Challenges Faced by Veterans with VA-Backed Mortgages
Army veteran Scott Boyd, residing near Columbus, Ohio, is dealing with increased mortgage payments after a loan modification raised his VA home loan by nearly $1,200 per month. Due to his work in military intelligence, Boyd requested that NPR exclude his face from photographs.
Recently, thousands of military veterans with VA-backed mortgages have faced higher interest rates and monthly payments following the closure of a low-interest program by the Trump administration. This program was designed to aid veterans. NPR’s investigation, using data from the Department of Veterans Affairs, reveals that more than 15,000 veterans experienced a monthly payment surge of at least $150, with over 700 veterans facing increases of $1,000 or more.
Lenders offer loan modifications for homeowners to address missed payments by adjusting loan terms. For most Americans, modifications either lower payments or keep them the same, based on affordability. However, this is not applicable for VA loans after the program termination.
NPR found that 63% of veterans receiving loan modifications encountered an increase in payments, compared to 2% for loans guaranteed by entities like Fannie Mae and Freddie Mac that dominate the U.S. mortgage market.
California Democratic Rep. Mark Takano, ranking member of the House Veterans’ Affairs Committee, criticized the findings. “These are veterans, already financially distressed,” he said, highlighting the situation of veterans like Scott Boyd.
Boyd, driven by family circumstances, joined the military at 16. He served in the infantry, saw combat, and later worked in Army intelligence. Post-military, he pursued a tech career. In 2021, he used a VA home loan to buy a house. Circumstances changed when he lost his job and faced PTSD challenges, leading to mortgage payment arrears.
Many Americans receive aid under similar situations to avoid foreclosure, which leads to losses for homeowners and mortgage companies. Boyd’s lender assured him of a VA loan forbearance program to pause and adjust payments, which proved inaccurate post VA program termination.
The VA’s Veterans Affairs Servicing Purchase (VASP) program previously helped veterans by converting missed payments into new loans at low interest rates. The shuttering of VASP left veterans like Boyd dealing with higher-cost modified loans under the current high interest rates.
Rep. Mark Takano emphasized the VA program should aid veterans in distress, not exacerbate their issues. Illinois Republican Rep. Mike Bost and Wisconsin Republican Rep. Derrick Van Orden declined NPR’s interview requests, despite leading efforts to wind down VASP.
The VA stated it provides various programs to help veterans preserve homeownership and prevent foreclosure. Before its closure, VASP was vital for veterans struggling with mortgage payments, offering a new mortgage at a reasonable 2.5% interest rate.
The mortgage industry warned against dismantling VASP without an alternative, predicting veterans would face distressing options amid interest rate hikes. Boyd experienced this firsthand, facing a drastic increase from 2.75% to 6.75% interest rates, impacting his payment distribution and extending his loan term.
This abrupt VA program ending led to foreseeable mortgage challenges. VA spokesman Quinn Slaven reiterated that assistance requires veterans to maintain payment ability, as foreclosure rates in VA loans hit a decade high due to VASP’s cessation.
A new VA program, the Partial Claim Program (PCP), aims to offer help by transferring missed payments to the loan end, preserving original low-cost mortgage terms. Despite bipartisan support and legislative directive, delays in PCP rollout left thousands with high-cost loans during its absence.
Congress could provide intervention, suggests industry groups and Rep. Takano, to restore veterans’ favorable loan conditions. Boyd continues paying higher mortgage amounts, committed to providing stability for his family, and feels unsupported by VA decisions, expressing his disappointment.