By Kathleen M. Howley
May 27 (Bloomberg) -- U.S. Air Force Technical Sergeant Jeffrey VerSteegh, who repairs F-16 jets for the 132nd Fighter Wing, departed
The four-bedroom farmhouse he and his wife, Kathleen, own near the Iowa State Fairgrounds went into default in December after their monthly mortgage costs doubled to $1,100. Kathleen missed work because of breast cancer and they struggled to keep up the house payment, falling behind on other bills. Their bankruptcy was approved by the court a week after VerSteegh left for
In the midst of the worst surge in mortgage defaults in seven decades, foreclosures in
``We've never faced a situation like this, not in the Vietnam War, World War II, or the Korean War, where so many military are in danger of losing their homes,'' said Paul Sullivan, executive director of Veterans for Common Sense, a Washington-based advocacy group started in 2002 by Iraq and Afghanistan War veterans. ``No one asked them for their credit score when we asked them to fight for us.''
Military Foreclosures
Foreclosure filings in 10 towns and cities within 10 miles of military facilities, including
The biggest surge was in
Foreclosure filings tripled in the cities surrounding Norfolk Naval Base and the Camp Pendleton Marine Corps Base near
Weak Credit
Military families were targeted as customers during the boom in subprime lending because their frequent moves, overseas stints, and low pay meant they were more likely to have weak credit ratings, said Rudi Williams of the National Veterans Foundation in
VA loans totaled 135,000 last year, its fourth consecutive annual decline.
An Army or Marine Corps sergeant with four years of experience makes $27,000 a year, plus combat pay of $225 a month, according to the 2008 Military Authorization Act, which increased basic pay rates 3.5 percent from a year ago.
Soldiers authorized to live off-base also receive a housing allowance that this year starts at about $500 a month, 7.3 percent higher than in 2007, paid even when they are deployed. Counting the stipends, they still fall short of the 2007 median
Legislative Effort
``Think about how much stress comes with a foreclosure, and then imagine you're walking the same tightrope while being employed in Baghdad,'' said Paul Rieckhoff, 33, the head of Iraq and Afghanistan Veterans of America and a former 1st lieutenant with the Army's 3rd Infantry Division.
The Servicemembers' Civil Relief Act protects soldiers and sailors from losing homes for nonpayment of mortgages only while on active duty and for 90 days after they return home. Members of Congress, including Senator Johnny Isakson, a Georgia Republican, and Representative Bob Filner, a Democrat from
Another flaw in the current law is it puts the burden on the soldiers, sailors or the families they left behind to come up with the paperwork and notify the bank, said Sullivan of the Washington Veterans' group. Unlike in other wars, members of the military often are able to telephone home or receive e-mails, creating a ``morale problem'' as they try to deal with foreclosure notices, he said.
VA Mortgages
``It's heartbreaking to see people struggling with a foreclosure while they or someone they love is in a war zone, or when they're trying to adjust after coming back from one,'' said Sullivan, a Cavalry Scout with the Army's 1st Armored Division during the 1991 Gulf War.
Lenders aren't required to keep records on the status of non-government loans to military members or veterans, said Mike Frueh, the VA's assistant director for loan management in
The share of VA mortgages in foreclosure was 1.12 percent in the fourth quarter, compared with 0.96 percent for so-called prime borrowers with the highest credit scores, the Washington- based Mortgage Bankers Association said in a March 6 report.
`Stench of Death'
``My data comes from those that have VA loans, and we haven't seen, as I understand it, a big jump'' in foreclosures, said James Peake, the Secretary of Veterans Affairs in
The increase may yet be coming: the share of VA loans with payments 30 days or more overdue was 6.49 percent in the fourth quarter, double the rate of 3.24 percent for prime borrowers. The share of VA mortgages more than 90 days overdue was 1.54 percent, also double the prime rate, according to the bankers' report.
Monique Kelly, a disabled Iraq War veteran, said she is on the verge of adding to those VA delinquency numbers. The former Army staff sergeant in the First Armored Division paid her May mortgage bill halfway through the month and said she won't be able to make June's payment for her house in Owings Mills, Maryland.
Kelly, designated disabled by the VA because of post- traumatic stress disorder, said she bought the property in January for $305,000 and had to spend $10,000 fixing structural problems that were not disclosed to her.
``We fought for our country, and now we have to fight to save our homes,'' said Kelly. ``After living with the stench of death in
Help for Veterans
The VA has nine regional loan centers in the
Counselors also try to help veterans who fall behind on non- VA loans, he said, though they don't track the number of those cases.
``We will always try to intercede on a veteran's behalf,'' said Frueh. ``If they have a VA-guaranteed loan, we can do more for them.''
Military families or veterans refinancing a mortgage have limited resources for VA-backed loans, Frueh said. The government can only guarantee refinanced veteran loans up to $144,000, Frueh said. The median price of a
`No Hope'
The law gives military personnel the right to have interest rates temporarily lowered to 6 percent on loans incurred prior to entering active service. To apply for protection, they have to send copies of their military orders to their mortgage servicing companies, even if they are on the front lines. The VerSteeghs in
Before leaving for
``We got no hope from Hope,'' and no information about the potential interest-rate deduction, according to Kathleen VerSteegh.
San Francisco-based Wells Fargo & Co., the servicer of the VerSteegh mortgage, removed the VerSteegh property from foreclosure in April after receiving a copy of the husband's active duty orders, said Debora Blume, a spokeswoman for the bank's mortgage unit, in an e-mailed statement. Kathleen VerSteegh, 42, said they weren't notified of the change. The mortgage had gone into foreclosure on Dec. 31, Wells Fargo said.
Refinancing Plans
Wells Fargo ``is working with Mrs. VerSteegh to reduce her monthly payment during this time of financial hardship,'' Blume said.
Like many
The so-called margin, a fixed charge added to the loan's index to determine interest rate resets, is 5.25 percent, about double the typical margin for an adjustable mortgage. Their loan is indexed to Libor, the London Interbank Offer Rate.
``We refinanced so we could get new windows and do some work on the house,'' she said. ``We assumed we'd have no problem getting another loan, but then it blew up in our faces.''
Now they can't apply to refinance into a VA mortgage because they owe more on the house than it's worth and ``our credit is shot,'' said VerSteegh.
Bonus Army
The last time veterans lost homes to this extent was during the Great Depression, said Sullivan of Veterans for Common Sense. The so-called Bonus Army of almost 20,000 World War I ex-soldiers marched on
VerSteegh, who gets to speak to her husband by telephone for 15 minutes once a week, said she tries to reassure him that everything on the home front is going well, even as she struggles with the threat of foreclosure and her health problems. She's eight weeks into a course of chemotherapy treatments for breast cancer and had a double mastectomy on March 14.
VerSteegh said she doesn't know exactly where her husband is, just that he's somewhere near
``I don't tell him the whole story, because he has to focus on his job,'' she said. ``The guys in his unit are depending on him.''
Foreclosure Filings Near Military Bases from January to April, Compared With a Year Earlier: Columbia , South Carolina Woodbridge , Virginia Triangle, Virginia Oceanside , California Norfolk , Virginia Havelock , North Carolina Carlsbad , California Barstow , California Columbus , Georgia Twentynine Palms, California U.S. 
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