The U.S. Department of Veterans Affairs, as of Thursday, has ended a new mortgage-rescue program that so far has helped about 20,000 veterans avoid foreclosure and keep their homes.
The move leaves millions of military veterans with far worse options than most other American homeowners if they run into trouble paying their home loans. And it comes at a time when nearly 90,000 VA loans are seriously past due, with 33,000 of those already in the foreclosure process, according to the data and analytics firm ICE.
At issue is the VA Servicing Purchase program, or VASP. It was put in place during the Biden administration after missteps by the VA left homeowners with no affordable way to catch up on their VA-backed home loans if they fell behind. VASP rolls the homeowners' missed payments into a new, low-interest rate loan that the VA then owns outright. With today's higher mortgage rates of around 7%, it is often the only affordable option for homeowners with VA loans.
But Republicans in Congress have been critical of the VA Servicing Purchase
program, saying it puts too much taxpayer money at risk. In a statement this week to NPR, the VA said, "[As of May 1,] the program, which was unilaterally created by the Biden Administration and lacks congressional authority, will stop accepting new enrollees."
Mortgage industry groups, housing advocates and veterans organizations have been warning the VA that shutting down VASP without replacing it with something else first would result in large numbers of veterans losing their homes, many of whom are in this financial peril because of the VA's own mistakes.
"With the expiration of VASP, tens of thousands of Veterans and their families are now at significant risk of losing their homes," said Mike Calhoun, president of the nonprofit Center for Responsible Lending, a nonpartisan organization that advocates for the financial rights of underserved communities, including veterans.
His group is urging Congress to quickly pass legislation to create a new program to fill the gap, and he said, "VA should extend VASP until this program is up and running."
Thousands of vets left stranded, again
Thousands of veterans were left facing foreclosure two years ago after the VA abruptly canceled a key part of a pandemic-era mortgage relief program that allowed veterans to skip mortgage payments if they had trouble paying. When an NPR investigation first uncovered the VA's move in late 2023, there were about 40,000 vets in danger of losing their homes.
Kevin Conlon is one of them.
Conlon and his wife, Jenny, live in upstate New York, not far from where he was stationed with the Army at Fort Drum. After his two combat tours in Iraq, about 12 years ago the couple had a young kid and were struggling to pay rent and save money. Getting a VA loan meant that they could buy a house with no down payment. And they've been there ever since.
"That's the longest I've been in one place," said Conlon.
"Without the VA loan, there was no way that we could have afforded to buy a house," his wife added.
The VA home loan has long been a bedrock benefit of the GI Bill, giving vets a leg up into the middle class.
But all that came unraveled for tens of thousands of vets like Conlon who were on what's known as a mortgage forbearance. It was supposed to help them during a time of financial hardship by pausing their monthly payments and then giving them an affordable way to start paying again and get current. After NPR reported that the VA had shut down the only affordable option for veterans to do that, the VA responded by halting foreclosures for a full year while it rolled out its VASP rescue plan.
While they've been waiting to get into VASP, the Conlons have been told not to make payments, so they've been falling further and further behind, and they say their family has nowhere to go if they lose this house.
"I joined right after Sept. 11th," said Conlon, who grew up in Queens, N.Y., and was in Manhattan the day of the attacks.
Conlon's wounds from his time in Iraq aren't visible, but they've taken years to heal. During his two combat tours, roadside bombs hit his convoys repeatedly and left him with traumatic brain injuries. On the second tour, his best friend died when he hugged a suicide bomber to the ground, giving his life to protect his friends. The trauma and survivor's guilt wounded Conlon, he says, as bad as the blast injuries. He struggled with PTSD and thoughts of suicide for more than a decade before finally getting to a stable, healthy place.
"I was willing to die for what I believed in. And for someone [to] ... take away the home that my family lives in? Like we've paid enough, we've really paid enough," he said.
Referring to the VA winding down VASP, VA spokesman Pete Kasperowicz told NPR, "This change is necessary because VA is not set up or intended to be a mortgage loan restructuring service."
