VA Housing: Guaranteed Loans, Direct Loans,
and Specially Adapted Housing Grants
Libby Perl
Specialist in Housing Policy
February 4, 2013
Congressional Research Service
7-5700
www.crs.gov
R42504
CRS Report for Congress
Prepared for Members and Committees of Congress
VA Housing: Guaranteed Loans, Direct Loans, and Specially Adapted Housing Grants
Summary
The Department of Veterans Affairs (VA) has assisted veterans with homeownership since 1944,
when Congress enacted the loan guaranty program to help veterans returning from World War II
purchase homes. The loan guaranty program assists veterans by insuring mortgages made by
private lenders, and is available for the purchase or construction of homes as well as to refinance
existing loans. The loan guaranty has expanded over the years so that it is available to (1) all
veterans who fulfill specific duration of service requirements or who were released from active
duty due to service-connected disabilities, (2) members of the reserves who completed at least six
years of service, and (3) spouses of veterans who died in action, of service-connected disabilities,
or who died while receiving (or were entitled to receive) benefits for certain service-connected
and Specially Adapted Housing Grants
April 13, 2015
(R42504)
Summary
The Department of Veterans Affairs (VA) has assisted veterans with homeownership since 1944, when Congress enacted the loan guaranty program to help veterans returning from World War II purchase homes. The loan guaranty program assists veterans by insuring mortgages made by private lenders, and is available for the purchase or construction of homes as well as to refinance existing loans. The loan guaranty has expanded over the years so that it is available to (1) all veterans who fulfill specific duration of service requirements or who were released from active duty due to service-connected disabilities, (2) members of the reserves who completed at least six years of service, and (3) spouses of veterans who died in action, of service-connected disabilities, or who died while receiving (or were entitled to receive) benefits for certain service-connected disabilities (see Table 1). Under the loan guaranty, the VA agrees to reimburse lenders for a
portion of losses if borrowers default. Unlike insurance provided through the Federal Housing
Administration (FHA) insurance program, the VA does not insure 100% of the loan, and instead
the percentage of the loan that is guaranteed is based on the principal balance of the loan (see
Table 3
).
).
Veterans who enter into VA-guaranteed loans must pay an up-front fee based on a number of
factors that include the type of loan entered into (for example, purchase or refinance), whether
service was active duty or in the reserves, whether the loan is the first or subsequent VA loan a
borrower has entered into, and the amount of down payment (see Table 6). Borrowers are not
required to make a down payment for a VA-guaranteed loan, but the up-front fee is reduced if
there is a down payment of 5% or more. Most borrowers (
8884% in
FY2011FY2013) do not make a down
payment.
In addition to guaranteeing loans from private lenders, the VA also makes direct loans to
borrowers in certain circumstances. The original VA direct loan, which was targeted to veterans in
rural areas, is now available only to veterans or servicemembers with certain service-connected
disabilities. Another direct loan program, originally enacted as a demonstration program in 1992,
serves Native American veterans, including veterans living in American Samoa, Guam, and the
Commonwealth of the Northern Mariana Islands. In addition, the VA may enter into direct loans
in cases where a borrower is delinquent or defaults on a VA-guaranteed loan. The VA may either
acquire a loan from a lender and continue servicing itself (called
“"acquired loans
”") or, in cases of
foreclosure, the VA may purchase the property and resell it. In these cases, the VA may enter into
a loan with a purchaser whether he or she is a veteran or not (called
“"vendee loans
”).
").
A third way in which the VA provides housing assistance to both veterans and active duty
servicemembers is through the Specially Adapted Housing (SAH) Program. Through the SAH
program, veterans with certain service-connected disabilities may obtain grants from the VA to
purchase or remodel homes to fit their needs. The amount of a grant depends on the disability, and
in some cases grants can be used to modify the homes of family members with whom veterans or
servicemembers are staying (see Table 7
).
).
This report discusses these three types of housing assistance—the loan guaranty program, direct
loan programs, and Specially Adapted Housing program—their origins, how they operate, and
how they are funded. The report also has a section that discusses the default and foreclosure of
VA-guaranteed loans.
Congressional Research Service
VA Housing: Guaranteed Loans, Direct Loans, and Specially Adapted Housing Grants
Contents
Introduction...................................................................................................................................... 1
The VA Loan Guaranty Program ..................................................................................................... 1
Borrower Eligibility................................................................................................................... 2
Service Criteria.................................................................................................................... 2
Financial Criteria ................................................................................................................. 4
Uses of the Loan Guaranty ........................................................................................................ 5
Financing the Purchase, Construction, or Improvement of Dwellings or
Farm Residences .............................................................................................................. 5
Loan Guaranty for Manufactured Housing ......................................................................... 7
Refinancing Loans............................................................................................................... 8
Number and Amount of Loans Guaranteed ............................................................................... 9
Amount of Coverage Provided by the Loan Guaranty ............................................................ 12
Maximum Loan Amount ................................................................................................... 15
Subsequent Loans: The Veteran’s Entitlement .................................................................. 15
How the VA Loan Guaranty Differs from FHA Insurance ...................................................... 16
Direct VA Loans............................................................................................................................. 18
The Original Direct Loan for Veterans in Rural Areas, Now Limited to Veterans with
Disabilities ............................................................................................................................ 18
Direct Loans for Native American Veterans (Including Guam, American Samoa, and
CNMI) .................................................................................................................................. 19
Direct Loans Resulting from Borrower Delinquency or Default (Acquired and Vendee
Loans) ................................................................................................................................... 22
Funding for the VA Direct and Guaranteed Loan Programs .......................................................... 24
Sources of Funding for Loan Programs ................................................................................... 25
The VA Budget and Congressional Appropriations for VA Loan Programs...................... 25
Fees from Borrowers ......................................................................................................... 26
Collection of Loan Payments and Property Sales ............................................................. 28
The Specially Adapted Housing Program ...................................................................................... 28
Specially Adapted Housing Grants, 38 U.S.C. Section 2101(a) .............................................. 29
Special Housing Adaptation Grants, 38 U.S.C. Section 2101(b) ............................................ 30
Use of Grants to Modify the Home of a Family Member ....................................................... 31
Grant Limits............................................................................................................................. 31
Special Considerations on Trust Lands ................................................................................... 33
VA Actions in Event of Delinquency, Default, and Foreclosure .................................................... 34
Options to Prevent Foreclosure ............................................................................................... 35
VA Actions in the Event of Foreclosure .................................................................................. 37
Tables
Table 1. Service Eligibility for the Loan Guaranty .......................................................................... 3
Table 2. VA Loans Guaranteed by Fiscal Year, FY2000-FY2011.................................................. 10
Table 3. Limits on the Level of Loan Guaranty ............................................................................. 14
Table 4. Direct Loans for Native American Veterans, FY2000-FY2011 ....................................... 21
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VA Housing: Guaranteed Loans, Direct Loans, and Specially Adapted Housing Grants
Table 5. Guaranteed Loans Acquired by VA, Vendee Loans Extended, and Direct Loans
Sold ............................................................................................................................................. 23
Table 6. Current Loan Guaranty Fees ............................................................................................ 27
Table 7. Specially Adapted Housing Grant Limits, 2012 .............................................................. 32
Table 8. Specially Adapted Housing and Special Housing Adaptation Grants FY2000FY2011 ....................................................................................................................................... 33
Table 9. VA Loans in Foreclosure Process and Foreclosed Properties in VA Inventory,
FY2001-FY2012 ......................................................................................................................... 38
Contacts
Author Contact Information........................................................................................................... 39
Congressional Research Service
VA-guaranteed loans.
VA Housing: Guaranteed Loans, Direct Loans, and Specially Adapted Housing Grants
Introduction
Introduction
The U.S. Department of Veterans Affairs (VA) administers several programs that assist individual
veterans in purchasing and/or rehabilitating homes. The specific ways in which the VA assists
veterans include (1) guaranteeing home mortgages from private lenders (through the Loan
Guaranty Program, a form of insurance) to help veterans obtain financing for home purchases,
improvements, or refinancing; (2) providing direct loans for home purchases to Native American
veterans and to purchasers of homes that are in the VA inventory due to default and foreclosure;
and (3) extending grants and loans to veterans with service-connected disabilities so that they can
adapt housing to fit their needs through the Specially Adapted Housing Program.
This report discusses some of the legislative history behind each of these housing programs, and
provides details about how the programs currently operate. There is a separate section on funding
for VA loan programs, and the final section of the report discusses VA efforts to assist borrowers
who face default and foreclosure. While the VA also provides housing assistance for homeless
veterans, this report does not address these programs. For more information about homeless
veterans and programs that assist them, see CRS Report RL34024, Veterans and Homelessness
,
by Libby Perl.
, by [author name scrubbed].
The VA Loan Guaranty Program
The VA Loan Guaranty Program is a mortgage insurance program through which eligible veterans
enter into mortgages with private lenders, and the VA guarantees that it will pay lenders a portion
of losses that may be suffered as a result of borrower default. VA-guaranteed loans are available
for the purchase, construction, or repair/rehabilitation of a
“dwelling”"dwelling"—defined to include homes
with up to four units, single condominium units, and manufactured homes classified as real
property1 property1—or a farm and farm residence. The guaranty is also available to finance the purchase of
a manufactured home not classified as real property, and to refinance an existing loan.
