John Plahovinsak
In October of 2022, the Department of Veterans Affairs (VA) officially ended the Partial Claim Payment (PCP) program. The PCP Program was established by Congress because of the COVID pandemic impact and it allowed veteran homeowners, who lost their primary source of income, to temporarily skip mortgage payments.
Created in 1944, the VA Home Loan Program was a major part of the Servicemen’s Readjustment Act. The Program was administered by the VA and it has helped over 24 million veterans secure their homes. The PCP Program was incorporated in 2020 into the VA Home Loan Program.
The PCP was essentially a COVID Mortgage Forbearance program. Many veterans were told by their mortgage companies that they could skip up to six (6) months of mortgage payments and then start re-paying again.
The veterans were told that the months that the veterans missed payments would be added onto the back end of their mortgage. Therefore, they would not owe the missed payments in a lump sum. However, the VA officially ended the PCP in 2022 and, unfortunately, this did not happen!
Currently, according to statistics and data released from ICE Mortgage Technology, over 6,000 veteran homeowners with VA loans, who had used COVID forbearances, are in the foreclosure process and 34,000 additional veteran homeowners are now considered delinquent and facing foreclosure in the future.
On January 17, 2023, the VA was warned (by letter) not to end the existing PCP Program by veteran groups, the mortgage industry and housing advocates, because thousands of veteran homeowners needed to catch up on missed payments.
The letter stated: “We believe your agency’s current loss mitigation tools and resources are insufficient to meet the needs of veterans who require assistance to keep their homes.”
The letter urged the VA to “reactivate and update the partial claim program, which allows borrowers to receive payment relief and/or assistance in resolving missed payments, while keeping their original mortgage rates (which are much lower than currently available rates).
The VA indicated that they are looking into the situation and “seeking public input on how it can improve its existing options on the matter.”
“Many of these people have 2% or 3% interest rate loans,” said Kristi Kelly, a consumer lawyer located in Virginia. “With the PCP program they could keep that interest rate.”
“The homeowners entered into COVID forbearances, they were made certain promises, and there were certain representations that were made,” says Kelly. “And the VA essentially pulled the rug out from under everybody.”
For example, if veteran homeowners enter a loan modification to pay for their skipped/ missed back payments, their interest rate would not be at the two (2%) percent or three (3%) percent rate, but now at the current market rate of over seven (7%) percent.
The plight of over 40,000 veteran homeowners reached Ohio Senator Sherrod Brown; Virginia Senator Tim Kaine; Montana Senator Jon Testor and Rhode Island Senator Jack Reed.
These Senators requested that the VA Secretary Denis McDonough take immediate action “to protect veterans from foreclosure even as the pandemic-era program for mortgage forbearance ended one year ago.”
On November 18, 2023, the VA announced that it was “extending a pandemic-era program (PCP) that helped financially-strapped veterans keep their homes.”
According to VA Press Secretary Terrence Hayes, the VA called on mortgage servicers to pause foreclosures of VA-guaranteed loans through May 31, 2024 to allow the VA to present workable home retention solutions.
“By pausing foreclosures and extending the COVID-19 Refund Modification Program, we can continue assisting veterans with their loans while we launch our newest home retention option, the VA Servicing Purchase (VASP) program,” explained Press Secretary Hayes.
Through VASP, the VA will purchase defaulted VA loans from mortgage servicers, modify the loans, and then place them in the VA-owned portfolio as direct loans.
With the extension of the mortgage forbearance program, noted Hayes, the VA will allow veterans to obtain a zero-interest deferred-payment loan from the VA to cover missed payments and modify their existing VA-guaranteed loan to achieve affordable monthly payments for the duration of this extension.
My Opinion: The VA has finally reacted to the pleas of 40,000 distressed veterans who were in danger of losing their homes due to foreclosure.
If the veterans had used FHA loans or loans backed by either Fannie Mae or Freddie Mac, they would have ways to avoid foreclosure by moving payments to the back of the loan. But homeowners with VA loans did not have that opportunity, because the VA ended the PCP Program.
In summary, veteran homeowners with VA loans were being treated worse than most other homeowners. It appears that Senators Sherrod Brown; Tim Kaine; Jack Reed and Jon Testor stepped up and stopped the foreclosure actions, at least until May 31, 2024.
I will keep monitoring the situation until it is resolved for the veteran homeowners, who were facing foreclosure. We owe it to them!
BioSketch: John Plahovinsak is a retired 32-year Army veteran who served from 1967 to1999. He is the current Disabled American Veterans (DAV) Department of Ohio Hospital Chairman and Adjutant of Chapter #63 (Clermont County) and can be reached at: plahovinsak@msn.com.