Republicans have their own plan, but it's not in place yet
Republican critics in Congress don't like that VASP buys the rescued loans from the mortgage industry and then holds the loans on the VA's own books. They say the VA would lose too much money if the homeowners fall behind again.
"The Trump administration rightfully put an end to VA's VASP program," said a joint statement from Rep. Mike Bost, an Illinois Republican and chairman of the House Committee on Veterans' Affairs, and Rep. Derrick Van Orden, a Wisconsin Republican, when VA announced its plan to end VASP.
Van Orden has sponsored a bill to replace VASP with what's known as a "partial claim" program that experts say would help vets struggling to keep their homes by moving their missed payments to the back of their loan term so they would pay them back down the road.
But between VASP ending and Van Orden's bill possibly becoming law is a chasm that could swallow thousands of VA home loans.
"Veteran borrowers will face otherwise preventable foreclosures, which harm the government through increased payouts as well as harm Veteran homeowners," warned the nonprofit National Consumer Law Center and the Center for Responsible lending in a letter to Congress last month.
"Without VASP or immediate access to alternative policy tools that provide relief … many of these homeowners will be forced to sell their homes and move or face foreclosure," the letter said.
In the wake of the move by the VA, Democrats and Republicans in Congress both say they want to pass legislation to give veterans with VA loans better options for avoiding foreclosure. But it's unclear how long that will take.
In the meantime, veterans behind on their mortgages have far worse options than most other Americans who have loans backed by Fannie Mae, Freddie Mac or the Federal Housing Administration. Those entities all have loss mitigation options that allow homeowners to catch up on missed payments without being forced into a new modified loan at today's high interest rates.
Vets left in limbo and disbelief
For their part, veterans interviewed by NPR feel like the VA has now repeatedly stranded them by first offering them a lifeline and then cutting the rope once they grabbed hold.
"I feel let down and deceived," said Samuel McCrary, a Marine Corps vet with three young kids in Loganville, Ga. The new VASP program looked like it was going to save his house, but now the VA has ended new enrollments in it and he says his mortgage company can only tell him his application for VASP is "pending."
"I believe that we are going to lose the house," McCrary said. "Losing my house and having to go rent — it makes me sick to my stomach to think about."
Even veterans who have made it into the VASP program aren't sure if they'll be OK. That's because many of those vets are in a VASP three-month trial payment period. The VA says vets who have entered that process can continue it through August, "subject to VA's determination that funds remain available for VASP."
The VA did not respond to NPR's request for information about how much funding is available or how many more veterans in these trial periods will in fact be placed into affordable VASP loans.
Veterans also tell NPR they feel like they're scapegoated and paying the price for the VA's mistakes.
At a recent House Veterans' Affairs Subcommittee hearing, Rep. Van Orden criticized VASP this way:
"I understand the whole developmental process of this, and it was moronic," Van Orden said. "It gets rid of a bum loan, and it passes it off to the American taxpayers."
That comment did not sit well with fellow Iraq veteran Conlon and his wife, Jenny.
"That's a hell of a thing to say about his brothers and sisters," said Conlon.
"That was so hurtful because these are not bum loans, and they're making the veterans and their families out to sound like irresponsible people," his wife added.
The couple says Kevin took the forbearance so he could get treatment for PTSD. "That's why we needed it, so he could go inpatient at a veterans program," Jenny said.
The Conlons say they followed the VA's instructions and then got stuck when the VA shut off part of its forbearance program in 2022. Then they followed the VA's instructions again by applying for the new rescue program, VASP. And the VA now says it's shutting that off. Their mortgage company tells them they are enrolled in the VASP trial payment plan, but it's unclear whether the VA will determine it has funding to help all the veterans on those trial plans with permanent new VASP loans.
"The level of just mistrust I have — I mean, I get they're trying to cut spending and all that, but it's like, how do you justify cutting something that is to help the vets who were basically put in this position because of you?" Conlon said.
NPR asked the VA if it's concerned about veterans losing their homes after it shuts down VASP with no replacement ready yet. A VA spokesman has not answered that question but at one point referred our reporters to Congress.
NPR asked the Republican House VA committee leadership the same question; that office referred our reporters back to the VA.
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