The VA loan guaranty came about as an alternative to a cash bonus for veterans returning from
World War II, considered less expensive than a bonus, but still a way to provide benefits to
veterans.
22 Credit was seen as one of the areas where veterans were at a disadvantage compared to
their non-veteran counterparts because they had not had the time to establish a career or credit
history that would allow them to obtain a mortgage without a guaranty.
33 The Servicemen
’s
's Readjustment Act of 1944 (P.L. 78-346) created the loan guaranty as part of a package of benefits
for returning veterans. The act also included educational benefits (the 1944
Actact introduced the GI
Bill), employment counseling and placement services, and payments for unemployed veterans.
The package of benefits was meant to help veterans reintegrate into the civilian economy.
4 The
1
38 C.F.R. §36.4301.
U.S. Congress, House Veterans’ Affairs Committee, The Historical Development of Veterans’ Benefits in the United
States, A Report on Veterans’ Benefits in the United States, committee print, prepared by The President’s Commission
on Veterans’ Pensions, 84th Cong., 2nd sess., May 9, 1956, H.Prt. 84-244 (Washington: GPO, 1956), p. 161.
3
Ibid.
4
U.S. Congress, House Committee on World War Veterans’ Legislation, Providing Federal Government Aid for the
Readjustment in Civilian Life of Returning World War II Veterans, report to accompany S. 1767, 78th Cong., 2nd sess.,
May 5, 1944, H.Rept. 1418, p. 2.
2
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VA Housing: Guaranteed Loans, Direct Loans, and Specially Adapted Housing Grants
4 The law provided that the VA would guaranty loans for veterans to purchase or construct a home,
purchase a farm or farm equipment, or purchase a business. The guaranty was limited to the
greater of 50% of the loan or $2,000, and loans could not have an interest rate above 4%. The VA
paid the interest on the guaranteed portion of the loan during its first year. Veterans had the
greater of two years from the termination of the war, or two years from their date of separation
from the military, to apply.
Within a year, Congress amended the loan guaranty to address some of the aspects of the program
that did not seem to be working (P.L. 79-268). The maximum guaranty was raised to $4,000
(prices of homes had risen), the maximum maturity was increased from 20 to 25 years (the
shorter maturity period had resulted in higher payments), and veterans were given 10 years from
the end of the war to apply (two years had been too short a time frame).
5
5
Over time, the loan guaranty has been expanded to include all veterans who served on active duty
from World War II on, with varying length of service requirements, as well as those who served in
the selected reserves; the amount of the guaranty has grown; business purchases are no longer
eligible and farm purchases have been limited; and the uses have expanded to include
refinancing, energy efficiency improvements, and the purchase of manufactured homes. This
section of the report describes eligibility for the loan guaranty (
“"Borrower Eligibility
”"), ways in
which it can be used (
“"Uses of the Loan Guaranty
”"), coverage (
“"Amount of Coverage Provided
by the Loan Guaranty
”"), and how the VA loan guaranty differs from the Federal Housing
Administration (FHA) mortgage insurance program (
“"How the VA Loan Guaranty Differs from
FHA Insurance”).
Borrower Eligibility
Service Criteria
FHA Insurance").
Borrower Eligibility
Service Criteria
Veteran eligibility for the VA loan guaranty started narrowly, targeted to individuals who served
during World War II. As additional conflicts arose, veterans of those conflicts, as well as
peacetime eras, were made eligible for the program.
A veteran is defined as
“"a person who served in the active military, naval, or air service, and who
was discharged or released there from under conditions other than dishonorable.
”6"6 To be eligible
for VA loan benefits (and most other VA benefits), veterans must fulfill specific time period and
duration of service requirements. In addition, reservists with at least six years of service are
eligible for the loan guaranty.
77 Reservists need not have served on active duty, unlike what is
required for some other veterans benefits, as long as they fulfill the duration of service
requirement. The spouses of veterans who died in action, died of a service-connected disability, or
who are missing in action, captured, or forcibly detained are eligible for the loan guaranty. In
addition, P.L. 112-154, enacted in August 2012, expanded eligibility to include spouses of
veterans who die while receiving compensation (or who were eligible to receive compensation)
5
U.S. Congress, House Conference Committee, Providing Federal Government Aid for the Readjustment to Civilian
Life of Returning World War II Veterans, report to accompany S. 1767, 78th Cong., 2nd sess., June 12, 1944, H.Rept.
1624, pp. 162-163.
6
38 U.S.C. §101(2). For more information about who is a veteran, see CRS Report R42324, “Who is a Veteran?”—
Basic Eligibility for Veterans’ Benefits, by Christine Scott.
7
Reservists were made eligible as part of the Veterans Home Loan Program Amendments of 1992 (P.L. 102-547).
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VA Housing: Guaranteed Loans, Direct Loans, and Specially Adapted Housing Grants
for a service-connected disability rated totally disabling for a specified duration.8 Previously, only
surviving spouses of veterans who died from their service-connected disabilities were eligible for
the loan guaranty. See Table 1 for a complete list of eligibility categories.9
Table 1. Service Eligibility for the Loan Guaranty
Eligibility Category
Public Law
Initiating
Eligibilitya
Time Requirement
(if any)
Active Dutyb Service during World War II
(9/16/40 to 7/25/47)
P.L. 78-346
90 daysc
Active Duty Service during the Korean
Conflict
(6/27/50 to 1/31/55)
P.L. 82-550
90 daysc
Active Duty Service during the Vietnam Era
(8/5/64 to 5/7/75)
P.L. 95-476
90 daysc
Active Duty Service Post-
P.L. 100-322
181 days
P.L. 97-66
•
24 months or
•
full period ordered to
active duty, but no less
than 181 days during
peacetime or 90 daysc
during wartime
•
World War II (7/26/47 to 6/26/50)
•
Korea (2/1/55 to 8/4/64)
•
Vietnam (5/8/75 to 8/1/90d)
Service Begun Aftere
•
9/7/80 (enlisted personnel) or
•
10/16/81 (officersf)
Service in the Selected Reserveg
P.L. 102-547
720 days (six years)
Released from Active Duty or Selected
Reserve due to Service-Connected Disability
(any service after 9/15/40)
P.L. 78-346
—
Spouse of a Veteran who Died in Action or
of a Service-Connected Disability Who Has
Not Remarriedh
P.L. 81-475
—
Spouse of Member of Active Duty Military
who
P.L. 91-584
—
•
is missing in action,
•
captured, or
•
forcibly detained
8
The disability must meet one of three duration requirements: (1) it was continuously rated totally disabling for 10 or
more years immediately preceding death; (2) it was continuously rated totally disabling for at least five years from the
date of discharge from active duty; or (3) it was continuously rated totally disabling for not less than one year
immediately preceding death, and the veteran had been a prisoner of war who died after September 30, 1999.
9
38 U.S.C. §3702(a)(2).
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VA Housing: Guaranteed Loans, Direct Loans, and Specially Adapted Housing Grants
Eligibility Category
Surviving Spouse of Veteran Who Died
While Receiving Compensation for a
Service-Connected Disability Rated Totally
Disablingi
Public Law
Initiating
Eligibilitya
P.L. 112-154
Time Requirement
(if any)
—
Source: for a service-connected disability rated totally disabling for a specified duration.8 Previously, only surviving spouses of veterans who died from their service-connected disabilities were eligible for the loan guaranty. See Table 1 for a complete list of eligibility categories.9
Spouses of Veterans and Same-Sex Marriage
As discussed in the previous section, spouses of veterans may be eligible for the loan guaranty in their own right in certain circumstances. In addition, spouses may be co-applicants on a loan, with their additional income and resources a possible factor in helping to qualify for a loan.
The VA statute defines "surviving spouse" and "spouse" to include only those of the opposite sex.10 In September 2013, President Obama directed the executive branch to cease enforcing the definitions to the extent they do not recognize spouses of the same sex.11 However, the statute governing VA benefits also has a provision regarding the validity of marriages. A marriage is considered valid "according to the law of the place where the parties resided at the time of the marriage or the law of the place where the parties resided when the right to benefits accrued."12
Couples who reside in a state not recognizing same-sex marriage at the time of the marriage and when they apply for benefits may therefore be prevented from having a spouse apply for or qualify for a loan. As of the date of this report, 39 states and the District of Columbia recognized same-sex marriage.13
Table 1. Service Eligibility for the Loan Guaranty
Eligibility Category
|
Public LawInitiatingEligibilitya
Time Requirement(if any)
Active Dutyb Service during World War II (9/16/40 to 7/25/47)
P.L. 78-346
|
90 daysc
|
Active Duty Service during the Korean Conflict (6/27/50 to 1/31/55)
P.L. 82-550
|
90 daysc
|
Active Duty Service during the Vietnam Era(8/5/64 to 5/7/75)
P.L. 95-476
|
90 daysc
|
Active Duty Service Post- - World War II (7/26/47 to 6/26/50)
- Korea (2/1/55 to 8/4/64)
- Vietnam (5/8/75 to 8/1/90d)
|
P.L. 100-322
|
181 days
|
Service Begun Aftere - 9/7/80 (enlisted personnel) or
- 10/16/81 (officersf)
|
P.L. 97-66
|
- 24 months or
- full period ordered to active duty, but no less than 181 days during peacetime or 90 daysc during wartime
|
Service in the Selected Reserveg
|
P.L. 102-547
|
Six years
|
Released from Active Duty or Selected Reserve due to Service-Connected Disability(any service after 9/15/40)
P.L. 78-346
|
—
|
Spouse of a Veteran who Died in Action or of a Service-Connected Disability Who Has Not Remarriedh
|
P.L. 81-475
|
—
|
Spouse of Member of Active Duty Military who - is missing in action,
- captured, or
- forcibly detained
|
P.L. 91-584
|
—
|
Surviving Spouse of Veteran Who Died While Receiving Compensation for a Service-Connected Disability Rated Totally Disablingi
P.L. 112-154
|
—
|
Source: 38 U.S.C. §§3701-3702, 38 U.S.C. §5303A, and U.S. Department of Veterans Affairs, Manual M26-1
Guaranteed Loan Processing Manual, September 16, 1996, pp. 2-1 to 2-28, http://www.benefits.va.gov/warms/
M26_1.asp
.
