offering 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 urging them to put a hang on anymore 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, 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 implement an instant time out on all VA loan foreclosures where debtors are most likely to be qualified for VA's new ... program until it is offered and customers can be examined to see if they qualify."

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

Transcript

LEILA FADEL, HOST: An NPR investigation has actually discovered 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 dealing with a fix. But it could 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 know, I have mental retardation from my time in Iraq. So there's a great deal of different things that don't work the way they're supposed 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. Now the VA has actually put this household on the brink of losing their house.B QUEEN: This is the letter that my partner and I got the other day stating that they're beginning foreclosure proceedings.ARNOLD: What's occurring is that like millions of other Americans, the Queens took benefit of what's called a COVID mortgage forbearance. It was established by Congress after the pandemic hit for people who lost income. When Becky's mother passed away of COVID, she had to take an extended leave from work and lost her task. Last year, the couple says their mortgage company informed them that they could avoid 6 months of payments while they returned on their feet and then simply begin paying their mortgage again.B QUEEN: I really specifically 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 relocate to the back end of their loan term so they might resume their typical mortgage payment. But that is not how it worked out, because a year ago in October, the Department of Veterans Affairs ended the program that made it possible for house owners to do that, despite the fact that housing advocates and the mortgage industry and veterans groups all alerted them not to end the program because countless property owners needed to capture up on missed payments. Rate of interest, too, had increased so much that numerous could not pay for to re-finance or get back on track any other way. Ray Queen says no one told him about any of this.R QUEEN: How does that happen? This is expected to be a program that y' all need to assist individuals in times of crisis so you do not take their home from them.ARNOLD: The couple states in September, they were told that they required to come up with a huge 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 actually let individuals down.ARNOLD: Kristi Kelly is a consumer lawyer in Virginia who's hearing from a lot of veterans who remain in the exact same boat.KELLY: The homeowners entered into COVID forbearances. They were made particular promises, and the VA basically pulled the carpet out from under everybody.ARNOLD: Kelly says for most 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, however not if you have a VA loan. So she says veterans are being treated worse than most other homeowners.KELLY: Service members are going to lose their home, and for many 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 during COVID.ARNOLD: Some in the industry believe the VA did really have the authority to extend the program. Now, though, NPR has discovered that the VA is working on a new program to change the old one, however that's still 4 or 5 months away - too wish for much of the 6,000 property owners with VA loans who remain in the foreclosure process. Not to mention 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, "thinking about all alternatives."BELL: We owe it to our veterans to ensure that we're giving them every chance to be able to remain in the home.ARNOLD: Ray and Becky Queen are hoping that the VA does put a pause on foreclosures, since 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 help now.Chris Arnold, NPR News.