The VA loan is reforming… stay tuned


I’ve been away from my blog lately, helping dozens of families with the purchases of their new homes… HOWEVER i’m back at it and here is an AMAZING article from the Military By Owner website that I thought I would share…

The VA Home Loan Guaranty Program spoke during the annual meeting of the National Association of Realtors last month of reform and efforts toward improving efficiency; it seems that the entire VA system has many such intentions on its mind lately.

The VA loan is a popular product for military families even in the post-recessionclimate. The loan program not only offers loans for primary homes, but it also offers a second VA loan product for a second primary home in the even that a military family has either undergone a distressed sale or a PCS to a new location. At current count, the VA loan backs over one trillion dollars in mortgage holdings, making the mortgage a substantial player in the home financing industry.

Given that it holds such a large stake of the home financing market, establishing efficient measures to help manage the substantial influx of new home loan applications that it receives on a regular basis is imperative to help this government-owned mortgage insurer continue to operate effectively. To better understand how busy the agency is, VA Loan Guaranty Director Mike Freuh said that they processed over 630,000 loans just in 2013. The average loan amounted to approximately $225,000; however, over half of these loans were refinances, which is somewhat easier to process than an application for an entirely new property.

The VA loan is also a critical loan product in helping military families obtain homeownership. According to Military By Owner partner, Veteran’s United, a leader in the VA home loan industry that financed over $4.1 billion in VA loans last year alone, “80 percent of veterans and service members can’t qualify for a conventional loan.” The average applicant has only $7,000 in liquid assets available at the time of purchase, and most cannot afford a down payment of any sort. As a result, over 90-percent of all VA loans are zero down loans.

To help military families continue to acquire these loans in the short turnaround time that most have for each PCS relocation, the VA presented to the NAR four ways in which they propose to reform.

  1. Create an Automated Underwriting System

By automating the underwriting process, not only does the VA hope to speed up the underwriting process, but also they hope to improve their credit risk assessments. By removing human error and judgment, the credit risk assessments should be more uniform.

  1. Restructure a Full File Loan Review System

The VA recognizes that systemic issues may exist within their current system of file management. They proposed to restructure the way in which they manage information to help better analyze any issues as they arise.

  1. Change Fee Requirements

As covered in a recent article that addressed the increasing role of cash in the home buying market, having any contingencies such as additional fees may hinder a military family’s opportunity to buy a home. The VA is reviewing mandatory fees that the home seller must cover, such as pest inspections, to determine if they may prevent a prospective seller from accepting an offer from a VA loan applicant. These fees are designed to help ensure that military families are living in a safe environment, but the VA now aims to address whether this goal is counterproductive by dissuading sellers from working with military families.

  1. Expedite the Appraisal Process

Unlike any other home mortgage insurance agency, the VA uses its own in-house team of appraisers. As anyone who has ever sought a VA loan can attest, the shortage of appraisers can often substantially hold up the loan process. Therefore, the VA intends to increase the number of appraisers on hand to prevent unnecessary delays for military families seeking to reunite with their household goods after a long PCS. After all, who wants to spend more time than necessary in temporary base lodging?

If you have additional questions about the VA home loan, make sure to contact either Veteran’s United or a mortgage lender with significant experience in VA loans. Inquire as to whether they’re familiar with any of the proposed changes to VA home loan product; the current proposals make take quite a while to create and implement, but keep this in mind for your next PCS or home purchase!

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