.
Note: The two categories not included in the table are (1) sole surviving child in a family where a parent or
sibling was killed while in the Armed Forces, captured or missing in action, or permanently disabled and (2) in
some circumstances, commissioned officers of the Public Health Service and the National Oceanic and
Atmospheric Administration.
a.
a. Subsequent laws may have extended the period of service or otherwise modified eligibility requirements.
b.
b. Active duty service refers to full time service in the Army, Navy, Air Force, Marines, or Coast Guard.
c.
c. A veteran qualifies if any part of his or her 90 days of service was during wartime.
d.
d. While the Vietnam era extends to August 1, 1990, benefits for veterans who began service after September
7, 1980, are subject to 38 U.S.C. §5303A(b). See tablenote e.
e.
e. 38 U.S.C. §5303A(b). The two-year minimum service requirement for many veterans
’' benefits was added to
the law in 1980 as part of P.L. 96-342, the Department of Defense Authorization Act of 1981. A year later,
P.L. 97-66, the Veterans
’' Disability Compensation, Housing, and Memorial Benefits Amendments of 1981,
amended the law to include officers as well as enlisted personnel, and to exempt those discharged for
reduction-in-force purposes. Congress was concerned that
“"excessive numbers of servicemembers were,
through inappropriate or unproductive conduct, bringing about their early discharges, that many of them
had enlisted for the purpose of obtaining eligibility for veterans
’' benefits based on short periods of service,
and that it is wasteful for the Federal government to provide veterans
’' benefits to those who fail
substantially to fulfill their active-duty service commitments.
”" U.S. Congress, Senate Committee on
Veterans’ Veterans' Affairs,
Veterans’Veterans' Disability Compensation, Housing, and Memorial Benefits Amendments of 1981
,
, report to accompany S. 917
, 97th, 97th Cong.,
1st1st sess., July 16, 1981, S.Rept. 97-153, pp. 36-37.
f.
f. The dates for officers and enlisted personnel differ because the original law implementing the 24-month
length-of-service requirement (P.L. 96-342) only applied to enlisted personnel and not officers. See U.S.
Congress, House Committee on Veterans
’' Affairs,
Veterans’Veterans' Compensation Amendments of 1981, report to
accompany H.R. 3995
, 97th, 97th Cong.,
1st1st sess., July 16, 1981, H.Rept. 97-179, pp. 20-21. P.L. 97-66 amended the
law to apply to officers.
g.
g. The Selected Reserve includes the Army, Navy, Air Force, Marine Corps, and Coast Guard Reserves, the
Army National Guard, and the Air National Guard. 10 U.S.C. §10101.
h.
h. The term
“"surviving spouse
”" is defined at 38 U.S.C. §101 to mean someone who has not remarried.
i.
i. The disability must meet one of three duration requirements: (1) it was continuously rated totally disabling
for 10 or more years before death; (2) it was continuously rated totally disabling for at least five years from
the date of discharge from active duty; or (3) it was continuously rated totally disabling for not less than one
year, and the veteran had been a prisoner of war and died after September 30, 1999.
Financial Criteria
Financial Criteria
In addition to length of service requirements, the VA loan guaranty has underwriting criteria
designed to ensure that veterans have the financial means to make mortgage payments. The
statute gives the VA Secretary the authority to set underwriting standards in regulation, which are
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VA Housing: Guaranteed Loans, Direct Loans, and Specially Adapted Housing Grants
further supplemented by the VA Lenders Handbook
.10.14 The underwriting standards consider a
veteran’ veteran's income, expenses, and credit history in determining whether he or she qualifies for a
guaranteed loan. In seeking to balance income and expenses, a veteran must meet requirements
established via a debt-to-income ratio standard and a residual income analysis.
•
Debt-to-Income Ratio: In the debt-to-income analysis, a lender is to look at the
ratio of a veteran
’'s anticipated housing expenses and other long-term monthly
obligations compared to his or her stable and reliable monthly income.
1115 To be
stable and reliable, income is to be expected to continue
“"for the foreseeable
future.
”" Examples of unreliable income include VA education benefits,
unemployment compensation, and irregular overtime pay.
1216 A veteran
’'s total
debt-to-income ratio should not exceed 41%, although there are provisions to
allow for exceptions to this requirement in cases where a lender is able to justify
the loan to the VA.
•
Residual Income: The residual income test is used to determine whether a
veteran’ veteran's income after payments for shelter expenses and other debts is adequate
to meet living expenses. Unlike the debt-to-income ratio, the residual income test
looks at additional expenses such as food, clothing, health care, and gasoline that
are not captured as part of debt.
1317 The loan guaranty regulations contain a guide
to sufficient residual income by region.
14
18The Loan Guaranty Program does not require veterans to have a specific credit score to qualify
for a loan, but the underwriting guidelines require lenders to analyze a borrower
’'s credit history.
15
19 Lenders must be able to explain decisions to extend credit to borrowers who have an adverse
credit history, and certain situations, such as an unpaid court-ordered judgment or a bankruptcy
within the previous one or two years, may disqualify a borrower from obtaining a guaranteed
loan. A previous foreclosure is not a bar to obtaining a VA-guaranteed loan, but borrowers who
had previous VA-guaranteed loans that were foreclosed upon may have to repay the government
for any losses suffered prior to obtaining a new loan.
16
20
Uses of the Loan Guaranty
Financing the Purchase, Construction, or Improvement of Dwellings or
Farm Residences
Farm Residences
Loan guarantees are available for the purchase or construction, or to make improvements
(including energy efficiency improvements) to either a
“dwelling”"dwelling" or farm residence.
17 A dwelling
10
See 38 U.S.C. §3710(g) and 38 C.F.R. §36.4340. Further guidance is at U.S. Department of Veterans Affairs,
Lenders Handbook – VA Pamphlet 26-7, revised June 28, 2010, chapter 4, http://www.benefits.va.gov/warms/
pam26_7.asp (hereinafter VA Lenders Handbook).
11
38 C.F.R. §36.4340(d).
12
38 C.F.R. §36.4340(f).
13
VA Lenders Handbook, p. 4-55.
14
38 C.F.R. §36.4340(e).
15
38 C.F.R. §36.4340(g).
16
Ibid.
17
38 U.S.C. §3710.
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21 A dwelling is defined as a building primarily used and occupied as a home (defined as a
“"place of
residence”),18 residence"),22 and that consists of no more than four single family units (under most
circumstances),
1923 one of which will be occupied by an eligible veteran. While a daily physical
presence is not necessary to occupy the property as a home, occupancy of the property must be
more than intermittent.
2024 For example, the property should be near a borrower
’'s place of
employment, and if his or her job requires an absence for a
“"substantial amount of time,
”" there
must be a history of continuous presence in the community prior to the absence, and there should
be no attempt to establish a principal residence elsewhere.
2125 Use of a property as a vacation home
would not qualify for the VA loan guaranty. An exception exists for instances where veterans are
called away for active duty—their spouses or dependent children may satisfy the requirement by
occupying the property as a home.
22
26
A range of housing qualifies as a dwelling for VA loan guaranty purposes. A single condominium
unit qualifies as a dwelling, and a manufactured home may also be a dwelling if the veteran owns
the land to which it is affixed and the state classifies it as real property.
2327 Note, however, that a
manufactured home that does not meet these requirements may qualify separately under the
manufactured housing section of the law (for more information, see the next section of this report
entitled
“"Loan Guaranty for Manufactured Housing
”"). The loan guaranty can also include the
purchase of land for both the construction of a single-family
home24home28 or for placement of a
manufactured home.
25
29
In addition to purchasing property, an eligible veteran may enter into a guaranteed loan for the
construction of housing or to make improvements to property the veteran already owns. In
general, the loan guaranty cannot be used to purchase a property that requires significant work
(i.e., a fixer-upper) due to minimum property standards for homes purchased with VA-guaranteed
loans.
2630 However, if a property meets minimum property standards, and a veteran wants to
include funds for improvements in a purchase money loan, the appraiser is to take the value of the
improvements into account, increasing the loan amount for which a borrower could potentially
qualify.
