Countless veterans deal with 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 notice.

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

Queen survives on a small farm in rural Oklahoma with her partner, 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 helped veterans like him purchase homes through its VA loan program, run by the Department of Veterans Affairs.

Now the VA has actually put this family on the brink 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 expected to rely on with my mortgage."

Like countless other Americans, the Queens made the most of what's called a COVID mortgage forbearance, which allowed homeowners to avoid mortgage payments. It was set up by Congress after the pandemic hit for individuals who lost income.

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

After NPR initially 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 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 a prolonged leave from work and lost her task.

So in 2015, with their cost savings diminishing, the couple says they called the business that handles their mortgage, Mr. Cooper, and were informed they might avoid six months of payments. And once they got back on their feet and could begin paying again, the couple says they were informed, they would not owe the missed out on payments in a big swelling amount.

"I extremely particularly 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 relocated to the back end of their loan term so they might just start 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 house owners to do that. This occurred despite the fact that the mortgage industry, housing supporters and veterans groups all cautioned the VA not to end the program, stating thousands of house owners needed to catch up on missed out on payments. Rate of interest had actually increased a lot that numerous couldn't afford to re-finance or get back on track any other way.

Ray Queen says nobody 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 assist 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 faced hold-ups with the mortgage business.

Then, in September, the couple says they were told they required to come up with more than $22,000, which they do not have, or either offer their house or get foreclosed on.

Their mortgage servicing company, Mr. Cooper, said in a statement it "explored every possible opportunity to overcome a solution for this customer." But it said the VA requires better loss-mitigation choices and referred NPR to a letter from advocates, industry and veteran groups prompting the VA to restart the PCP program.

The VA "has truly let people down"

"The Department of Veterans Affairs has truly let individuals down," states Kristi Kelly, a customer lawyer in Virginia who says she is speaking with a lot of other veterans in the exact same situation 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 basically pulled the carpet out from under everyone."

For some house owners, ending the program might not indicate foreclosure, however it still suggests a monetary challenge.

"Many of these people have 2 or 3% rates of interest loans," Kelly says. With the PCP program they could keep that rates of interest. Today, she says, the only method they'll be able to save their home is to enter into 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, due to the fact that the VA has decided to end the partial claim program."

Many house owners can't manage such a substantial increase in their monthly payment.

According to the information 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 states most other house owners in America - people with FHA loans, for circumstances, or loans backed by Fannie Mae and Freddie Mac - still have ways to prevent foreclosure by moving missed payments to the back of the loan term.

But house owners 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 says. "And for the majority of people, that's everything they work for - and all their wealth remains in their homes."

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

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

"We had a short-term authority for that particular program throughout COVID," states 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 truth, have the authority to extend the program. But in either case, it ended it.

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

NPR has actually discovered that the VA is dealing with a new program to change the old one. It will operate in a different way but to comparable effect, to save individuals from foreclosure. Bell says it's going to take four to 5 months to get it up and running.

That's too wish for much of those 6,000 VA homeowners currently in the foreclosure process. Not to mention the many more who are delinquent.

Already, information 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 far too late?

With so numerous homeowners at threat, there's growing pressure on the VA to stop foreclosing on veterans till it gets its fix up and running.

"There need to be a pause on foreclosures," says Steve Sharpe, a senior attorney at the National Consumer Law Center. "Veterans ought to really be able to have a capability to access this program when it comes online due to the fact that it's been so long considering that they have actually had something that will really work.

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

Pausing foreclosures seems like a good concept to veteran Ray Queen in Oklahoma.

"Let us keep paying towards our routine mortgage in between from time to time," he says. "Then as soon as the VA has that fixed we can come back and attend to the circumstance. That looks like the adult, mature thing to do, not put a household through hell."

NPR duplicated Ray Queen's plea to John Bell at the VA straight. Bell stated the VA is "checking out all alternatives at this moment in time."

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

"Without this pause, countless veterans and servicemembers might needlessly 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 instant pause on all VA loan foreclosures where debtors are most likely to be qualified for VA's brand-new ... program till it is available and debtors can be evaluated to see if they qualify."

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

Transcript

LEILA FADEL, HOST: An NPR investigation has actually found 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 working on a repair. 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 two 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 so you understand, I have mental retardation from my time in Iraq. So there's a lot of various things that don't work the method they're supposed to anymore. And my memory is not great.ARNOLD: For years, the federal government's helped veterans like Queen to buy homes through its VA loan program. But now the VA has put this household on the edge of losing their house.B QUEEN: This is the letter that my partner and I received the other day mentioning that they're starting foreclosure proceedings.ARNOLD: What's happening 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 earnings. When Becky's mama 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 told them that they could avoid six months of payments while they got back on their feet and then just begin 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, due to the fact that a year ago in October, the Department of Veterans Affairs ended the program that made it possible for property owners to do that, even though housing supporters and the mortgage market and veterans groups all warned them not to end the program because countless homeowners required to catch up on missed payments. Rates of interest, too, had actually increased a lot that numerous could not pay for to re-finance or return on track any other way. Ray Queen says no one informed him about any of this.R QUEEN: How does that take place? This is supposed to be a program that y' all need to assist people in times of crisis so you don't take their home from them.ARNOLD: The couple states in September, they were informed that they needed to come up with a huge payment - upwards of $22,000, which they don't have - or sell their house 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 customer legal representative in Virginia who's hearing from a great deal of veterans who are in the exact same boat.KELLY: The property owners participated in COVID forbearances. They were ensured pledges, and the VA essentially pulled the rug out from under everybody.ARNOLD: Kelly states for most other property 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, however not if you have a VA loan. So she says veterans are being treated even worse than a lot of other homeowners.KELLY: Service members are going to lose their home, and for the majority of individuals, 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 however to end the program. John Bell heads up the VA's home financing division.JOHN BELL: We had a short-term authority for that particular program during COVID.ARNOLD: Some in the market think the VA did in fact have the authority to extend the program. Now, though, NPR has actually found out that the VA is working on a new program to replace the old one, but that's still 4 or five months away - too long for many of the 6,000 house owners with VA loans who are in the foreclosure procedure. Not to mention there's 34,000 more who were delinquent. 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 options."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 time out on foreclosures, since if the fire truck appears after your house burns down, it's not going to do much great for the countless veterans who need aid now.Chris Arnold, NPR News.