’s home purchase financing program is at record levels and these loans have more than doubled since 2007.
Since 2011, when VA-backed mortgages represented about 3% of total home-purchase mortgage activity, they’ve soared to roughly 7%, according to the Mortgage Bankers Association. For sales of newly built homes, the VA share is much larger — it was 14.5% in September compared with a 16.7% share for the other major federal housing finance program, the Federal Housing Administration (FHA
Not only has the Department of Veterans Affairs’ VA home-loan program gained significant market share compared with competing private and government mortgage options, but big banks and mortgage companies have stepped up efforts to help returning veterans obtain decent and affordable housing, including giving them free homes.
San Diego, California-based iServe Residental Lending has seen their VA business triple from 2013 to 2014. "iServe has placed a strong emphasis on educating our loan officers and realtor referrals, in addition to the veterans in our communities, about the benefits of VA loans," said Ken Michael, co-CEO at iServe Lending. " As a result, we have seen our VA business triple from 2013 to 2014. Our service members have proudly served our country well, and we believe it is iServe’s duty to help them realize the American Dream of home ownership."
A recent White House initiative
introduced in August is also helping the VA housing boom. The program is aimed at increasing mortgage benefits to service members and includes a 6% interest rate cap for eligible active service members ─ during their military service and for one year after. Participating banks and institutions can contact eligible military personnel to offer mortgage relief.
Foreclosure relief is also provided for service members up to one year after their service ends. The Servicemembers Civil Relief Act
prohibits the sale, foreclosure or seizure of property secured by an eligible mortgage during this time period.
Freddie Mac is providing resources and guidelines to servicers to help them implement military relief for borrowers with Freddie Mac-owned mortgages.
Why are VA loans are housing’s hot product?
- VA-guaranteed mortgages come with terms that no other financing source can match — zero down payment; flexible and generous credit underwriting that focuses on the individual. Plus VA interest rates are competitive and maximum loan amounts go well into the jumbo range.
- Lenders increasingly recognize VA loans as good business. Despite having features traditionally connected with high risks of serious default and foreclosure — zero down payment borrowers during the housing boom often performed poorly — VA’s default rates are as good as or better than prime conventional market performance and far superior to FHA’s. VA’s low rates of serious default are attributable in part to its intensive, hands-on servicing of mortgages. At the earliest hints that a borrower may be facing financial strains, VA servicers get in touch to begin finding ways of solving whatever problem may exist.
- Demand is booming. There are now an estimated 22 million veterans in this country, many of them with eligibility for VA loan benefits. In an era of extremely tight credit and underwriting in most segments of the marketplace, the VA program looks like an extended hand for creditworthy vets who don’t have large amounts of money to put down on a home purchase or are transitioning into regular employment in the mainstream economy.
Meanwhile, growing numbers of financial institutions are partnering with nonprofit groups to help veterans with housing needs. Organizations such as Operation Homefront, the Military Warriors Support Foundation, HomeStrong USA and Purple Heart Homes have given away hundreds of houses acquired through donations from Bank of America, JPMorgan Chase, Wells Fargo Home Mortgage, U.S Bank, SunTrust Mortgage and others.
Bank of America has donated more than 1,500 houses to nonprofits that serve veterans, according to a VA spokeswoman. JPMorgan Chase has donated about 700 as part of its commitment to give away at least 1,000. Wells Fargo has gifted $23 million in mortgage-free homes to 150 veterans and families in 40 states.
Operation Homefront has donated more than 450 mortgage-free houses to veterans and families during the past two years and has 60 more ready to award. It takes a go-slow approach to transitioning participating veterans into ownership.
For the first 12 to 24 months, the recipients legally are tenants of Operation Homefront. In order to receive the deed to the house, vets must pay property taxes, insurance and homeowner association fees; participate in a customized transition plan that includes financial counseling and set-asides of savings for long-term maintenance of the property; and must allow periodic inspections.
Builders with mortgage affiliates also have jumped into the burgeoning housing-for-heroes movement. Pulte Group, a key player in the field, has committed to build at least 20 mortgage-free new homes for wounded vets this year.
There may be fewer military boots on the ground overseas, but here in the U.S. there have been major campaigns in the housing market this year directed at veterans. The