2731 The loan guaranty can also be used for loans to make
“"energy efficiency improvements
”
" to a property a veteran is purchasing or to a property already owned. Energy efficiency
improvements were added as a permissible use of the loan guaranty in 1978 as part of the
Veterans’ Veterans' Housing Benefits Act (P.L. 95-476
). Energy efficiency improvements are limited to $6,000, and may include such things as solar heating and cooling or conservation measures, such as insulation, weatherizing, and furnace replacement.32
Loan Guaranty for Manufactured Housing
The VA loan guaranty has evolved so that there are two ways in which manufactured housing is classified and guaranteed. First, as mentioned in the previous section, manufactured housing can be classified as a dwelling that may be guaranteed under the regular guaranty provisions of the statute (38 U.S.C. §3710). In addition, it can be classified and guaranteed under a separate manufactured housing portion of the law (38 U.S.C. §3712). Congress created the latter program first in 1970 (see the Veterans' Housing Act of 1970, P.L. 91-506), and later specified that manufactured housing could be included as a dwelling for the regular guaranty provisions in Section 3710 (see the Veterans' Compensation and Program Improvements Amendments of 1984, P.L. 98-223). Despite this flexibility, it appears that the VA has not guaranteed new manufactured housing loans under Section 3712 of the law since 1996.33
The VA has slightly different definitions for manufactured housing based on the portion of the statute under which it is guaranteed. The definitions share in common that manufactured housing is
[a] movable dwelling unit designed and constructed for year-round occupancy on land by a single family, which dwelling unit contains permanent eating, cooking, sleeping, and sanitary facilities. A double-wide manufactured home is a movable dwelling designed for occupancy by one family consisting of (1) two or more units intended to be joined together horizontally when located on a site, but capable of independent movement or (2) a unit having a section or sections which unfold along the entire length of the unit.34
The definitions differ in that the regulations governing the Section 3710 guaranty require that the manufactured home be permanently affixed to a lot and classified as real property under state law. To be permanently affixed, the home must be placed on a foundation in a way that satisfies local building codes.35 This generally means being placed on a permanent foundation, and in some, but not all cases, connection to utilities and ownership of the land, although long-term rental agreements may suffice.36 Once a home is permanently affixed, it may be titled as real property rather than personal property (as a vehicle is titled). According to the Census Bureau, in 2010, approximately 73% of new manufactured homes were titled as personal property and 22% as real property.37
Separate Loan Guaranty for Manufactured Housing, 38 U.S.C. Section 3712
When Congress created the separate loan guaranty for manufactured housing in 1970, it was concerned that returning Vietnam veterans, some without significant financial resources, were unable to afford conventional homes and the costs of financing.38 The recommendation to include mobile homes as eligible properties for the loan guaranty originated from the President's Committee on the Vietnam Veteran, whose members saw growing construction costs of conventional homes as a barrier to home ownership for veterans.39 According to the committee, the lower costs of mobile homes represented "an enormous potential in meeting the housing needs of many veterans with low to moderate incomes."40 It was necessary to add a new manufactured housing portion to the law because, unlike loans for site-built homes, manufactured housing is often financed with "chattel mortgages," which are designed for moveable property and governed by different laws than mortgages for real property.
Manufactured housing loans that are guaranteed through Section 3712 differ from the Section 3710 loan guaranty in that the term of the mortgage is generally shorter depending on the type of manufactured housing,41). Energy efficiency improvements are limited to
18
38 C.F.R. §36.4301.
Ibid. There is an exception for a dwelling owned by more than one veteran—in that case there may be an extra unit
for each additional veteran owner. For example, if three veterans owned a property together, it could consist of six units
as long as three of the six units were occupied by the veteran owners.
20
VA Lenders Handbook, p. 3-14.
21
Ibid.
22
38 U.S.C. §3704(c). P.L. 112-154 amended the law to allow dependent children to satisfy the occupancy
requirement.
23
38 C.F.R. §36.4301.
24
Ibid., definition of “residential property.”
25
38 U.S.C. §3710(a)(9)(A)(ii).
26
VA Lenders Handbook, Chapter 12.
27
See VA response to questions for the record, U.S. Congress, House Committee on Veterans’ Affairs, Subcommittee
on Economic Opportunity, Hearing on the Loan Guaranty Program, 111th Cong., 2nd sess., May 20, 2010, p. 66.
19
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$6,000, and may include such things as solar heating and cooling or conservation measures, such
as insulation, weatherizing, and furnace replacement.28
Loan Guaranty for Manufactured Housing
The VA loan guaranty has evolved so that there are two ways in which manufactured housing is
classified and guaranteed. First, as mentioned in the previous section, manufactured housing can
be classified as a dwelling that may be guaranteed under the regular guaranty provisions of the
statute (38 U.S.C. §3710). In addition, it can be classified and guaranteed under a separate
manufactured housing portion of the law (38 U.S.C. §3712). Congress created the latter program
first in 1970 (see the Veterans’ Housing Act of 1970, P.L. 91-506), and later specified that
manufactured housing could be included as a dwelling for the regular guaranty provisions in
Section 3710 (see the Veterans’ Compensation and Program Improvements Amendments of 1984,
P.L. 98-223). Despite this flexibility, it appears that the VA has not guaranteed new manufactured
housing loans under Section 3712 of the law since 1996.29
The VA has slightly different definitions for manufactured housing based on the portion of the
statute under which it is guaranteed. The definitions share in common that manufactured housing
is
[a] movable dwelling unit designed and constructed for year-round occupancy on land by a
single family, which dwelling unit contains permanent eating, cooking, sleeping, and
sanitary facilities. A double-wide manufactured home is a movable dwelling designed for
occupancy by one family consisting of (1) two or more units intended to be joined together
horizontally when located on a site, but capable of independent movement or (2) a unit
having a section or sections which unfold along the entire length of the unit.30
The definitions differ in that the regulations governing the Section 3710 guaranty require that the
manufactured home be permanently affixed to a lot and classified as real property under state law.
To be permanently affixed, the home must be placed on a foundation in a way that satisfies local
building codes.31 This generally means being placed on a permanent foundation, and in some, but
not all cases, connection to utilities and ownership of the land, although long-term rental
agreements may suffice.32 Once a home is permanently affixed, it may be titled as real property
rather than personal property (as a vehicle is titled). According to the Census Bureau, in 2010,
28
For a complete list of acceptable improvements, see 38 U.S.C. §3710(d).
During the 1990s, the VA insured a decreasing number of manufactured housing units per year as reported in the VA
Annual Reports. From FY1971 through FY1990, the VA guaranteed 112,786 manufactured home loans. U.S.
Department of Veterans Affairs, FY1990 Annual Report of the Secretary of Veterans Affairs, March 1991, p. 29. In
FY1991, the VA insured 313 loans, with this number decreasing to 126 in FY1992, 67 in FY1993, 24 in FY1994, 23 in
FY1995, and 9 in FY1996, the last year in which manufactured home loans were separately noted in either the VA
Annual Reports or the VA Annual Benefits Reports.
30
This definition is from the manufactured housing portion of the regulations at 38 C.F.R. §36.4202. The definition of
manufactured housing for the regular home loan guaranty at 38 C.F.R. §36.4301 is substantially the same.
31
VA Lenders Handbook, p. 12-20.
32
For state laws governing the titling of manufactured housing as well as the conversion of housing titled as a motor
vehicle to real property, see the Fannie Mae website, https://www.efanniemae.com/sf/guides/ssg/relatedsellinginfo/
manufachousing/titlingmanufhsing.jsp.
29
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approximately 73% of new manufactured homes were titled as personal property and 22% as real
property.33
Separate Loan Guaranty for Manufactured Housing, 38 U.S.C. Section 3712
When Congress created the separate loan guaranty for manufactured housing in 1970, it was
concerned that returning Vietnam veterans, some without significant financial resources, were
unable to afford conventional homes and the costs of financing.34 The recommendation to include
mobile homes as eligible properties for the loan guaranty originated from the President’s
Committee on the Vietnam Veteran, whose members saw growing construction costs of
conventional homes as a barrier to home ownership for veterans.35 According to the committee,
the lower costs of mobile homes represented “an enormous potential in meeting the housing
needs of many veterans with low to moderate incomes.”36 It was necessary to add a new
manufactured housing portion to the law because, unlike loans for site-built homes, manufactured
housing is often financed with “chattel mortgages,” which are designed for moveable property
and governed by different laws than mortgages for real property.
Manufactured housing loans that are guaranteed through Section 3712 differ from the Section
3710 loan guaranty in that the term of the mortgage is generally shorter depending on the type of
manufactured housing,37 the maximum loan guaranty amount is set differently (see Table 3), and
fees charged by the VA are less than for conventional housing (see Table 6), among other
differences. However, as mentioned previously, the VA has not guaranteed loans pursuant to
Section 3712 for a number of years. The VA cites several reasons that the Section 3712 loan has
not been popular: interest rates are often higher for manufactured homes not permanently affixed
to a foundation, the maximum loan amount cannot exceed 95% of the purchase price plus the VA
fee38 fee42 (meaning that a veteran must make a down payment), and changed appraisal standards
instituted in the 1980s that resulted in sales prices that exceeded appraised values.
39
Refinancing Loans
43
Refinancing Loans
Veterans may use the loan guaranty to refinance an existing loan in two different ways: to reduce
the interest rate of an existing VA-guaranteed loan (sometimes referred to as an interest rate
33
U.S. Census Bureau, Selected Characteristics of New Manufactured Homes Placed: By Region - 2010, p. 1,
http://www.census.gov/const/mhs/char10.pdf.
34
U.S. Congress, Senate Labor and Public Welfare Committee, Extension of Veterans’ Home Loan Entitlements and
Inclusion of Mobile Home Purchases, report to accompany S. 3656, 91st Cong., 2nd sess., September 23, 1970, S.Rept.
