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<< Previous   of   Next >>   ADVERTISEMENT   CONTACT THE HERALD Mike Benbow, Business Editor benbow@heraldnet.com   Published: Saturday, June 7, 2008 VA acts to offer mortgage relief By Tom Philpott With thousands of service members and veterans having lost homes or facing foreclosure as the mortgage crisis continues, lawmakers are pushing legislation to raise VA loan ceilings, lower VA funding fees and expand the VA's ability to help veterans to refinance loans they can't afford. The Department of Veterans Affairs, meanwhile, encourages military members, veterans and surviving widows with at-risk loans to seek advice from VA loan counselors even if their loans are not VA-guaranteed. VA loan experts lack authority to restructure or renegotiate loans not backed by VA. But they can advise veterans on their options and on how they might negotiate with mortgage holders to avoid default. VA's effort to reach mortgage holders in distress now includes a toll-free number, 877-827-3702, that automatically directs callers the nearest of nine VA regional loan centers. VA loan counselors have helped 74,000 home­owners since 2000, including half of all VA loans in serious default last year, thus saving the government nearly $1.5 billion, officials contend. The VA Loan Guaranty program avoided the subprime loan debacle. While delinquency rates have climbed over the past five years for subprime, FHA and prime mortgages, delinquencies have fallen for VA-backed loans. During the easy mortgage money frenzy that led to the housing market crash, VA-backed loans with no down payment lost favor with homebuying veterans who needed bigger loans for more costly houses than the VA would approve, or were tempted by teaser loans and unchecked credit. "We never did the same things (as mortgage companies) as far as changing rules for what it takes to get a loan," said Judith Caden, director of the VA Loan Guaranty Service. "We've required underwriting and always had underwriting standards. We've always required that (applicant) income and credit be documented. We made sure that someone getting a VA loan could afford that loan." That doesn't mean VA loans operated well during the housing market bubble or mortgage crisis that has followed, according to Rep. Bob Filner, D-Calif., chairman of the House Veterans Affairs Committee. VA loans have "basically become irrelevant," Filner said. VA loan rates and fees often were seen as less competitive than other offerings. As a result, VA-guaranteed loans nationwide fell from a recent peak of nearly 500,000 in 2003 to 133,000 last year. The trend seems to have bottomed and VA loans across the country are rising. In California, 3,500 VA loans have been approved through the first eight months of fiscal 2008. Filner said the two major successes of the World War II-era GI Bill were in education and housing. He said he'd like to lead a new effort to enhance the VA home loan program. Filner's Helping Our Veterans to Keep Their Homes Act, HR 4884, would raise the maximum VA home loan to $730,000; eliminate a requirement that veterans have 10 percent equity in a home to be able to refinance through a VA loan; and lower VA home loan funding fees by moving to a flat fee of 1 percent regardless of type of home loan. Filner's call to eliminate any equity requirement for VA refinancing, and to lower most funding fees, are opposed by VA officials as too risky. "That's our job," Filner said, "to take the risk for the young people who served our nation. It is part of the cost of war …. If we can't take more risk than the bank does, then it's not worth having (VA loans) … We should be willing to take some risk on the people who took risks for us." To comment, e-mail milupdate@aol.com, write to Military Update, P.O. Box 231111, Centreville, VA 20120-1111, or visit militaryupdate.com.

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