U.S. military veterans who fell into a mortgage trap during Covid may finally get some help in avoiding foreclosure.

Senators Jon Tester and Sherrod Brown are behind the Veterans Housing Stability Act of 2024, which seeks to protect veterans and servicemembers holding Veterans Affairs (VA) home loans from foreclosure by restarting a complex forbearance program and adding another layer of security.

Veterans who experienced financial hardship during the pandemic were permitted to use forbearance payments without consequences and stay in their homes, providing desperate relief at the time.

However, the VA paused that feature in 2022 even as many veterans were still dependent on it for their survival, requiring them to make delayed payments that often amounted to tens of thousands of dollars all at once.

The Veterans Housing Stability Act wants to fix this problem by restarting the forbearance program to help wean borrowers off forbearance and adding an option to place a moratorium on foreclosures.

“No Ohio veterans should be kicked out of their homeparticularly not when they are trying to get back on track with their payments,” Sen. Brown, who represents Ohio, said. “The Veterans Housing Stability Act will keep our promises to veterans and servicemembers today and in the future by giving homeowners affordable options to stay in their homes.”

The very program that was launched to protect vets during the pandemic could be the one that is responsible for making them homeless. While lawmakers are trying to fix the issue, it also exposes a bigger problem in which veterans are often given the short end of the stick.

Congressional program a catch-22

While the pandemic is in the rearview mirror by now, many vets feel like they’re experiencing déjà vu. It’s a catch-22 in which families who fell behind on mortgage payments during the pandemic were offered a lifeline, only to have it taken away later.

That rescue, which was engineered by Congress, came in the form of mortgage payment relief that allowed borrowers to skip payments for a while.

Those payments weren’t forgiven but tacked on to the back of their mortgage loan, with the expectation that homeowners with VA-backed loans would resume payments when they were more financially stable.

But when the forbearance program came to a crashing halt two years ago, lenders required homeowners to suddenly become current on their mortgages. Those vets who couldn’t foot the bill were denied the opportunity to continue with regular payments and only fell deeper into the red as a result.

NPR described the program as “bait and switch,” suggesting it lured in desperate veteran homeowners only to pull the rug out from under them when it came time to pay the piper.

Edmund Garcia, a combat veteran who served in Iraq, is one of those borrowers. After his wife became unemployed during Covid, the couple was offered a forbearance period. But when that abruptly ended, they were on the hook for thousands of dollars they couldn’t pay.

The only option that the lender offered was to pay or face a short sale in which they would lose their home. He told NPR: I'm like, how am I gonna come up with ... almost $23,000? How am I gonna come up with that?

The Garcias are one example, but some 40,000 vets are currently facing foreclosure in America.

Veteran housing crisis

Veteran homelessness is a major problem in America, and the pandemic only made things worse.

According to the Department of Housing and Urban Development (HUD), 36,000 veterans were homeless as of early 2023, a 7.4% increase from 2022. It has been one step forward and two steps back as the number of vets suffering from homelessness has been more than slashed in half since 2010.

One of the biggest barriers to homeownership among former service members has been soaring housing costs. A 2022 report by The Gap, a National Low Income Housing Coalition division, revealed that a mere 36% of rental homes fell into the affordable and available category out of every 100 low-income renter families.

To help, HUD and the VA recently directed $14 million in rental vouchers, a program dubbed HUD-VASH, toward assisting homeless veterans with finding housing.

VASH is designed to help veterans obtain “affordable and scheduled monthly mortgage payments that reduce debt owed over time at a rate much lower than the current market interest rate,” according to John Bell of the Veterans Benefits Administration.

Historically, even those vets possessing vouchers could be denied housing in pricey neighborhoods where the real estate supply is low.