With Refinance Booming, VA Loan Volume Hits 18-Year High

VA loan volume hit an 18-year high in the fiscal year that ended in September, according to data recently released by the Department of Veterans Affairs.

The significant increase — both historical and year-over-year — is another sign that military borrowers are moving away from the tighter conventional lending space and toward the VA loan program’s more flexible credit and income requirements. Loan volume jumped 51 percent from FY11 to FY12, spurred in large part by a boom in refinance loans.

VA loan growth

Record-low interest rates have made the VA’s Streamline and Cash-Out refinance programs increasingly attractive. In some cases VA-approved lenders are able to process Streamlines without an appraisal, which continues to help qualified underwater homeowners take advantage of low rates.

Here’s a look at how VA loan volume has changed in the last five years alone:

FY12: 539,884
FY11: 357,592
FY10: 314,011
FY09: 325,690
FY08: 179,670
FY07: 133,313

The continued growth of the VA loan program comes as consumers continue to face tighter lending requirements in the wake of the subprime mortgage meltdown. Generally, VA lenders are looking for a credit score of at least 620, and the program offers financial benefits such as $0 down, no private mortgage insurance and higher allowable debt-to-income ratios.

Flexible requirements

Many military borrowers can struggle to hit the credit and/or down payment requirements necessary to secure conventional or even FHA financing. The average credit score on an FHA denial in May was 669, according to the National Association of Realtors. More than half the conventional loans issued in August went to borrowers with at least a 740 score.

Every state experienced at least a 25 percent increase in loan volume. Some military-dense states posted big gains in particular, including Hawaii (89 percent), Virginia (69 percent) and California (65 percent).

VA Loans Still Safest Product on the Market

The Department of Veterans Affairs issued a news release this week trumpeting the continued growth of the VA Loan Guaranty program. The agency backed just under 360,000 loans last year, a 14-percent increase from FY10 and a whopping 168-percent increase since FY07.

But that wasn’t the only good news. The release also noted that VA loans have had the lowest rates of foreclosure and serious delinquency for the past 14 quarters and 11 quarters, respectively, according to the Mortgage Bankers Association National Delinquency Survey.

Those figures are even more surprising considering that about 90 percent of VA loans come with no down payment.

“The continued strong performance and high volume of VA loans are a testament to the importance of VA’s home loan program and a tribute to the skilled VA professionals who help homeowners in financial trouble keep their homes,” Secretary of Veterans Affairs, Eric K. Shinseki said in the release.

The VA works closely with borrowers and their servicers to avoid foreclosure. Veterans in jeopardy should always contact their loan servicer first, but the VA provides services and staff to help borrowers pursue options like modifications, forbearances and repayment plans. Homeowners can call 877-827-3702 to talk with a VA specialist.

“We are committed to making even more veterans and service members aware of this important benefit and delivering the assistance they deserve when financial difficulties arise,” said VA Under Secretary for Benefits Allison A. Hickey.


Riding a Refinance Wave, VA Loan Volume Up 14% in FY11

Riding a wave of new refinance loans, the VA home loan program experienced a huge year in Fiscal 2011, guaranteeing nearly 360,000 loans, according to data provided by the Department of Veterans Affairs.

VA refinance loans surged 40 percent from FY10, as military borrowers sought to capitalize on historically low interest rates. Refinance volume increased at least 40 percent in more than two dozen states, from Alaska to West Virginia.

Purchase loans fell slightly from FY10, but overall loan volume was up 14 percent.

Odds and Ends

Total loans guaranteed increased at least 20 percent in 11 states (Alaska, California, Colorado, Hawaii, Iowa, Massachusetts, Michigan, Oregon, Tennessee, Vermont and West Virginia) and the District of Columbia.

Four states saw VA refinance volume increase at least 70 percent, including a staggering 108-percent jump in Michigan.

With FY11 in the books, the VA has now helped more than 18.7 million borrowers secure a home purchase or refinance since 1944. The total loan amount now exceeds $1 trillion.

Looking Ahead

A tighter lending climate has spurred renewed interest in this long-cherished program. VA loans feature less stringent requirements and require no down payment for the vast majority of borrowers. In fact, 9 in 10 VA borrowers secured financing in FY10 without putting down a dime.

That flexibility, coupled with record-low interest rates, continues to spur military borrowers to explore the home loan benefits earned by their service.

With rates likely to remain low and thousands of service members set to return from Iraq and Afghanistan in the coming months, the VA loan program appears poised for continued growth.

Bill Would Open VA Loans to More Surviving Military Spouses

A House bill passed this week would increase access to the VA home loan program for surviving spouses of permanently disabled veterans.

Dubbed the Disabled Veterans’ Surviving Spouses Home Loans Act, the proposed legislation would eliminate the requirement that only spouses of veterans whose death is attributed to a service-connected disability may qualify for a VA loan.

Instead, the bill would provide loan eligibility to spouses of permanently disabled veterans whose deaths are not necessarily attributed to their service-related disability. It passed by a 418-6 vote as part of the Veterans Opportunity to Work Act.

“As we approach Veterans Day, we should ask ourselves if this Congress doing all that can be done for our veterans,” U.S. Rep. Virginia Foxx, R-N.C., the bill’s sponsor, said before the House vote. “This bill maintains our promise not only to the men and women that have served in the Armed Forces, but to their families as well.”

