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Countless veterans deal with 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 notification.

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

Queen resides on a little farm in rural Oklahoma with her husband, Ray, and their two 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.

Now the VA has put this family on the verge of losing their home.

"I didn't do anything incorrect," says 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 took benefit 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 income.

But an NPR investigation has found that thousands of 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 way to repair the problem, for numerous it could 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 passed away of COVID-19. She needed to take an extended leave from work and lost her task.

So in 2015, with their savings dwindling, the couple states they called the business that handles their mortgage, Mr. Cooper, and were informed they could avoid six months of payments. And as soon as they returned on their feet and might begin paying again, the couple says they were informed, they would not owe the missed out on payments in a huge lump sum.

"I really 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 could simply begin making their regular 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 house owners to do that. This happened even though the mortgage industry, housing advocates and veterans groups all cautioned 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 so much that lots of couldn't afford to refinance or return on track any other way.

Ray Queen says 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 have to help people in times of crisis, so you don't take their house from them."

The Queens state they tried 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 business.

Then, in September, the couple says they were informed they needed to come up with more than $22,000, which they don't have, or either offer their house or get foreclosed on.

Their mortgage servicing company, Mr. Cooper, said in a declaration it "checked out every possible avenue to resolve a service for this client." But it stated the VA needs much better loss-mitigation options and referred NPR to a letter from supporters, market and veteran groups prompting the VA to restart the PCP program.

The VA "has truly let people down"

"The Department of Veterans Affairs has actually let people down," states Kristi Kelly, a consumer 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 house owners entered into COVID forbearances, they were made sure pledges, and there were particular representations that were made," says Kelly. "And the VA basically pulled the rug out from under everybody."

For some house owners, ending the program might not mean foreclosure, but it still suggests a financial difficulty.

"A lot of these individuals have 2 or 3% interest rate loans," Kelly states. With the PCP program they might keep that rate of interest. Now, she states, the only method they'll have the ability to save their home is to enter into a loan modification where the rate 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, due to the fact that the VA has actually decided to end the partial claim program."

Many property owners can't pay for such a big boost in their 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 procedure. And 34,000 more are overdue.

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

But homeowners with VA loans do not, due to the fact that the VA ended that program. So veterans are being treated even worse than many other house owners, Kelly said.

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

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

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

"We had a short-term authority for that particular program throughout COVID," says John Bell, 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 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 actually found out that the VA is working on a new program to change the old one. It will operate in a various method however to comparable result, to conserve individuals from foreclosure. Bell states it's going to take 4 to five months to get it up and running.

That's too long for a lot of those 6,000 VA homeowners already in the foreclosure process. Not to discuss the lots of more who are delinquent.

Already, data reveals that more VA property owners have been heading into foreclosure considering 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 so numerous property owners at risk, there's growing pressure on the VA to stop foreclosing on veterans until it gets its spruce up and running.

"There must be a time out on foreclosures," states Steve Sharpe, a senior attorney at the National Consumer Law Center. "Veterans ought to actually have the ability to have an ability to gain access to this program when it comes online due to the fact that it's been so long given that they've had something that will truly work.

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

Pausing foreclosures sounds like an excellent idea to veteran Ray Queen in Oklahoma.

"Let us keep paying towards our regular mortgage in between now and then," he states. "Then as soon as the VA has actually that repaired we can come back and address the scenario. That appears like the adult, mature thing to do, not put a family 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 giving them every opportunity to be able to remain in the home," Bell said.

Wednesday, a group of U.S. Senators sent out a letter to the VA advising them to put a hang on anymore foreclosures.

"Without this time out, 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 immediate time out on all VA loan foreclosures where borrowers are likely to be eligible for VA's new ... program up until it is readily available and customers can be examined to see if they certify."

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 present on their mortgages. Because if the firetruck appears after the house has actually burned down, it's not going to do much great for the countless veterans and service members who need help now.
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Transcript

LEILA FADEL, HOST: An NPR investigation has actually found that countless U.S. military service members and veterans could lose their homes through no fault of their own. As NPR's Chris Arnold reports, the Department of Veterans Affairs is working on a repair. 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 2 young kids. Ray served in Iraq in the Army. Inside their house, he says that he was wounded by an improvised explosive device, or IED.RAY QUEEN: And just so you understand, I have brain damage from my time in Iraq. So there's a great deal of different things that don't work the method they're expected 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. Today the VA has actually put this household on the brink of losing their house.B QUEEN: This is the letter that my spouse and I got the other day mentioning that they're starting foreclosure proceedings.ARNOLD: What's taking place is that like countless other Americans, the Queens benefited from what's called a COVID mortgage forbearance. It was established by Congress after the pandemic hit for people who lost income. When Becky's mom died of COVID, she needed to take an extended leave from work and lost her job. In 2015, the couple says their mortgage business informed them that they could avoid 6 months of payments while they got back on their feet and after that just start paying their mortgage again.B QUEEN: I really particularly 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 out on payments would move to the back end of their loan term so they might resume their typical 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 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 payments. Rates of interest, too, had increased a lot that lots of could not afford to refinance or return on track any other way. Ray Queen states nobody informed him about any of this.R QUEEN: How does that occur? This is supposed to be a program that y' all have to assist individuals in times of crisis so you do not take their house from them.ARNOLD: The couple states in September, they were informed 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 truly let individuals down.ARNOLD: Kristi Kelly is a consumer attorney in Virginia who's hearing from a lot of veterans who are in the same boat.KELLY: The homeowners entered into COVID forbearances. They were ensured promises, and the VA basically pulled the carpet out from under everybody.ARNOLD: Kelly states for a lot 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 prevent getting foreclosed on, however 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 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 choice but to end the program. John Bell directs the VA's home financing division.JOHN BELL: We had a short-term authority for that particular 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 discovered that the VA is dealing with a new program to replace the old one, however that's still four or 5 months away - too wish for a lot of the 6,000 house owners with VA loans who are in the foreclosure process. Not to mention there's 34,000 more who were delinquent. 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, "considering all choices."BELL: We owe it to our veterans to ensure that we're giving them 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, due to the fact that if the fire truck shows up after your house burns down, it's not going to do much helpful for the countless veterans who require help now.Chris Arnold, NPR News.