91-1230, p. 13. When the Veterans’ Housing Act (H.R. 16710) was considered and passed by the Senate, the bill was
amended by and replaced with S. 3656, the companion bill to H.R. 16710, which contained a similar version of the loan
guaranty program. See “Veterans’ Housing Act of 1970,” Senate debate, Congressional Record, vol. 116 (September
25, 1970), pp. 33781-33783.
35
Report of the President’s Committee on the Vietnam Veteran, Washington, DC, 1970, p. 33.
36
Ibid.
37
38 U.S.C. §3712(d). The maximum loan terms are: single-wide, about 20 years for home and lot; double-wide, a
maximum of 25 years for home and lot; or lot purchase, approximately 15 years.
38
38 U.S.C. §3712(c)(5).
39
Email communication from the VA, May 17, 2012. Regarding appraisals, manufactured housing dealers often sold
manufactured homes with furniture included, but beginning in the 1980s, the furniture could no longer be included in
appraised value.
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the interest rate of an existing VA-guaranteed loan (sometimes referred to as an interest rate reduction refinancing loan or IRRRL),
4044 or to refinance generally with fewer restrictions. Loans
in the latter category are sometimes referred to as
“"cash out
”" refinancings because veterans may
choose to take out equity as part of the transaction. The ability to refinance a loan on a property
owned and occupied by an eligible veteran became part of the loan guaranty law as part of the
Veterans’ Veterans' Housing Act of 1970 (P.L. 91-506).
4145 Manufactured housing loans became eligible for
refinancing as part of the Veterans
’' Compensation and Program Improvements Amendments of
1984 (P.L. 98-223
).
).
IRRRL: When a veteran refinances a loan that is already guaranteed by the VA as an IRRRL,
generally the interest rate on the new loan should be lower than the loan being refinanced.
42
46 However, a veteran may refinance from an adjustable-rate loan to a fixed-rate loan without the
requirement for a lower rate. The amount of the new loan may not exceed the principal balance of
the original loan, plus any closing costs, and the term of the new loan cannot exceed the original
loan term by more than 10 years.
4347 A veteran may also take advantage of energy efficiency
improvements as part of an IRRRL, in which case the principal balance of the new loan may be
increased by the amount of the improvements.
4448 Another aspect of an IRRRL refinancing is that a
veteran need not occupy the residence as a home after refinancing as long as it had been occupied
as a home prior to refinancing. The limitation on occupancy was removed in 1987 (P.L. 100-198
)
) due to concern that servicemembers who were transferred or stationed elsewhere were unable to
take advantage of refinancing.
4549 In general, no appraisal and no new underwriting are required for
an IRRRL,
4650 and, unlike purchase-money VA loans, closing costs may be financed as part of the
loan.
47
“51
"Cash-Out
”" Refinancing: A veteran may also refinance without the restrictions involved in an
IRRRL. The loan or lien being refinanced need not be VA-guaranteed, the new loan does not have
to have a lower interest rate, the loan balance on the refinanced loan may be higher than on the
original loan, and the veteran may receive cash from the refinancing for any purpose approved by
the lender. Property improvements are often undertaken as part of a refinancing.
4852 However, there
are requirements for cash-out refinancings that are not required for IRRRLs. A veteran must
occupy the property as his or her home after the refinancing, and, unlike the IRRRL, an appraisal,
credit check, and underwriting are required.
49
53
Number and Amount of Loans Guaranteed
VA-guaranteed loans make up a relatively small share of mortgage loans in the United States.
According to the
20092013 American Housing Survey, approximately
7.6% of primary mortgages
40
38 U.S.C. §3710(a)(8) and (a)(9)(i).
38 U.S.C. §3710(a)(5).
42
38 U.S.C. §3710(e).
43
Ibid.
44
38 U.S.C. §3710(e)(1)(C).
45
U.S. Congress, House Committee on Veterans’ Affairs, Veterans’ Housing Rehabilitation and Program
Improvement Act of 1987, report to accompany H.R. 2672, 100th Cong., 1st sess., July 30, 1987, H.Rept. 100-257, p. 15.
46
VA Lenders Handbook, p. 6-2.
47
Ibid., p. 3-3.
48
Ibid., p. 10-10.
49
Ibid., p. 6-18.
41
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3.6% of primary mortgages outstanding were VA-guaranteed loans.
50 54 Table 2 shows the number of loans that have been
guaranteed by the VA from FY2000 through
FY2011FY2013 broken down by purchase and refinance
loans, the dollar amount of the loans, and the dollar amount of the portion guaranteed.
During periods where interest rates have fallen, refinance loans make up a greater share of the
total VA loans extended. And during the mid-2000s, when housing prices were at their height, the
numbers of VA-guaranteed purchase loans were lower than the number entered into at both the
beginning and end of the last decade. Among the reasons for this are the fact that looser lending
standards on private mortgage loans, particularly subprime loans, might have made them more
appealing for veteran borrowers. This may have been particularly true in a climate where the
ability to close loans quickly was considered appealing to sellers, and bypassing the VA loan fee
was appealing to veteran borrowers.
5155 In addition, higher home prices during the mid-2000s could
have made it difficult for veterans living in high-cost areas to take advantage of the loan guaranty.
Until enactment of legislation in 2008, the VA loan guaranty did not cover properties in high
cost
-cost areas where the cost exceeded $417,000. (For more information about maximum mortgage limits,
see the next section of this report entitled
“"Amount of Coverage Provided by the Loan
Guaranty.”)
Guaranty.")
Table 2. VA Loans Guaranteed by Fiscal Year, FY2000-
FY2011
Number of Loans in Year
Volume of Loans Made
in Year
($ in billions)
Cumulative Volume of
Loans Outstandinga
($ in billions)
Fiscal
Year
Purchase
Loans
Refinance
Loansb
Total
Loans
Amount
of Loans
Amount
Guaranteed
Amount
of Loans
Amount
Guaranteed
2000
185,553
13,607
199,160
23.372
7.071
—c
2001
177,158
72,851
250,009
31.255
9.152
218.455
71.431
2002
176,898
140,353
317,251
40.129
11.667
216.042
69.547
2003
148,810
340,608
489,418
63.255
18.245
213.248
67.654
2004
152,395
183,393
335,788
44.131
12.643
207.374
64.683
2005
119,130
46,724
165,854
24.901
6.808
202.073
62.114
2006
122,604
20,104
142,708
24.635
6.486
203.186
61.277
2007
117,941
15,372
133,313
24.890
6.438
207.644
61.456
2008
142,340
37,330
179,670
36.089
9.236
220.839
63.921
2009
180,896
144,794
325,690
68.201
17.492
183.365
50.368
2010
192,625
121,386
314,011
65.051
16.745
214.726
58.080
2011
186,588
171,006
357,594
74.929
19.318
247.648
66.222
—c
50
U.S. Department of Housing and Urban Development and U.S. Department of Commerce, American Housing Survey
for the United States: 2009, March 2011, p. 65, http://www.census.gov/prod/2011pubs/h150-09.pdf. See p. A-23 for
the way in which “primary mortgage” status is determined.
51
Statement of Tim S. Embree, Iraq and Afghanistan Veterans of America, U.S. Congress, House Committee on
Veterans’ Affairs, Subcommittee on Economic Opportunity, Hearing on the Loan Guaranty Program, 111th Cong., 2nd
sess., May 20, 2010, pp. 51-52.
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Source: The data on the number and dollar amount of guaranteed loans in a fiscal year are from the
FY2013
Fiscal Year
|
Number of Loans in Year
|
Volume of Loans Made in Year($ in billions)
Cumulative Volume of Loans Outstandinga($ in billions)
Purchase Loans
|
Refinance Loansb
Total Loans
Amount of Loans
|
Amount Guaranteed
|
Amount of Loans
|
Amount Guaranteed
|
2000
|
185,553
|
13,607
|
199,160
|
23.372
|
7.071
|
—c
—c
2001
|
177,158
|
72,851
|
250,009
|
31.255
|
9.152
|
218.455
|
71.431
|
2002
|
176,898
|
140,353
|
317,251
|
40.129
|
11.667
|
216.042
|
69.547
|
2003
|
148,810
|
340,608
|
489,418
|
63.255
|
18.245
|
213.248
|
67.654
|
2004
|
152,395
|
183,393
|
335,788
|
44.131
|
12.643
|
207.374
|
64.683
|
2005
|
119,130
|
46,724
|
165,854
|
24.901
|
6.808
|
202.073
|
62.114
|
2006
|
122,604
|
20,104
|
142,708
|
24.635
|
6.486
|
203.186
|
61.277
|
2007
|
117,941
|
15,372
|
133,313
|
24.890
|
6.438
|
207.644
|
61.456
|
2008
|
142,340
|
37,330
|
179,670
|
36.089
|
9.236
|
220.839
|
63.921
|
2009
|
180,896
|
144,794
|
325,690
|
68.201
|
17.492
|
183.365
|
50.368
|
2010
|
192,625
|
121,386
|
314,011
|
65.051
|
16.745
|
214.726
|
58.080
|
2011
|
186,588
|
171,006
|
357,594
|
74.929
|
19.318
|
247.648
|
66.222
|
2012
|
201,866
|
338,018
|
539,884
|
119.227
|
30.578
|
286.626
|
76.137
|
2013
|
241,205
|
388,107
|
629,312
|
141.975
|
36.240
|
339.245
|
89.227
|
2014d
—
|
—
|
—
|
—
|
—
|
389.272
|
101.506
|
Source: The data on the number and dollar amount of guaranteed loans in a fiscal year are from the Department of Veterans Affairs, Annual Benefits Reports. The data on the cumulative volume of loans come from
the VA Performance and Accountability Reports
.
a.
