Planet Money: The Veteran Loan Calamity

NPR’s Planet Money delves deep into a burgeoning crisis threatening the financial stability of thousands of U.S. veterans. Titled "The Veteran Loan Calamity," this episode uncovers how a seemingly beneficial policy meant to aid veterans during the COVID-19 pandemic has spiraled into a nightmare, pushing veterans like Ray and Becky Queen to the brink of foreclosure.

1. Introduction: A Promising Policy Gone Awry

The episode opens with NPR reporters Quill Lawrence and Chris Arnold arriving at the home of Ray and Becky Queen in rural Oklahoma. What initially appears to be a serene family farm soon reveals the stress of impending foreclosure:

Ray Queen (02:54): "I didn't want to talk to you in the first place... it made me feel a lot better about being about wanting to get this fixed."

Kenny Malone, the host, sets the stage by explaining that a minor tweak in mortgage terms has endangered tens of thousands of veterans' homes—a change that went largely unnoticed until now.

2. Understanding VA Loans and COVID-19 Forbearance

Background on VA Loans: VA loans, backed by the Department of Veterans Affairs (VA), have historically provided veterans with advantageous home-buying options, including no down payment and favorable interest rates. This support system is likened to having a "very good, very rich friend" vouching for veterans, thereby reducing the risk for lenders.

The Onset of COVID-19: When the pandemic struck, millions lost their jobs, prompting the government to introduce mortgage forbearance—a temporary pause on mortgage payments to prevent immediate foreclosures. Forbearance became a critical tool, especially for those in crisis, allowing them to regroup without losing their homes.

Chris Arnold (05:03): "The whole point of that was, was to buy time for the Department of Veterans affairs to roll out... this program that it was calling VASP."

However, the VA’s handling of the repayment options post-forbearance fell short for veterans holding VA loans.

3. The Queens’ Struggle: A Personal Story

Ray and Becky Queen utilized a VA loan to purchase their Oklahoma home in June 2021. During the pandemic, facing financial strain due to job loss and family health issues, they took advantage of mortgage forbearance. Initially assured that resuming payments would be straightforward—merely shifting missed payments to the end of the loan—Ray and Becky found themselves cornered when the VA altered repayment options.

Kenny Malone (12:56): "She says that they told her that when it was time to start making her mortgage payments again, nothing would really change. Those missed payments would move to the end of the loan."

Instead, the VA presented them with untenable choices:

1. Lump Sum Repayment: Paying back all missed payments at once—a daunting $22,000.
2. Loan Modification: Refinancing at significantly higher interest rates, doubling their monthly payments.

Quill Lawrence (14:16): "They couldn't afford any of those options."

After months of frustration and numerous calls, Ray and Becky faced the grim reality of foreclosure.

4. Investigative Reporting: Uncovering the Broader Crisis

Chris Arnold and Quill Lawrence embarked on an investigative journey to understand why VA loans were failing veterans post-forbearance. Their research revealed that while other mortgage-backed entities like Fannie Mae and Freddie Mac smoothly processed repayment options, the VA had abruptly discontinued its primary, affordable repayment pathway.

Chris Arnold (16:00): "The VA basically blew up the on ramp and people couldn't get back."

Their investigation uncovered that up to 40,000 veterans were now on the verge of losing their homes, a stark contrast to the VA’s intended protective role.

5. The VA’s Delayed Response: Introducing VASP

Under mounting pressure from reporters and concerned senators, the VA eventually introduced the Veterans Affairs Servicing Purchase Program (VASP)—a bailout plan aimed at halting foreclosures by taking over veterans' mortgages and resetting them at a much lower, affordable interest rate of 2.5%.

Kenny Malone (27:42): "The bailout essentially gives the VA the ability to take over the mortgages of veterans like the Queens and then allow the Queens to restart affordable mortgage payments."

This intervention provided a temporary six-month foreclosure moratorium, offering immediate relief to veterans like the Queens.

Ray Queen (24:54): "It sucks that it had to get to this point to get them to do that. But the fact that telling our story... also helps 40,000 other veterans, that's absolutely amazing to me."

6. The Lingering Crisis: Veterans Still in Peril

Despite the VASP's introduction, a critical gap remained. Veterans who had attempted partial repayments or modified their loans—like Natalie Donaldson—found themselves ineligible for the bailout. These veterans faced exorbitant monthly payments, some up to 50% higher than before, without access to the VA’s new program.

Quill Lawrence (32:08): "Natalie's mortgage company gives her a deadline... she is excluded from this rescue plan."

The VA clarified that VASP was only applicable to those who had fully defaulted on their loans, leaving veterans like Natalie without assistance unless they strategically defaulted—an option fraught with long-term financial repercussions.

Kenny Malone (37:30): "The VA finally did give us a clear answer... they don't have the authority to include people like Natalie in the bailout plan."

7. Conclusion: An Ongoing Battle for Stability

The episode concludes by highlighting that while VASP has provided temporary relief, it does not comprehensively address the underlying issues faced by all veterans. The VA's inability to extend support to those who partially navigated repayment options underscores a systemic flaw in veteran support mechanisms.

Chris Arnold (34:11): "This is not the way forbearance plans are supposed to work... Something's broken."

As of the episode's recording, the VASP rollout is ongoing, but the crisis remains unresolved for a significant subset of veterans. Ray and Becky Queen, along with thousands like Natalie, continue to advocate for equitable solutions to safeguard their homes and well-being.

Notable Quotes

• Ray Queen (15:06): "And this is supposed to be a program that you're supposed to help people in times of crisis, not being able to afford their mortgage, so you don't take their house from them."

• Quill Lawrence (35:57): "They say that veterans who are in trouble should reach out to the VA for help."

• Becky Queen (33:46): "I just say please help me to help us too... I want some semblance of what my life was before."

Final Thoughts

"The Veteran Loan Calamity" is a poignant exploration of how well-intentioned policies can falter without robust implementation and oversight. Through the heartfelt stories of the Queens and Natalie, Planet Money underscores the urgent need for comprehensive reforms to support veterans—a group that has long been deserving of unwavering support.

By spotlighting this crisis, Planet Money not only informs listeners about the economic intricacies of VA loans and forbearance policies but also humanizes the statistics, reminding us of the real lives impacted by financial policies.