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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 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 wounded in Iraq. Since the 1940s, the federal government has actually helped 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 edge of losing their house.

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

Like countless other Americans, the Queens made the most of what's called a COVID mortgage forbearance, which allowed property owners to skip mortgage payments. It was set up by Congress after the pandemic hit for people who lost earnings.

But an NPR investigation has actually 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 dealing with a method to repair the problem, for numerous it could be far too late.

After NPR at first published this story, a group of four U.S. Senators sent out a letter to the VA asking it to instantly stop foreclosing on the homes of veterans and servicemembers. It's if the VA will do that.
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For the Queens, this all started in September of 2021, when Becky's mother passed away of COVID-19. She had to take a prolonged leave from work and lost her job.

So last year, with their savings diminishing, the couple states they called the business that handles their mortgage, Mr. Cooper, and were informed they could avoid 6 months of payments. And as soon as they got back on their feet and might begin paying again, the couple says they were informed, they would not owe the missed payments in a big lump sum.

"I extremely specifically 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 out on payments would be moved to the back end of their loan term so they might just begin making their normal 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 enabled homeowners to do that. This took place despite the fact that the mortgage industry, housing supporters and veterans groups all cautioned the VA not to end the program, saying thousands of property owners required to capture up on missed out on payments. Rates of interest had actually risen a lot that numerous could not pay for to re-finance or return on track any other method.

Ray Queen states nobody informed him about any of this.

"How does that take place?" Queen asked. "This is expected to be a program that you all have to assist individuals in times of crisis, so you don't take their home 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 do not have, or either sell their home or get foreclosed on.

Their mortgage servicing business, Mr. Cooper, stated in a declaration it "explored every possible avenue to overcome a solution for this client." But it stated the VA requires better loss-mitigation alternatives and referred NPR to a letter from supporters, market and veteran groups advising the VA to reboot the PCP program.

The VA "has actually let individuals down"

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

"The homeowners participated in COVID forbearances, they were ensured promises, and there were particular representations that were made," states Kelly. "And the VA essentially pulled the carpet out from under everyone."

For some house owners, ending the program might not suggest foreclosure, however it still implies a financial hardship.

"A lot of these people have 2 or 3% interest rate loans," Kelly states. With the PCP program they might keep that interest rate. Today, she states, the only way they'll be able to save 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 many people, their payments will increase by $600 or $700 a month, since the VA has decided to end the partial claim program."

Many homeowners can't pay for such a huge boost in their month-to-month payment.

According to the data company 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 delinquent.

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

But property owners with VA loans do not, since the VA ended that program. So veterans are being dealt with worse than a lot of other house owners, Kelly stated.

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

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

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

"We had a short-term authority for that specific program during COVID," says 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 fact, have the authority to extend the program. But either way, it ended it.

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

NPR has actually learned that the VA is dealing with a brand-new program to replace the old one. It will work in a various method but to similar result, to save individuals from foreclosure. Bell states it's going to take four to five months to get it up and running.

That's too wish for a number of those 6,000 VA house owners already in the foreclosure process. Not to point out the numerous more who are delinquent.

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

Will the firetruck show up too late?

With many house owners 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 lawyer at the National Consumer Law Center. "Veterans must truly have the ability to have a capability to access this program when it comes online because it's been so long given that they have actually had something that will genuinely work.

Sharpe states the VA might likewise reboot the PCP program that it closed down. "They have the authority to do both," he says.
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Pausing foreclosures seems like a great idea to veteran Ray Queen in Oklahoma.

"Let us keep paying towards our regular mortgage between now and then," he says. "Then once the VA has that repaired we can come back and attend to the situation. That looks like the adult, fully grown thing to do, not put a household through hell."

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

"We owe it to our veterans to ensure that we're providing 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 urging them to put a hold on any more foreclosures.

"Without this time out, countless 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 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 immediate pause on all VA loan foreclosures where borrowers are most likely to be eligible for VA's new ... program till it is readily 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 new program can provide them a way to get current on their mortgages. Because if the firetruck shows up after your home has actually burned down, it's not going to do much excellent for the countless veterans and service members who need assistance 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 dealing with 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 2 young kids. Ray served in Iraq in the Army. Inside their home, he says that he was wounded by an improvised explosive device, or IED.RAY QUEEN: And so you're conscious, I have mental retardation from my time in Iraq. So there's a great deal of various things that don't work the way they're supposed to any longer. And my memory is not great.ARNOLD: For decades, the federal government's helped veterans like Queen to buy homes through its VA loan program. And now the VA has put this family on the verge of losing their house.B QUEEN: This is the letter that my spouse and I received the other day stating that they're starting foreclosure proceedings.ARNOLD: What's taking place is that like countless other Americans, the Queens took benefit of what's called a COVID mortgage forbearance. It was set up by Congress after the pandemic hit for individuals who lost earnings. When Becky's mommy passed away of COVID, she had to take a prolonged leave from work and lost her job. Last year, the couple states their mortgage company informed them that they could avoid 6 months of payments while they returned on their feet and then simply start paying their mortgage again.B QUEEN: I very 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 move to the back end of their loan term so they could resume their typical 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 enabled property owners to do that, although housing advocates and the mortgage market and veterans groups all warned them not to end the program due to the fact that thousands of property owners required to capture up on missed out on payments. Rates of interest, too, had actually increased so much that numerous couldn't pay for to re-finance or return on track any other method. Ray Queen says no one informed him about any of this.R QUEEN: How does that take place? This is expected to be a program that y' all have to help individuals in times of crisis so you do not take their house 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 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 individuals down.ARNOLD: Kristi Kelly is a customer legal representative in Virginia who's hearing from a great deal of veterans who remain in the exact same boat.KELLY: The property owners got in into COVID forbearances. They were made sure guarantees, and the VA basically pulled the carpet out from under everybody.ARNOLD: Kelly says for the majority of other house owners in America, there are still methods to move your missed 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 states veterans are being dealt with worse than most 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 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 particular program throughout COVID.ARNOLD: Some in the industry believe the VA did really have the authority to extend the program. Now, however, NPR has discovered that the VA is working on a new program to change the old one, but that's still 4 or five months away - too long for numerous 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. 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 options."BELL: We owe it to our veterans to make certain that we're giving them every chance to be able to stay 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 great for the thousands of veterans who need help now.Chris Arnold, NPR News.