The change would provide loan eligibility to thousands of military spouses.

A series of veterans organizations came out in favor of the bill, including Veterans of Foreign Wars, the American Legion and Disabled American Veterans.

More than 18 million Americans have used the VA loan program to become homeowners since 1944. The program has become increasingly important in recent years as lending requirements have tightened.

VA loan volume has increased 135 percent since 2007. Last year, the agency guaranteed 314,011 loans last year, including about 1,000 to surviving spouses.

Military Members Can Still Secure Home-Buying Tax Credits

The home-buying tax credits that helped the sagging real estate industry stay afloat last year are still available to one final group of prospective buyers: Active duty military members.

But time is running out, which means real estate professionals should jump at the opportunity, especially in military-rich parts of the country.

Service members who served at least 90 days on extended duty from January 2009 through April 2010 may be eligible for the $8,000 credit for first-time buyers or the $6,500 credit for existing homeowners. Service members have until April 30 to sign a purchase agreement and until June 30 to close on the home.

They also face the same general requirements that civilians did, including:

  • The purchase price cannot exceed $800,000
  • Buyers must be at least 18 years old
  • Individuals can’t have an income greater than $125,000; married couples filing taxes jointly can’t have a combined income greater than $225,000
  • First-time buyers cannot have owned a home in the last three years

The requirements for the $6,500 credit are the same, except that buyers must have lived in their current home for five of the last eight years.

Thousands of veterans and active duty service members serving in Iraq, Afghanistan and other destinations abroad may be eligible for these tax credits. They can be claimed no matter the loan product.

For many prospective buyers, the VA Loan Guaranty program may represent the most cost-effective path to homeownership. These government-backed loans come with no down payment and feature flexible credit and underwriting standards. VA loan rates are typically lower than conventional rates, and VA loans have no private mortgage insurance or prepayment penalties.

VA County Loan Limits Set For FY 2011

Stasis is the story when it comes to conventional loan limits in 2011.

The county loan limits for VA loans established in late 2008 will remain in place through Sept. 30, 2011, which is the close of the agency’s fiscal year. Qualified borrowers throughout most of the country can secure a government-backed loan for up to $417,000 with no money down.

But the loan limits are higher in some of the nation’s costlier counties, ranging from $417,500 in Clallam County, Washington, to more than $1 million in parts of California, Colorado and Massachusetts.  The Department of Veterans Affairs guarantees a quarter of each loan.

It’s important to understand that the loan limits aren’t the ceiling on how much a service member can borrow. Instead, these limits are used to calculate how much of the loan the VA will guarantee — again, it’s 25 percent of the county limit. Borrowers who qualify for more can certainly get it. But they will also be facing the prospect of a down payment and other financial considerations.

VA loans posted another solid year in FY 2010. The agency guaranteed about $15 billion through nearly 281,000 loans, according to figures released in a recent letter from the agency’s chief financial officer (alert: This is a PDF document). That tally, if final, would represent about a 13-percent decrease from last year’s totals.  It’s unclear at this point what the breakdown looks like between purchase and refinance loans.

In all, the total amount of VA loans guaranteed is $57.7 billion.

VA Pushes Lenders to Ease Burden for Gulf Coast Vets

Several mortgage companies have offered to loosen up on late payments and credit bureau reporting for veterans affected by the Gulf Oil spill.

The Veterans Administration this week urged everyone else to climb aboard.

VA Secretary Eric K. Shinseki issued a statement Monday asking all mortgage companies to provide veterans with some breathing room when it comes to their mortgages. Scores of veterans have struggled to cobble together an income in the wake of the spill, putting mortgage payments in jeopardy.

“Through no fault of their own, many of our veterans are out of work and are struggling to earn an income,” Shinseki said in a news release. “We must assist these veterans in this difficult time, just as they have supported us in their sacrifice to the nation.”

Veterans who now find themselves mired in financial uncertainty can contact their nearest VA Regional Loan Center for free mortgage counseling. Veterans do not need to have a VA loan in order to receive help and information. To find the closest VA center, call 1-877-827-3702. There’s information on the VA Loan Guaranty website for veterans who have been affected by a major disaster.

Lenders Stop Taking USDA Loans as Funding Bottoms Out

USDA rural housing funding has all but dried up, leaving prospective home buyers to consider lending alternatives until the program gets another injection of much-needed capital.

Problem is, there’s no telling when that might actually happen.

Lenders, including behemoth Wells Fargo, have already stopped taking USDA loan commitments, according to Mortgage News Daily. It’s not unusual for the program to run out of money — it does almost every year. The difference this year is how early it’s happening and the looming reality that it’s going to directly impact consumers.

Most years, funding is restored or recovered without home buyers feeling a pinch.

It’s going to take at least another $150 million to keep the USDA loan program afloat through the fiscal year. There’s no clear path at this point to getting funding restored.

The shortfall comes after renewed interest in USDA’s rural home program, which helps mostly low- and middle-income consumers purchase homes in qualified rural areas. The program has more stringent standards than other government-backed loans but features no down payment.

Homeowners flocked to these flexible loans in the wake of tighter credit and a declining housing market. Now, those hoping to purchase with a USDA loan may need to find another lending vehicle. Both FHA and a VA home loan are likely targets for homeowners who qualify.

Industry officials have urged consumers to contact their elected officials and urge them to quickly find a solution and help homeowners in need.