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Countless veterans face foreclosure and it's not their fault. The VA might 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 resides on a little farm in rural Oklahoma with her other half, 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 purchase 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 home.

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

Like millions of 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 set up by Congress after the pandemic hit for people who lost earnings.

But an NPR investigation has actually discovered that thousands of 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 fix the issue, for lots of it could be 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 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 started in September of 2021, when Becky's mom passed away of COVID-19. She needed to take an extended leave from work and lost her task.

So last year, with their savings dwindling, the couple states they called the business that handles their mortgage, Mr. Cooper, and were informed they could avoid 6 months of payments. And when they returned on their feet and could begin paying once again, the couple says they were informed, they would not owe the missed payments in a huge lump sum.

"I very specifically asked 'how does this work?'" states 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 transferred to the back end of their loan term so they could just begin making their regular 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 enabled homeowners to do that. This occurred even though the mortgage industry, housing supporters and veterans groups all alerted the VA not to end the program, saying countless house owners required to catch up on missed out on payments. Rates of interest had increased a lot that lots of 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 occur?" 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 home 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 delays with the mortgage company.

Then, in September, the couple says they were told they needed 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 statement it "checked out every possible opportunity to overcome a solution for this consumer." But it said the VA needs 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 really let people down"

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

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

For some homeowners, ending the program might not mean foreclosure, however it still implies a monetary challenge.

"A lot of these people have 2 or 3% interest rate loans," Kelly states. With the PCP program they might keep that interest rate. But now, she states, the only method they'll be able to conserve their home is to participate in a loan adjustment where the interest rate will be around today's market rate of 7.5%.

"For the majority of individuals, 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 pay for such a huge increase in their monthly payment.

According to the data firm ICE Mortgage Technology, 6,000 house owners with VA loans who had COVID forbearances are currently in the foreclosure process. And 34,000 more are delinquent.

Kelly states most other homeowners in America - individuals 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 don't, because the VA ended that program. So veterans are being dealt with even worse than the majority of other homeowners, Kelly stated.

"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 is in their homes."

VA has a plan to help, however it could be too late

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

"We had a short-term authority for that particular 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 market believe the VA did, in reality, have the authority to extend the program. But either way, it ended it.

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

NPR has found out that the VA is working on a new program to change the old one. It will operate in a different way but to similar result, to save individuals from foreclosure. Bell says it's going to take 4 to 5 months to get it up and running.

That's too wish for much of those 6,000 VA house owners currently in the foreclosure process. Not to mention the numerous more who are overdue.

Already, data shows that more VA homeowners have been heading into foreclosure because the VA ended its PCP program. The very 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 property owners at risk, 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 time out on foreclosures," states Steve Sharpe, a senior attorney at the National Consumer Law Center. "Veterans must truly have the ability to have an ability to gain access to this program when it comes online since it's been so long because they've had something that will truly work.

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

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

"Let us keep paying towards our regular mortgage in between now and then," he says. "Then as soon as the VA has actually that repaired we can come back 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 straight. Bell stated the VA is "checking out all choices at this point in time."

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

Wednesday, a group of U.S. Senators sent a letter to the VA advising them to put a hang 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, 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 debtors are most likely to be qualified for VA's brand-new ... program up until it is available and debtors can be examined to see if they certify."

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

Transcript

LEILA FADEL, HOST: An NPR investigation has 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 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 2 young kids. Ray served in Iraq in the Army. Inside their home, he says that he was injured by an improvised explosive gadget, or IED.RAY QUEEN: And simply so you're aware, I have brain damage from my time in Iraq. So there's a great deal of different things that do not work the way they're supposed to anymore. And my memory is not great.ARNOLD: For decades, the federal government's assisted veterans like Queen to purchase homes through its VA loan program. Now the VA has put this family on the verge of losing their house.B QUEEN: This is the letter that my husband and I got yesterday specifying that they're starting foreclosure proceedings.ARNOLD: What's taking place is that like millions of 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 mother passed away of COVID, she had to take a prolonged leave from work and lost her job. Last year, 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 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 transfer to the back end of their loan term so they could resume their regular 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 allowed house owners to do that, although housing advocates and the mortgage industry and veterans groups all alerted them not to end the program due to the fact that thousands of homeowners required to capture up on missed out on payments. Interest rates, too, had actually increased so much that numerous couldn't pay for to refinance 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 home from them.ARNOLD: The couple says in September, they were told that they needed to come up with a big 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 people down.ARNOLD: Kristi Kelly is a consumer legal representative in Virginia who's hearing from a great deal of veterans who remain in the exact same boat.KELLY: The homeowners entered into COVID forbearances. They were made certain pledges, and the VA basically pulled the carpet out from under everybody.ARNOLD: Kelly states for the majority of other house owners in America, there are still methods to move your missed out on 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 dealt with 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 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 in fact have the authority to extend the program. Now, however, NPR has actually learned that the VA is dealing with a brand-new program to replace the old one, but that's still four or five months away - too long for much of the 6,000 homeowners with VA loans who are in the foreclosure procedure. Not to mention 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 says the VA is, quote, "thinking about all choices."BELL: We owe it to our veterans to make certain that we're providing 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 engine appears after your house burns down, it's not going to do much great for the thousands of veterans who need aid now.Chris Arnold, NPR News.