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Countless 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 remembers opening the letter with the foreclosure notification.

"My heart dropped," she said, "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 actually assisted veterans like him buy homes through its VA loan program, run by the Department of Veterans Affairs.

And now the VA has put this family on the brink of losing their home.

"I didn't do anything wrong," says Ray Queen. "The only thing I did was trust a business 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 permitted homeowners to avoid mortgage payments. It was established by Congress after the pandemic hit for people who lost earnings.

But an NPR investigation has actually 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 dealing with a way to repair the problem, for many it could be far too late.

After NPR initially published this story, a group of four U.S. Senators sent a letter to the VA asking it to immediately 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 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 states they called the company that manages their mortgage, Mr. Cooper, and were informed they might avoid 6 months of payments. And once they got back on their feet and might start paying again, the couple says they were told, they would not owe the missed payments in a huge lump amount.

"I very particularly 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 might 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 allowed house owners to do that. This occurred even though the mortgage industry, housing supporters and veterans groups all cautioned the VA not to end the program, saying countless house owners required to capture up on missed payments. Interest rates had increased a lot that lots of could not pay for to refinance or return on track any other method.

Ray Queen states nobody informed him about any of this.

"How does that take place?" Queen asked. "This is supposed to be a program that you all need to assist people in times of crisis, so you don't take their home from them."

The Queens state they tried to come off their forbearance in February of this year and their mortgage. They were both working once again. But they encountered delays with the mortgage company.

Then, in September, the couple says they were told they required 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, stated in a statement it "explored every possible avenue to resolve a solution for this customer." But it said the VA requires much better loss-mitigation options and referred NPR to a letter from advocates, 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 truly let people down," states Kristi Kelly, a consumer lawyer in Virginia who says she is hearing from a great deal of other veterans in the very same scenario as Ray and Becky Queen.

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

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

"Much of these individuals have 2 or 3% rate of interest loans," Kelly says. With the PCP program they might keep that rates of interest. Today, she states, the only way they'll be able 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%.
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"For many people, their payments will increase by $600 or $700 a month, since the VA has decided to end the partial claim program."

Many house owners can't pay for such a huge boost in their month-to-month payment.

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

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

But property owners with VA loans do not, due to the fact that the VA ended that program. So veterans are being dealt with worse than a lot of other homeowners, Kelly said.

"Service members remain in a position where they're going to lose their home," she states. "And for the majority of people, that's whatever 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 option 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 typical authority."

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

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

NPR has actually discovered that the VA is working on a brand-new program to change the old one. It will operate in a different method however to similar effect, to save people from foreclosure. Bell says it's going to take 4 to 5 months to get it up and running.

That's too long for a number of those 6,000 VA house owners already in the foreclosure process. Not to point out the lots of more who are delinquent.

Already, data shows that more VA property owners have 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 a lot of property owners at danger, there's growing pressure on the VA to stop foreclosing on veterans till 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 should truly be able to have an ability to gain access to this program when it comes online because it's been so long because they have actually had something that will truly work.

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

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

"Let us keep paying towards our regular mortgage in between from time to time," he states. "Then as soon as the VA has actually that fixed we can come back and resolve 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 directly. Bell stated the VA is "exploring all alternatives at this point 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 stated.

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

"Without this pause, countless veterans and servicemembers might 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 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 time out on all VA loan foreclosures where debtors are likely to be eligible for VA's new ... program till it is offered and debtors can be assessed 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 current 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 help now.

Transcript

LEILA FADEL, HOST: An NPR examination 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 two young kids. Ray served in Iraq in the Army. Inside their house, he states that he was wounded 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 different things that don't work the method they're expected to any longer. And my memory is not great.ARNOLD: For decades, the federal government's assisted veterans like Queen to buy homes through its VA loan program. Today the VA has actually put this household on the edge of losing their house.B QUEEN: This is the letter that my husband and I received yesterday specifying 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 individuals who lost earnings. When Becky's mommy died of COVID, she needed to take an extended leave from work and lost her job. Last year, the couple says their mortgage business informed them that they could skip six months of payments while they returned on their feet and after that just start paying their mortgage again.B QUEEN: I very 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 relocate to the back end of their loan term so they could resume their regular mortgage payment. But that is not how it worked out, due to the fact that 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 market and veterans groups all cautioned them not to end the program due to the fact that thousands of house owners required to capture up on missed payments. Interest rates, too, had increased so much that numerous could not manage to refinance or return on track any other way. Ray Queen states no one told him about any of this.R QUEEN: How does that happen? This is expected to be a program that y' all need 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 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 really let people down.ARNOLD: Kristi Kelly is a customer lawyer 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 made certain promises, and the VA essentially pulled the rug out from under everybody.ARNOLD: Kelly says for many other house owners in America, there are still methods to move your missed 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 treated worse than the majority of other homeowners.KELLY: Service members are going to lose their home, and for many 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 financing division.JOHN BELL: We had a short-term authority for that particular program during COVID.ARNOLD: Some in the industry believe the VA did actually have the authority to extend the program. Now, however, NPR has found out that the VA is working on a brand-new program to replace the old one, however that's still 4 or five months away - too long for many of the 6,000 house owners with VA loans who remain in the foreclosure procedure. Not to discuss there's 34,000 more who were overdue. Right now there's pressure on the VA to put a pause on foreclosures while it gets that program running. John Bell states the VA is, quote, "thinking about all alternatives."BELL: We owe it to our veterans to ensure 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 pause on foreclosures, since if the fire engine appears after the house burns down, it's not going to do much great for the thousands of veterans who require assistance now.Chris Arnold, NPR News.