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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 keeps in mind opening the letter with the foreclosure notification.

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

Queen lives on a small farm in rural Oklahoma with her spouse, Ray, and their 2 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.

Today the VA has actually put this family 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 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 set up by Congress after the pandemic hit for people who lost earnings.

But an NPR examination has discovered 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 way to repair the issue, for numerous it could be far 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 immediately 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 mom died of COVID-19. She had to take a prolonged leave from work and lost her job.

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

"I extremely 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 moved to the back end of their loan term so they could simply begin making their normal mortgage payment once 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 happened although the mortgage industry, housing advocates and veterans groups all warned the VA not to end the program, saying thousands of homeowners needed to catch up on missed out on payments. Interest rates had risen so much that lots of 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.

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

Their mortgage servicing company, Mr. Cooper, stated in a statement it "checked out every possible avenue to overcome an option for this customer." But it said the VA needs much better loss-mitigation alternatives and referred NPR to a letter from supporters, industry and veteran groups urging the VA to reboot the PCP program.

The VA "has really let individuals down"

"The Department of Veterans Affairs has actually let individuals down," states Kristi Kelly, a customer legal representative in Virginia who states she is speaking with a great deal of other veterans in the same scenario as Ray and Becky Queen.

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

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

"Many of these individuals have 2 or 3% interest rate loans," Kelly states. With the PCP program they might keep that interest rate. Today, she states, the only method they'll have the ability to conserve their home is to get in into a loan adjustment 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 decided to end the partial claim program."

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

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

Kelly states most other homeowners in America - individuals 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 don't, due to the fact that the VA ended that program. So veterans are being treated 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 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 too late

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

"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 normal authority."

Some in the industry believe the VA did, in reality, have the authority to extend the program. But in any case, it ended it.

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

NPR has learned that the VA is working on a new program to replace the old one. It will work in a various method however to similar impact, to conserve people 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 house owners currently in the foreclosure process. Not to point out the lots of more who are overdue.

Already, data shows that more VA homeowners have been into foreclosure because 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 get here far too late?

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

"There should be a time out on foreclosures," says Steve Sharpe, a senior lawyer at the National Consumer Law Center. "Veterans must 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 because they've had something that will genuinely work.

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

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

"Let us keep paying towards our routine mortgage between now and then," he says. "Then when the VA has that fixed we can return and address the scenario. That looks 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 said the VA is "exploring all alternatives at this moment in time."

"We owe it to our veterans to ensure that we're giving them every chance to be able to stay in the home," Bell stated.

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

"Without this pause, 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 execute an immediate pause on all VA loan foreclosures where customers are likely to be eligible for VA's new ... program up until it is offered and debtors can be evaluated to see if they qualify."

Ray and Becky Queen are hoping the VA does let individuals keep their homes up until the new program can offer them a way to get current on their mortgages. Because if the firetruck appears after your home has burned down, it's not going to do much great for the countless veterans and service members who need aid now.

Transcript

LEILA FADEL, HOST: An NPR investigation has discovered that thousands of 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 dealing with a fix. 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 home, he states that he was injured by an improvised explosive gadget, or IED.RAY QUEEN: And just so you understand, I have mental retardation from my time in Iraq. So there's a great deal of various things that do not work the method they're supposed to any longer. 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. Now the VA has actually put this family on the edge of losing their house.B QUEEN: This is the letter that my hubby and I received the other day mentioning that they're starting foreclosure proceedings.ARNOLD: What's occurring 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 people who lost income. When Becky's mommy passed away of COVID, she needed to take a prolonged leave from work and lost her job. Last year, the couple says their mortgage company told them that they could skip six months of payments while they returned on their feet and after that simply start paying their mortgage again.B QUEEN: I extremely 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 transfer to the back end of their loan term so they could resume their normal 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, despite the fact that housing advocates and the mortgage market and veterans groups all cautioned them not to end the program because thousands of property owners needed to capture up on missed out on payments. Rate of interest, too, had risen a lot that numerous couldn't pay for to re-finance or return on track any other way. Ray Queen says no one told him about any of this.R QUEEN: How does that take place? This is supposed to be a program that y' all need to help individuals in times of crisis so you don't take their home 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 do not have - or offer 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 truly let people down.ARNOLD: Kristi Kelly is a customer legal representative in Virginia who's hearing from a great deal of veterans who are in the same boat.KELLY: The homeowners participated in COVID forbearances. They were made specific promises, and the VA basically pulled the carpet out from under everybody.ARNOLD: Kelly says for most other house 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, but not if you have a VA loan. So she says veterans are being treated even worse than the majority of other homeowners.KELLY: Service members are going to lose their home, and for most people, that's whatever 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 however to end the program. John Bell heads up the VA's home loaning division.JOHN BELL: We had a short-term authority for that particular program during COVID.ARNOLD: Some in the market think the VA did really have the authority to extend the program. Now, though, NPR has actually learned 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 much of the 6,000 property owners with VA loans who remain in the foreclosure process. 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 alternatives."BELL: We owe it to our veterans to make certain that we're providing every opportunity to be able to remain in the home.ARNOLD: Ray and Becky Queen are hoping that the VA does put a pause on foreclosures, because if the fire truck appears after the home burns down, it's not going to do much excellent for the countless veterans who need assistance now.Chris Arnold, NPR News.