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

Today the VA has put this household on the brink of losing their home.

"I didn't do anything incorrect," states 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 benefited from what's called a COVID mortgage forbearance, which enabled property owners to skip mortgage payments. It was established by Congress after the pandemic hit for people who lost earnings.

But an NPR investigation has 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 repair the problem, for many it might be too late.

After NPR initially released 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 uncertain if the VA will do that.

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

So in 2015, with their cost savings dwindling, the couple states they called the company that manages their mortgage, Mr. Cooper, and were informed they might avoid 6 months of payments. And as soon as they returned 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 huge lump sum.

"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 relocated to the back end of their loan term so they could just begin making their typical mortgage payment once 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 market, housing supporters and veterans groups all warned the VA not to end the program, stating thousands of house owners needed to capture up on missed payments. Rates of interest had actually risen so much that many couldn't pay for to re-finance or get back on track any other way.

Ray Queen says 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 help 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 once again. But they encountered hold-ups with the mortgage business.

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

Their mortgage servicing company, Mr. Cooper, stated in a declaration it "checked out every possible avenue to resolve an option for this client." But it stated the VA needs much better loss-mitigation choices 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 individuals down"

"The Department of Veterans Affairs has really let individuals down," states Kristi Kelly, a consumer lawyer in Virginia who says she is hearing from 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 pledges, and there were certain representations that were made," states Kelly. "And the VA essentially pulled the rug out from under everybody."

For some property owners, ending the program might not suggest foreclosure, but it still means a monetary challenge.

"A lot of these people have 2 or 3% rates of interest loans," Kelly says. With the PCP program they could keep that interest rate. And now, she states, the only method they'll have the ability to conserve their home is to participate in a loan adjustment where the rate 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, since the VA has chosen to end the partial claim program."

Many property owners can't manage such a big increase in their regular monthly payment.

According to the data company ICE Mortgage Technology, 6,000 homeowners with VA loans who had COVID forbearances are currently in the foreclosure procedure. And 34,000 more are delinquent.

Kelly states most other house 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 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 property owners, Kelly said.

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

VA has a plan to help, but it could 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 specific program throughout 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 industry believe the VA did, in reality, have the authority to extend the program. But in either case, it ended it.

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

NPR has actually found out that the VA is working on a new program to replace the old one. It will operate in a various way however to similar result, to save people from foreclosure. Bell says it's going to take four to 5 months to get it up and running.

That's too long for a number of those 6,000 VA homeowners already in the foreclosure procedure. Not to point out the lots of more who are overdue.

Already, data shows that more VA house owners have actually been heading into foreclosure since 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 get here too late?

With numerous property owners at danger, there's growing pressure on the VA to stop foreclosing on veterans up until it gets its fix up and running.

"There should be a time out on foreclosures," states Steve Sharpe, a senior lawyer at the National Consumer Law Center. "Veterans must truly be able to have a capability to gain access to this program when it comes online due to the fact that it's been so long since they've 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 states.

Pausing foreclosures seems like an excellent idea 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 actually that repaired we can return and address the situation. 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 straight. Bell stated the VA is "exploring all choices at this point in time."

"We owe it to our veterans to make sure that we're giving them every chance 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 any more foreclosures.

"Without this time out, 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 carry out an immediate pause on all VA loan foreclosures where debtors are most likely to be qualified for VA's new ... program till it is available and debtors can be evaluated to see if they certify."

Ray and Becky Queen are hoping the VA does let individuals keep their homes till the new program can provide them a way to get present on their mortgages. Because if the firetruck appears after your home 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 examination 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 dealing with 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 2 young kids. Ray served in Iraq in the Army. Inside their home, he states that he was injured by an improvised explosive gadget, or IED.RAY QUEEN: And so you're conscious, I have brain damage from my time in Iraq. So there's a lot of various things that don't work the method they're expected 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 edge of losing their house.B QUEEN: This is the letter that my partner and I received the other day stating that they're beginning foreclosure proceedings.ARNOLD: What's taking place is that like countless 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 an extended leave from work and lost her task. Last year, the couple states their mortgage business informed them that they could skip 6 months of payments while they returned on their feet and after that just 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 out on payments would move to the back end of their loan term so they might resume their regular mortgage payment. But that is not how it exercised, because a year ago in October, the Department of Veterans Affairs ended the program that allowed homeowners 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 countless house owners required to capture up on missed payments. Interest rates, too, had actually risen so much that many couldn't afford to refinance or get back on track any other method. Ray Queen says nobody told him about any of this.R QUEEN: How does that take place? This is expected to be a program that y' all have to assist individuals in times of crisis so you do not take their home from them.ARNOLD: The couple states in September, they were informed that they needed to come up with a substantial payment - upwards of $22,000, which they do not 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 truly let individuals down.ARNOLD: Kristi Kelly is a consumer attorney in Virginia who's hearing from a lot of veterans who remain in the same boat.KELLY: The house owners entered into COVID forbearances. They were made sure guarantees, 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 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 states veterans are being dealt with worse than most other homeowners.KELLY: Service members are going to lose their home, and for a lot of people, that's everything they work for and all their wealth, are in their homes.ARNOLD: For its part, the Department of Veterans Affairs states it had no option but to end the program. John Bell directs the VA's home loaning division.JOHN BELL: We had a short-term authority for that particular program during COVID.ARNOLD: Some in the industry think the VA did really have the authority to extend the program. Now, though, NPR has found out that the VA is dealing with a brand-new program to replace the old one, but that's still 4 or five months away - too wish for much of the 6,000 property owners with VA loans who are in the foreclosure process. Not to discuss there's 34,000 more who were delinquent. Right now 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 make certain that we're providing them 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, due to the fact that 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.