The chairmen of the U.S. Senate's Banking and Veterans Affairs committees introduced a bill Thursday to help veterans at risk of losing their homes because of a COVID-assistance program that the VA ended abruptly in 2022.
The bill, which they call the "Veterans Housing Stability Act," would let the Department of Veterans Affairs restart the program, which thousands of veterans used to skip mortgage payments when they faced pandemic-related financial problems.
"Our veterans earned their home loan guarantee benefit, and they deserve a viable option to get back on track with payments and keep their homes," said Sen. Jon Tester, a Montana Democrat and chairman of the Veterans Affairs Committee. He sponsored the bill along with Sen. Sherrod Brown, an Ohio Democrat who heads the Banking Committee.
Like millions of other Americans, veterans took advantage of what's called a COVID mortgage forbearance, which allowed homeowners to stop paying their mortgage for six to 18 months. It was set up by Congress after the pandemic hit for people who lost income. But an NPR investigation last November found that tens of thousands of veterans who took a forbearance were suddenly left with no way to resume making payments after the VA ended a crucial part of the program for people with VA loans.
One homeowner affected was Marine combat veteran Jason Miles.
Miles served four tours, in Iraq, Afghanistan and Syria. He lost a sales job during the pandemic and had to take a forbearance when he couldn't afford his mortgage. Like many veterans, he was told the missed payments would be moved to the back end of his loan term. But then the VA ended the part of the program that allowed homeowners to do that, leaving Miles and thousands of others facing foreclosure.
"This is horrifying," Miles told NPR in November. "I'm scared to death that we're about to lose our home."
After NPR first reported on the problem, the VA stopped the foreclosures and announced a six month pause while it worked to roll out a fix.
The sponsors of Thursday's bill say their legislation could play a key role. It would make clear that the VA has the authority to restart the program that it shut down back in 2022.
Brown said the bill "will keep our promises to veterans and service members today and in the future by giving homeowners affordable options to stay in their homes."
The VA's Partial Claim Payment program enabled mortgage companies to bundle up the missed payments from a forbearance and effectively move them to the back of the loan term so the homeowner could just return to making normal mortgage payments — with the same principal and interest payment and interest rate as before the forbearance. The missed payments would get paid back when the homeowner sold the house or refinanced down the road.
The VA told NPR it had concluded that it no longer had the authority to do that after October of 2022. Industry and housing experts disagreed and warned the VA that given a historic spike in mortgage rates, ending the program would strand thousands of veterans with no affordable way to get current on their loans. But the VA ended the program anyway and didn't replace it.
Since the 1940s, loans backed by the VA have been a bedrock part of the benefits offered to military veterans. But since October of 2022, VA loans have had worse options for homeowners who are behind on payments compared to mortgages backed by the FHA or the government-sponsored enterprises Fannie Mae and Freddie Mac.
"Our veterans and service members need to be able to bring their mortgage current," said Tester. "Our bill will ensure they can do that and are granted the same options as they would be under other federally backed loans."
The VA guarantees the loans, but they're actually made and managed by private lenders, who appear supportive of the Senate bill.
"We think a partial claim, which is necessary to enable forbearance in the VA program, is very important," said Justin Wiseman with the Mortgage Bankers Association. The group has been calling on the VA to offer more affordable ways for homeowners to get current.
Alongside the new legislation, the VA says it is working on a new loan modification program that could help the thousands of vets who were delinquent or in the foreclosure process before it paused foreclosures.
At a press conference on Tuesday, VA Secretary Denis McDonough said he is eager to work with Congress on a fix for the forbearance problem, and he promised the VA's own fix would be ready by summer.
"Each of these steps is meant to ensure that our veterans who have confronted this difficult challenge know that we're here for them and we can help them manage through this period coming out of the pandemic," said McDonough. "If that is not the case, I urge our veterans to please be in touch with us so that we can address any questions or concerns or confusion that they're encountering."
But while homeowners who were on the verge of foreclosure have a reprieve, there's another group of veterans who may not be getting any help.
Many people with VA loans ended up in loan modifications with much higher monthly payments as a result of the VA ending its pandemic relief program. The VA hasn't yet told NPR how many veterans this happened to or whether it is going to do anything for them. In an interview with NPR, Sen. Tester acknowledged that this initial bill doesn't address those veterans, but he vowed that they will be made whole.
"The VA needs to be tracking this and we're going to continue to put pressure on them," Tester said.
As for veteran Jason Miles in Mississippi, back in November his mortgage company was telling him he had to come up with a year's worth of missed payments all at once to make his loan current.
"It was essentially 'you've gotta pay the $20,000 or you're going into foreclosure.'"
These days Miles is a teacher and a coach at Clinton Christian Academy, a high school in Clinton, Miss. But even after selling some furniture and some of his firearms, there was no way he could come up with a lump sum payment to avoid losing the house where he lives with his wife and three children.
He could, however, afford to resume making his monthly mortgage payments. But his mortgage company still won't accept monthly payments unless he somehow gets his loan current again.
Now that the VA has paused foreclosures, that gives Miles some breathing room. He just hopes the VA can actually come up with a fix.
"I'm still very nervous about it," he says. But he adds, "I have hope now."