.
a. The cumulative volume of loans is the total dollar amount of all guaranteed loans that was outstanding at
the end of the fiscal year.
b.
b. Refinance loans include interest rate reduction refinancing loans and cash-out or other refinancing
transactions.
c.
c. The FY2000 Performance and Accountability Report
did not provide information about the total loan volume.
d. As of the date of this report, the FY2014 Annual Benefits Report had not been released.
Amount of Coverage Provided by the Loan Guaranty
Freddie Mac Conforming Loan Limit
The conforming loan limit is a ceiling on the value of loans that Freddie Mac, one of the Government Sponsored Enterprises, can purchase from lenders.56 The single-family home loan limit in statute was initially pegged to the FHA insurance limit—$33,750 in 197057—then revised to follow the loan limits for savings and loans.58 However, beginning in 1980 as part of the did not provide information about the total loan volume.
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Amount of Coverage Provided by the Loan Guaranty
While there is technically no limit to the
amount that a veteran can borrow and still
receive a loan guaranty through the VA, the
VA limits the guaranty that it will provide
based on the amount of the loan as well as the
type of loan (purchase money, refinance, or
energy efficiency mortgage). In most cases,
the VA guaranty covers at least 25% of the
principal balance of a loan. While the VA
guaranty does not insure 100% of the loan (as
Federal Housing Administration loan
insurance does, for example), the guaranty
covers what would typically be required as a
down payment in a conventional mortgage
transaction to avoid the requirement for
private mortgage insurance. In cases where the
loan guaranty does not cover 25% of the loan
amount, a veteran may have to make a down
payment.
The statute governing the loan guaranty for
home purchase sets out four categories of
coverage depending on the principal balance
of the loan.58 (For all guaranty amounts,
including manufactured housing, refinance
loans, and energy efficiency mortgages, see
Table 3.) In general, the amount of the loan
guaranty is based on the amount borrowed by
a veteran.
Freddie Mac Conforming Loan Limit
The conforming loan limit is a ceiling on the value of
loans that Freddie Mac, one of the Government
Sponsored Enterprises, can purchase from lenders.52
The single-family home loan limit in statute was initially
pegged to the FHA insurance limit—$33,750 in 197053—
then revised to follow the loan limits for savings and
loans.54 However, beginning in 1980 as part of the
Housing and Community Development Act (P.L. 96-399
), ),
Congress inserted the maximum loan limit directly in the
Freddie Mac statute. P.L. 96-399 set the single-family limit
at $93,750, and it was to be adjusted administratively
each year based on the national average single-family
home price.
5559 While Congress did not amend the statute
to increase the loan limit until 2008, the limit was
changed administratively 27 times.
56
60
As part of the Housing and Economic Recovery Act of
2008 (P.L. 110-289), Congress amended the Freddie Mac
statute to raise the
statutorystatutory conforming loan limit from
$93,750 to $417,000, which was the level that had been
established administratively for 2006 and 2007. P.L.
110289110-289 also added a sentence to the statute allowing the
limit to increase in high-cost areas where 115% of the
median home price exceeds the conforming loan limit. In
these high-cost areas, the loan limit may go up to 115%
of the area median home price, not to exceed 150% of
the loan limit (or as high as $625,500).
Since the enactment of P.L. 110-289, the Freddie Mac
statute itself has not been amended, although Congress
temporarily raised the loan limits for high-cost areas
through September 30, 2011, via several laws. This limit
was the lower of 125% of the area median home price or
175% of the Freddie Mac limit (or $729,750).
5761 These
temporary limits expired at the end of FY2011.
•
At loan levels at or below $45,000,
the VA guaranties 50% of the loan.
•
For loans above $45,000 and up to and including $56,250, the guaranty is
$22,500.
52
For more information about Freddie Mac and the conforming loan limits, see CRS Report RS22172, The Conforming
Loan Limit, by N. Eric Weiss and Sean M. Hoskins.
53
P.L. 91-351, §305. The FHA statute was amended in 1969 to raise the limit to $33,000 (P.L. 91-152).
54
P.L. 93-383, §805. The federal savings and loan limits on mortgage lending were codified at 12 U.S.C. §1464(c)
(1976).
55
P.L. 96-399, §313.
56
Federal Housing Finance Agency, History of Conforming Loan Limits, http://www.fhfa.gov/webfiles/860/
loanlimitshistory07.pdf. Limits were increased in each year with the exception of 1990.
57
P.L. 111-5 returned the limit for high-cost areas to the level first instituted in 2008 as part of the Economic Stimulus
Act of 2008 (P.L. 110-185).
58
38 U.S.C. §3703.
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•
At loan levels above $56,250 and up to and including $144,000, the VA guaranty
is the lesser of $36,000 or 40% of the loan.
•
For loan levels above $144,000, the maximum loan guaranty is the lesser of the
“maximum guaranty amount” (described below) or 25% of the loan.
The Maximum Guaranty Amount
The VA loan “maximum guaranty amount” is defined in 38 U.S.C. Section 3703 as 25% of “the
Freddie Mac conforming loan limit limitation determined under section 305(a)(2) of the Federal
Home Loan Mortgage Corporation Act.”59 The Freddie Mac statute has most recently set the
conforming loan limit at $417,000 for single-family homes (for more information about the
Freddie Mac conforming loan limit, see the text box).60 However, for certain high-cost areas, the
loan limit may be as high as 115% of the area median home price, though it may not exceed
150% of the conforming loan limit (or $625,500).61
However, for two periods—from October 10, 2008, through December 31, 2011, and from
August 6, 2012, through December 31, 2014—limits to the VA loan guaranty for loan levels
above $144,000 have been higher than the limit in 38 U.S.C. Section 3703. The Veterans’
temporary limits expired at the end of FY2011.
While there is technically no limit to the amount that a veteran can borrow and still receive a loan guaranty through the VA, the VA limits the guaranty that it will provide based on the amount of the loan as well as the type of loan (purchase money, refinance, or energy efficiency mortgage). In most cases, the VA guaranty covers at least 25% of the principal balance of a loan. While the VA guaranty does not insure 100% of the loan (as Federal Housing Administration loan insurance does, for example), the guaranty covers what would typically be required as a down payment in a conventional mortgage transaction to avoid the requirement for private mortgage insurance. In cases where the loan guaranty does not cover 25% of the loan amount, a veteran may have to make a down payment.
The statute governing the loan guaranty for home purchase sets out four categories of coverage depending on the principal balance of the loan.62 (For all guaranty amounts, including manufactured housing, refinance loans, and energy efficiency mortgages, see Table 3.) In general, the amount of the loan guaranty is based on the amount borrowed by a veteran. - At loan levels at or below $45,000, the VA guaranties 50% of the loan.
- For loans above $45,000 and up to and including $56,250, the guaranty is $22,500.
- At loan levels above $56,250 and up to and including $144,000, the VA guaranty is the lesser of $36,000 or 40% of the loan.
- For loan levels above $144,000, the maximum loan guaranty is the lesser of the "maximum guaranty amount" (described below) or 25% of the loan.
The Maximum Guaranty Amount
The VA loan "maximum guaranty amount" is defined in 38 U.S.C. Section 3703 as 25% of "the Freddie Mac conforming loan limit limitation determined under section 305(a)(2) of the Federal Home Loan Mortgage Corporation Act."63 The Freddie Mac statute has most recently set the conforming loan limit at $417,000 for single-family homes (for more information about the Freddie Mac conforming loan limit, see the text box).64 However, for certain high-cost areas, the loan limit may be as high as 115% of the area median home price, though it may not exceed 150% of the conforming loan limit (or $625,500).65
If the amount of a mortgage exceeds the maximum amount at which the VA will guarantee 25% of the loan (for example, the amount of a mortgage is $500,000 in a county where the loan limit is $417,000), then a veteran may have to make a down payment equal to 25% of the amount over the loan limit to qualify for the loan due to secondary market considerations (see the next section of this report entitled "Maximum Loan Amount" for more information about the secondary market). However, the majority of VA-guaranteed loans are made with no down payment (84% of purchase loans in FY2013 had no down payment),66 so the limits described here will apply to most veteran borrowers.
Maximum Guaranty from 2008-2014
For two periods—from October 10, 2008, through December 31, 2011, and from August 6, 2012, through December 31, 2014—limits to the VA loan guaranty for loan levels above $144,000 were higher than the limit in 38 U.S.C. Section 3703. The Veterans' Benefits Improvement Act of 2008 (P.L. 110-389) temporarily increased the
“"maximum guaranty
amount” amount" through 2011 (it did not make the change in statute), and then P.L. 112-154 again
increased the limit through 2014. The two laws set the maximum guaranty amount at 25% of the
higher of
•
the Freddie Mac conforming loan limit, or
•
125% of the area median home price, but no higher than 175% of the limit
determined under the Freddie Mac statute.
