When you walk up to Natalie Donaldson's little cottage-style house in Tulsa, Okla., you're greeted by her bright smile, and her well-muscled pit bull named Sigrid.
"She's friendly but she's gonna want to check you out," Donaldson said.
Donaldson is an army vet, and she had a rough go in the military. She has PTSD. And that's partly why owning this house is important to her — she has her own space where she feels safe.
But these days Donaldson is barely able to scrape the money together to pay her mortgage, because she was hurt by a botched VA home loan program. The program was meant to help her, but instead it stranded her in a modified mortgage with a much higher interest rate that has raised her payments by 50% — nearly $500 more every month, permanently.
"I bought a house that I could afford by myself and now I can't," Donaldson said. "The girl that's my loan advisor, she doesn't have the power to do anything… except for listening to me rant and cry and tell me she's sorry over and over again."
There are many other vets in Donaldson's same situation.
NPR has learned that thousands of other veterans appear to have been similarly hurt by the VA's missteps and left stranded in higher-cost mortgages. According to documents obtained under the Freedom of Information Act, at least 1,300 veterans ended up in loans that raised their monthly payments by more than 50%.
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A program to help vets is hurting them
This all started for Donaldson after COVID hit. She'd been working as a schoolteacher after leaving the Army but her grandfather was dying and she needed to stop working to care for him.
Donaldson called her mortgage company, desperate for help. "I was crying and she goes, 'Oh honey, why are you crying… it's gonna be OK.' "
It should have been OK, because back then Congress said anyone with a federally backed mortgage could pause their payments for up to 18 months through what's called a COVID mortgage forbearance. Donaldson, like millions of other veterans, has a home loan backed by the Department of Veterans Affairs. So she was told she could stop paying her mortgage.
A mortgage forbearance gives a homeowner a way to temporarily stop paying their mortgage, and then when they get back on their feet financially, they're supposed to be able to resume paying and be current on their loan. A forbearance is not supposed to result in a massive increase in a homeowner's mortgage payment because the whole point is to help somebody who is struggling to pay in the first place.
When they started the forbearance, many vets were told that when they were ready to start paying again, their missed payments would be moved to the back of their loan term. That would enable them to just resume making their original monthly mortgage payment, and the missed payments would get paid back down the road.
But that's not how it worked out for many veterans.
When Donaldson was ready to start paying her loan again, her mortgage company told her she only had two options — both of them bad.
The first option, Donaldson was told, was to pay back all the missed payments right away in a lump sum of more than $15,000, which she didn't have. The other option was a loan modification. But mortgage rates had doubled, so the loan representative told Donaldson this new modified loan would have a much higher interest rate and monthly payment.
"I'm telling her it's not sustainable. I can't do this," Donaldson said. "I don't know what to do."
How the VA stranded vets
The reason Donaldson and thousands of other vets were put in this position is that in October of 2022, the VA suddenly shut down a key part of its mortgage forbearance program — the part that enabled homeowners to move their missed payments to the back of their loan term. Interest rates had just risen more sharply than they had in 40 years. And so without that option, there was no affordable choice left for veterans. They were stuck.
Donaldson's mortgage company gave her a deadline to accept a loan modification. Her interest rate would rise from 3.25% to 6.75%, pushing her monthly payments up by nearly $500 a month, on a school teacher's salary.
"Finally the date has come and gone and they're calling me, they're calling me every day," said Donaldson. "I'm on the phone with the girl… and she said, 'You have to sign it, you know you have to, otherwise we're gonna foreclose on your home.'"
Donaldson didn't want to lose her house. So she took that really bad deal and scrambled to find any extra work she could take on, in addition to her full-time job.
"Tuesday, I was doing one after-school program, Thursday I was doing one after-school program, and Wednesday, I was doing another one," Donaldson said. "And so I'm just doing all this stuff so that I can make all this money so I can try to pay my house payment."
Donaldson said the burden of making the extra money has been relentless.
"I just went to work, I came home, I kind of shut down," she said. "I just said, 'I can't, I can't do this anymore.' "
But she is still somehow making those payments. And, Ironically, that's what's hurting her. If she'd thrown up her hands and hadn't even tried to pay this more expensive mortgage, Donaldson would likely be OK right now.
That's because when NPR first reported on this problem within the VA last year, the story revealed that thousands of veterans were on the verge of foreclosure. In response, a group of powerful U.S. senators fired off a letter to the VA which quickly halted foreclosures across the country while it rolled out a rescue plan.
The VA is just now rolling out that plan. It will offer vets who were left facing foreclosure a new loan – with affordable payments at a low 2.5 percent interest rate. That should help tens of thousands of veterans.
But it's not helping Donaldson.
The VA's rescue program, with these new affordable loans, is only for people who never accepted a loan modification like Donaldson got.
"All these other people, it's fixed for them and I'm so happy for them," Donaldson said. "But I want, I need that for myself too.
"I want some semblance of what my life was before I did this."
Other vets have told NPR the same thing. They were offered a lifeline with this forbearance, but because of the VA's missteps, they got stuck with a much higher-cost modified mortgage that they can't afford.
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And under the current rules of the VA's program, these veterans are not eligible for the VA's rescue plan and a lower-cost loan.
What's more, the fine print of the VA's rescue plan explains that many vets who took on one of these higher cost loan modifications and then fell behind because they couldn't afford it – they, too, are excluded from the rescue plan.
In a statement to NPR, a VA spokesman said the agency "does not have the authority" to include veterans like Donaldson in its new program, known as the Veterans Affairs Servicing Purchase program, or VASP.
Steve Sharpe, an attorney and mortgage policy expert at the National Consumer Law Center, said he's skeptical of that claim by the VA.
"The VA probably does have the authority," Sharpe said. "It should be able to find a way to help these borrowers."
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