Edmund Garcia, an Iraq War veteran, stands outside his home in Rosharon, Texas. Like many vets, he was told that if he received mortgage deferment, his monthly payments would not increase afterward.
Joseph Bui for NPR
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Edmund Garcia, an Iraq War veteran, stands outside his home in Rosharon, Texas. Like many vets, he was told that if he received mortgage deferment, his monthly payments would not increase afterward.
Joseph Bui for NPR
The Department of Veterans Affairs announced a long-awaited new program Wednesday to help thousands of veterans who remain on the verge of losing their home after pandemic aid efforts went awry.
But it seems likely that many people who have suffered financial losses will not qualify for this new help.
“The purpose of this program is to assist more than 40,000 veterans at risk of forfeiture,” Josh Jacobs, VA undersecretary for benefits, said at a media roundtable introducing the program. Highest collateral collection”. Veterans Service Purchase Program, or “VASP.”
What senior VA officials didn’t say on the call with reporters is that the VA has put veterans in a difficult position from the start. In 2022, the VA abruptly ended part of its COVID mortgage forbearance program while tens of thousands of vets were still in the middle of the program — leaving them with no affordable way to get loans now in.
VASP is supposed to fix that problem by allowing VA to offer modifications to these homeowners’ loans at interest rates much lower than market rates on conventional mortgages. VA will own the mortgages and will offer qualified veterinarians a modified home loan with an interest rate of 2.5%.
But not everyone who is injured qualifies. Most veterinarians who had to take out much more costly loan modifications will not receive help.
VA tolerance failure
In November, the VA paused foreclosures for all homeowners with VA-guaranteed loans after a NPR investigation revealed that the agency had left thousands of veterinarians facing foreclosure through no fault of their own.
COVID mortgage forbearance programs were established by Congress during the pandemic to help people with federally backed loans by providing them with an affordable way to skip payments. pay off their mortgage and then get their current loan back.
But at the end of 2022, the VA abruptly ended the Partial Claim Payment (PCP) program, which had allowed homeowners at the end of their forbearance period to roll over missed payments later in the loan term and keep the same interest rate on their original mortgage. .
That effectively turned a well-intentioned program into a bait-and-switch trap. Veterans say that before forbearance, they were told that their regular monthly mortgage payments would not increase and that their missed payments could be rolled over over the loan term. Final. But after the VA eliminated the PCP program, veterinarians were told they needed to settle all outstanding payments at once.
“Almost $23,000? How could I come up with that amount?” Edmund Garcia asked earlier this year in an interview with NPR. Garcia is a veteran who served in Iraq. He bought a house in Rosharon, Texas with a VA home loan. After his wife lost her job during the pandemic, his mortgage company offered him a forbearance.
Edmund Garcia holds a photo of himself taken in 2000 as a specialist in charge of handling ammunition and supplies while in the Army.
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Joseph Bui for NPR
Edmund Garcia holds a photo of himself taken in 2000 as a specialist in charge of handling ammunition and supplies while in the Army.
Joseph Bui for NPR
The VA has other loan modification options, but those essentially require a new mortgage with a new interest rate, and interest rates are rising sharply – from about 3% to about 7%.
Garcia was informed that if he could not pay back all the missing payments at once, he would have to accept a loan modification that would result in a much larger monthly bill. His old mortgage rate was 2.4%; the offer would increase that rate to 7.1% with payments higher than $700 a month. In addition, he may have his assets confiscated.
“I deal with PTSD, I deal with anxiety, and you know, my heart is pounding in my chest as I talk about this,” he told NPR. “My daughter… she asked, ‘Dad, are you okay?’ “
Now it appears that any veterans who succumb to that pressure and accept these higher-cost loan modifications will not be able to get help through the VA’s new rescue plan.
Veterinarians pushed into high-cost loans won’t get help
“If you’re not in default, this program is not for you,” John Bell, director of the VA home loan program, told NPR in a news conference this week. “And you have to default for a certain amount of time.”
In other words, veterans who are paying off these higher cost loans will not qualify. And it seems like that would exclude a lot of people.
Data obtained by NPR shows that thousands of veterans ended up taking out modified loans with significantly higher interest rates after receiving mortgage forbearance.
The fine print of the VA’s new program also says that if a loan is modified, the borrower must make at least six months of payments and then be in default for at least three months to qualify.
That doesn’t seem like the right approach to some policy experts.
“We certainly don’t think borrowers should have to pay six months for a terrible, unacceptable modification,” said Steve Sharpe of the nonprofit National Consumer Law Center.
Additionally, the rules mean that if a veteran tries to pay a more expensive loan modification for a few months, then defaults and can’t afford the payments, they won’t qualify.
“If they fail to get a modification at an unaffordable price, they will be able to access VASP,” Sharpe said.
He said the VA should extend the foreclosure moratorium on VA loans, which is scheduled to expire at the end of May, to give the VA time to consider fixing problems such as This gives mortgage companies time to prepare and reach out to homeowners.
However, Sharpe said, for those who qualify, the VASP rescue plan will be of great help.
“It is great news that VASP has been released,” he said. “It is sorely needed because people have lacked a reasonable alternative to foreclosure for a long time. … Interesting.”
VA Under Secretary Jacobs told reporters that the new program’s key difference is that VA will hold the loans itself, rather than simply guarantee loans owned by investors. That’s what would allow the VA to set any mortgage interest rate it wants.
“These borrowers will have stable, affordable payments for the remainder of their loan at a 2.5% fixed interest rate,” Jacobs said.
Back in Rosharon, Texas, Edmund Garcia is wondering what will happen next.
Edmund Garcia stands with his wife, Iris Garcia, in their home, where they live with their four daughters. Iris lost her job during the pandemic and their mortgage company offered them a forbearance.
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Edmund Garcia stands with his wife, Iris Garcia, in their home, where they live with their four daughters. Iris lost her job during the pandemic and their mortgage company offered them a forbearance.
Joseph Bui for NPR
“I was a little shocked when I found out that I would have to qualify for this program,” Garcia told NPR this week.
The VA says borrowers should work with their mortgage company and reach out a VA loan technician if they need help.
In Garcia’s case, he never actually accepted that more costly loan modification. And from looking at the rules, it seems like he should be eligible for VASP. But there’s a catch. According to regulations, he will likely have to take out a mortgage for 40 years. That could eventually happen to so many other veterans.
“I will eventually be 82 years old,” Garcia said. But he will still be happy to receive help.
“This will be a great relief to my family,” Garcia said. “And it feels like it’s within reach.”