According to guidance issued by the VA,
6267 this
meansmeant that in certain high-cost areas, the VA
can
could guarantee loans up to a maximum of 175% of $625,500, or $1,094,625. Loan limits in a number
of counties
have exceeded the statutory maximum level of $625,500 during these time periods,
with three counties reaching $1,094,625 in 2013
.63 and one county in 2014.68 Therefore, depending on where a property
is
was located, the maximum VA loan guaranty
may be as high as 25% of $1,094,625, or $273,656.
If the amount of a mortgage exceeds the maximum amount at which the VA will guarantee 25%
of the loan (for example, the amount of a mortgage is $500,000 in a county where the loan limit is
$417,000), then a veteran may have to make a down payment equal to 25% of the amount over
the loan limit to qualify for the loan due to secondary market considerations (see the next section
of this report entitled “Maximum Loan Amount” for more information about the secondary
market). However, the majority of VA-guaranteed loans are made with no down payment (88% of
59
38 U.S.C. §3703(a)(1)(C).
12 U.S.C. §1454.
61
This is based on the provision in the Freddie Mac statute for areas where 115% of median home prices exceed the
conforming loan limit. 12 U.S.C. §1454(a)(2)(C). See the text box for more information.
62
U.S. Department of Veterans Affairs, VA Circular 26-08-19, Implementation of Loan Guaranty Provisions of P.L.
110-389 , October 16, 2008, p. 2, http://www.benefits.va.gov/homeloans/docs/26_08_19.pdf.
63
2013 VA County Loan Limits, http://www.benefits.va.gov/HOMELOANS/documents/docs/
2013_county_loan_limits.pdf.
60
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purchase loans in FY2011 had no down payment),64 so the limits described here will apply to
most veteran borrowers.
was as high as 25% of $1,094,625, or $273,656.
Maximum Guaranty for Alaska, Hawaii, U.S. Virgin Islands, and Guam
The maximum single-family guaranty limit for Alaska, Hawaii, the U.S. Virgin Islands, and
Guam is higher than in the other states and the District of Columbia due to costs of construction.
65
69 As with the maximum guaranty for the 50 states and Washington, DC, P.L. 110-389 and
P.L. 112-154P.L. 112154 have increased the maximum guaranty through the end of 2014.
The statutory Freddie Mac conforming loan limit for Alaska, Hawaii, the U.S. Virgin Islands, and
Guam is 50% higher than the $417,000 limit for the rest of the country, resulting in a statutory
conforming loan limit of $625,500.
6670 Further, with the Freddie Mac statutory provision allowing
the area limit to be increased up to 150% of the conforming loan limit for high-cost areas, it is
possible for the loan limit in Alaska, Hawaii, the U.S. Virgin Islands, and Guam to be as high as
$938,250 (150% of $625,500).
In addition, because When P.L. 110-389 and P.L. 112-154 increased the
maximum limit to as much as 175% of the limit determined under the Freddie Mac statute, the
maximum loan limit could be set as high as $1,641,937.50 (175% of $938,250).
However,
through 2013, only two communities, Honolulu County and St. John, Virgin Islands, saw their
In 2014, four communities in Hawaii saw their limits exceed $625,500.
67
71
Table 3. Limits on the Level of Loan Guaranty
Amount of Loan
Limits on Guaranty
Home Loan Guaranty
•
$45,000 or less
•
50% of the loan amount
•
from $45,000 up to and including $56,250
•
$22,500
•
from $56,250 up to and including $144,000
•
Lesser of $36,000 or 40% of the loan amounta
•
more than $144,000
•
Lesser of
(1) 25% of the loan amount or
(2) 25% of the higher of (a) the Freddie Mac
conforming loan limit ($417,000) or (b) 125% of
the area median home price, not to exceed 175%
of the limit determined under the Freddie Mac
Statute (a maximum of 175% of $625,500).
Refinance:
Amount of Loan
|
Limits on Guaranty
|
Home Loan Guaranty
|
|
|
- from $45,000 up to and including $56,250
|
|
- from $56,250 up to and including $144,000
|
Lesser of $36,000 or 40% of the loan amounta
|
Lesser of (1) 25% of the loan amount or (2) 25% of the Freddie Mac conforming loan limit of $417,000, or $625,500 for high-cost areas.
Refinance: Same as for purchase, but in the case of an interest rate reduction refinancing loan (IRRRL), the guaranty
may not exceed the greater of the original loan
’s guaranty or 25% of the loan.
64
U.S. Department of Veterans Affairs, FY2011 Annual Benefits Report, p. 66, http://www.vba.va.gov/REPORTS/abr/
2011_abr.pdf.
65
12 U.S.C. §1454(a)(2)(C).
66
The higher conforming loan limit for Alaska, Hawaii, and Guam was introduced in 1980 (P.L. 96-399). The U.S.
Virgin Islands was added to the list in 1992 (P.L. 102-550). See also, U.S. Congress, Conference Report, report to
accompany S. 2719, 96th Cong., 2nd sess., September 26, 1980, H.Rept. 96-1420, p. 117.
67
2013 VA County Loan Limits, http://www.benefits.va.gov/HOMELOANS/documents/docs/
2013_county_loan_limits.pdf.
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Amount of Loan
Limits on Guaranty
's guaranty or 25% of the loan.
Energy Efficiency Improvements: The sum of (1) the guaranty amount without the energy efficiency
improvements and (2) the guaranty percentage (from step (1)) multiplied by the portion borrowed for energy
efficiency improvements.
b
b
Manufactured Housing Purchase: The lesser of $20,000 or 40% of the loan.
Manufactured Housing Refinance: If refinancing a VA loan, the guaranty may not exceed the greater of the
original loan guaranty or 25% of the refinancing amount.
Source: 38 U.S.C. §3703(a),
P.L. 112-154, §3710(d)-(e), §3712(a),(c).
a.
a. This effectively means that for loans between $90,000 and $144,000, the maximum guaranty is $36,000.
b.
b. While the Energy Efficiency Improvement guaranty is effectively the same as the guaranty for home
purchase, the separate calculations are meant to ensure that the portion of the guaranty related to the
improvements are not counted against the veteran
’'s entitlement. 38 U.S.C. §3710(d)(4). See also, VA Lenders
Handbook Handbook, p. 7-20, http://www.benefits.va.gov/WARMS/docs/admin26/pamphlet/pam26_7/ch07.doc
.
.
Maximum Loan Amount
Although there is no limit to the amount a veteran may borrow and still participate in the VA loan
guaranty program, lenders may be unwilling to extend a loan that exceeds the limit where the VA
will guaranty 25% of the loan. VA loans are securitized through the Government National
Mortgage Association (Ginnie Mae). Ginnie Mae may secure certain
“"high balance loans
”
" originated after October 1, 2008—loans where the balance exceeds the conforming loan limit of
$417,000 for single-family properties.
6872 However, according to the VA, the
“"rule of thumb
”" for
Ginnie Mae to purchase a VA loan is that at least 25% of the principal balance either be
guaranteed and/or covered by a down payment.
6973 As a result, the effective maximum loan limit
with no down payment corresponds to the
“"maximum guaranty amount
”" described in the
previous section.
previous section.
Subsequent Loans: The Veteran
’'s Entitlement
The term
“entitlement”"entitlement" is used to refer to the amount of guaranty to which a veteran is entitled
under the loan guaranty statute. It is different from the guaranty amount described in the previous
section in that it is technically a lifetime limit on the amount of loan insurance coverage for which
a veteran may qualify. However, given the broad circumstances under which entitlement may be
restored (described below), veterans may use the guaranty for the purchase of more than one
home during a lifetime, though not necessarily more than one home at a time.
The statute governing the VA loan guaranty limits a veteran
’'s entitlement to $36,000 or, for loans
that exceed $144,000, the
“"maximum guaranty amount
”" described in the previous section
(under
current law, this amount may be no more than $273,656 in high-cost areas).70 The term “basic
entitlement”.74 The term "basic entitlement" is sometimes used to refer to entitlement up to $36,000, and the term
“bonus
entitlement”"bonus entitlement" is used to refer to entitlement that exceeds $36,000. In general, due to the
68
The Ginnie Mae Mortgage Backed Securities Guide, August 1, 2011, p. 9-1, http://www.ginniemae.gov/guide/pdf/
chap09.pdf.
69
VA Lenders Handbook, p. 3-9.
70
38 U.S.C. §3703(a).
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requirement that VA-guaranteed loans be used to purchase properties that a veteran will occupy as
his or her home,
7175 unused entitlement cannot be used to purchase more than one home at a time.
In addition to being able to put unused entitlement toward a future guaranteed loan, there are
instances in which already-used entitlement may be restored so that a veteran may use the
maximum available loan guaranty to purchase another home.
7276 These circumstances cover most
situations where a veteran has ended the previous loan transaction in some way.
•
Entitlement is restored where a veteran has disposed of the property (e.g.,
through sale) or the property has been destroyed through natural disaster, and
either (1) the loan is paid off in full; (2) if the VA suffered a loss on the loan, the
loss is repaid; or (3) the VA has been released from liability on the loan.
•
When one veteran assumes a guaranteed loan from another, entitlement is
restored to the original mortgagor.
•
In cases of refinancing, entitlement is restored either when a veteran has paid off
the original loan prior to entering into a new loan or where proceeds from the
refinancing will be used to pay off the original loan.
73
•
77
Where a veteran has paid off a VA-guaranteed loan, but has not yet sold the
property that secured it, the VA may do a one-time restoration of entitlement to
be used toward the purchase of another property.
