Served with foreclosure notice for serving your country well

Foreclosures in Military Towns Surge at Four Times U.S. Rate
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 Des Moines, Iowa, in April for his third tour in Iraq. The father of four may lose his home when he returns.

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 Iraq.

In the midst of the worst surge in mortgage defaults in seven decades, foreclosures in U.S. towns where soldiers live are increasing at a pace almost four times the national average, according to data compiled by research firm RealtyTrac Inc. in Irvine, California. As military families like the VerSteeghs signed up for the initial lower rates and easier terms of subprime mortgages, the number of people taking out Veterans Administration loans fell to the lowest in at least 12 years.

``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 Norfolk, Virginia, home of the Navy's largest base, rose by an average 217 percent from January through April from a year earlier. Nationally, the rate was 59 percent in the same period, according to RealtyTrac, which tallies bank seizures, auctions and default notices.

The biggest surge was in Columbia, South Carolina, home to Fort Jackson, where the Army trains recruits for combat in Afghanistan and Iraq. Properties in some stage of foreclosure rose 492 percent from a year earlier, RealtyTrac said. The second-biggest increase was 414 percent in Woodbridge, Virginia, next to the Marine Corps Base Quantico.

Foreclosure filings tripled in the cities surrounding Norfolk Naval Base and the Camp Pendleton Marine Corps Base near Oceanside, California, RealtyTrac said. Havelock, North Carolina, site of Marine Corps Air Station Cherry Point, saw foreclosures more than double.

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 Los Angeles. In 2006, at the peak of U.S. subprime lending, the number of VA loans fell to barely a third the level of two years earlier, according to VA data.

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 U.S. household income of $59,224 as measured by the National Association of Realtors in Chicago.

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 California, are trying to extend that to a year, saying three months isn't enough.

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 Washington. Judging solely by data on VA mortgages, active military and veterans in the current housing slump are getting into trouble with their home loans at a pace only slightly above the civilian rate, he said.

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.
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