74
78If available entitlement is less than 25% of the loan, then a lender may require a veteran to make a
down payment to make up the difference between the loan guaranty and 25% of the loan to meet
secondary market requirements.
75
79
How the VA Loan Guaranty Differs from FHA Insurance
Both the Federal Housing Administration (FHA) loan insurance program and the VA loan
guaranty program provide borrowers with the federal government
’'s promise to reimburse lenders
in the event of borrower default on private mortgages. Due to the insurance features of each
program, borrowers who might not otherwise have the resources for a conventional mortgage
may still be able to purchase a home. Despite similar purposes, however, the programs differ in
their specifics. Aside from the requirement that a borrower through the VA meet service
requirements, other features such as the amount of coverage, borrower fees, loan processing and
underwriting, terms of the loan, etc., vary between the two.
•
Amount of Coverage: As discussed earlier in the
“"Amount of Coverage
Provided by the Loan Guaranty
”" section, the VA loan guaranty covers only a
portion of the mortgage loan in the event of a borrower
’'s default. Insurance
through FHA covers 100% of the loan amount (up to a certain limit).
71
VA Lenders Handbook, pp. 3-12 and 3-14.
38 U.S.C. §3702(b).
73
Ibid. See also VA Lenders Handbook, p. 2-15.
74
VA Lenders Handbook, p. 2-15.
75
Ibid., p. 3-9.
72
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•
Maximum Loan Amount: As a practical matter, the maximum loan amount for
the VA loan guaranty in certain high-cost areas is may be as high as $1,094,625
(see the “Maximum Loan Amount” section of this report). In the case of FHA,
the insurance will currently cover loans up to $729,750 in certain high-cost
areas.76
•
through FHA covers 100% of the loan amount (up to a certain limit).
Borrower Fees: Fees paid by veterans participating in the VA loan guaranty
program are paid up front as a percentage of the loan (see Table 6), and
borrowers do not pay additional annual premiums. Borrowers who go through the
FHA program currently pay an up-front fee of 1.75% of the loan amount, and
then pay annual premiums that
range between 1.20% and 1.50are 0.80% and 0.85% of the mortgage
balance balance for 30-year loans, depending on the loan-to-value ratio
and size of the mortgage.77
•
.80
Down Payment: Veteran borrowers who participate in the VA loan guaranty
program are not required to make a down payment. However, if the loan balance
exceeds loan limits, the borrower generally must make up the difference between
the guaranty and 25% of the loan amount. In general, borrowers through FHA
must make a 3.5% down payment (10% for credit scores ranging from 500 to
579).
78
•
81
Fees Charged at Closing: While both the VA loan guaranty and the FHA
insurance program have rules about what lenders may charge borrowers at
closing, the VA loan guaranty is more restrictive. VA loan guaranty regulations
list services where lenders are allowed to charge itemized fees to borrowers (such
as appraisal, recording, and credit report fees),
7982 and any other fees must be
recouped through a flat fee not to exceed 1% of the loan, limiting such charges as
application fees, document preparation, interest rate lock-in fees, and charges
from mortgage brokers.
8083 FHA rules are more general, specifying that lenders
“ "may only collect fair, reasonable, and customary fees and charges
”" from
borrowers.
81
•
84
Minimum Credit Score: The VA loan guaranty does not require a specific credit
score from a borrower, while FHA requires a credit score of at least 500.
82
•
85
Appraisal: Appraisers for properties that are to be guaranteed through the VA
loan guaranty program must go through a separate VA certification procedure,
and they are chosen by the VA rather than lenders.
8386 The statute requires the VA
to review appraisals prior to loan closings, although the VA has a program in
76
See CRS Report RS20530, FHA-Insured Home Loans: An Overview, by Katie Jones.
See CRS Report R42875, The FHA Single-Family Mortgage Insurance Program: Financial Status and Related
Current Issues, by Katie Jones.
78
Ibid.
79
38 C.F.R. §36.4313.
80
See VA Lenders Handbook, p. 8-7.
81
U.S. Department of Housing and Urban Development, Handbook 4155.2, Lender’s Guide to the Single Family
Mortgage Insurance Process, p. 6-A-12, http://portal.hud.gov/hudportal/documents/huddoc?id=4155-2_6_secA.pdf.
82
CRS Report R42875, The FHA Single-Family Mortgage Insurance Program: Financial Status and Related Current
Issues, by Katie Jones.
83
38 U.S.C. §3731 requires the VA Secretary to set up a process for approving appraisers that includes a testing
process and recommendations from other appraisers, and to develop and maintain a list of approved appraisers.
77
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to review appraisals prior to loan closings, although the VA has a program in place to allow lenders to process appraisals after application and training.
8487 FHA
does not have similar policies regarding appraisers, and they may be selected by
lenders.
In addition, for a number of years, veterans were given special terms when entering into FHA
loans. The Housing and Urban Development Act of 1965 (P.L. 89-117) first allowed veterans to
enter into FHA loans with slightly higher maximum mortgages compared to nonveteran
borrowers, and it also exempted them from what was then a 3% cash down payment requirement
on the first $15,000 of the loan. Over time, some of the specifics of the maximum mortgage and
down payment requirements changed, but veterans still retained favorable levels compared to
nonveterans. In 2002, the FHA Downpayment Simplification Act (P.L. 107-326) removed
statutory language that allowed for higher maximum mortgages for veteran borrowers.
8588 And
when the Housing and Economic Recovery Act of 2008 (P.L. 110-289) was enacted, it eliminated
the provision exempting veterans from the requirement of what had previously been a 3% down
payment in cash or its equivalent.
86
89
Direct VA Loans
In addition to the VA loan guaranty program, through which the VA insures loans made to
veterans by private lenders, there are several circumstances under which the VA makes loans
directly to veterans, as well as occasionally to nonveterans. The direct loans through the VA can
be put into two broad categories. The first category involves loans that are targeted to specific
veteran populations: one program was created to address the needs of rural veterans, but has
evolved to serve veterans with certain disabilities, and the other program is designed for Native
American veterans. The second category involves loans made as the result of borrower default on
guaranteed loans—these are referred to as
“"acquired loans
”" and
“"vendee loans.
”
"
The Original Direct Loan for Veterans in Rural Areas, Now Limited
to Veterans with Disabilities
The VA first made direct housing loans available to veterans who were unable to obtain
mortgages through private lenders and were therefore unable to participate in the loan guaranty
program. The direct loan portion of the program was enacted as part of the Housing Act of 1950
(P.L. 81-475), and was meant to be a
“"last resort
”" where private financing was not available to
veterans.
8790 The enacting legislation did not specify that the program was directed to veterans in
rural areas, but about eight years later, in 1958, Congress changed the law to apply specifically to
veterans living in rural areas and small towns as part of P.L. 85-857.
88 The law provided that the
84
VA Lenders Handbook, chapter 15.
See Section 2(1)(B)(ii)(I). Just prior to the enactment of P.L. 107-326, veteran borrowers qualified for a principle
balance of 100% of the first $25,000 of the appraised value, compared to 97% for non-veteran borrowers. In addition,
the maximum principle balance on amounts above $125,000 was 90% for non-veteran borrowers, compared to 95% for
veteran borrowers.
86
See Section 2113 of P.L. 110-289.
87
U.S. Congress, Senate Committee on Banking and Currency, Housing Act of 1950, report to accompany S. 2246, 81st
Cong., 2nd sess., February 24, 1950, S.Rept. 81-1286, p. 92.
88
The old U.S. Code Section, 38 U.S.C. §694l (1952), was replaced by 38 U.S.C. §1811 (1958). See the table of
contents for Title 38 of the U.S. Code 1958 version.
85
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91 The law provided that the VA Secretary would designate an area without private loan options for veterans as a
“housing
"housing credit shortage area
”" and make loans to veterans at a rate not exceeding the rate set for guaranteed
loans at a maximum principal balance (at the time the law was enacted) of $13,500. In the
Veterans’ Veterans' Housing Act of 1970 (P.L. 91-506), Congress made direct loans available to veterans
who qualified for Specially Adapted Housing grants for veterans with certain disabilities, who it
recognized might also have difficulty obtaining credit for home purchases.
89
92
The VA direct loan program continues to exist today, but in limited form.
9093 A 1980 review of the
direct loan program found that 98% of veterans in rural areas received loans from private lenders,
and only 2% received VA direct loans.
9194 As a result of the increased availability of private loan
funds in rural areas, beginning in the FY1981 Department of Housing and Urban
DevelopmentIndependentDevelopment-Independent Agencies Appropriation Act (P.L. 96-526), Congress specified that VA direct loans
be made only for veterans with disabilities through the Specially Adapted Housing Program
(described in a later section of this report entitled
“"The Specially Adapted Housing Program
”).
"). Congress has continued to include similar language in subsequent appropriations acts.
92
95 Currently, direct loans are limited to $500,000 in obligations for Specially Adapted Housing loans
of not more than $33,000 apiece.
9396 Interest rates on the loans are to be determined by the VA
Secretary, and veterans are eligible as long as they qualify for the loan guaranty program.
Direct Loans for Native American Veterans (Including Guam,
American Samoa, and CNMI)
While the VA loan guaranty program is available to Native American veterans,
9497 due in part to
certain tribal land ownership issues, Congress enacted a direct loan program specifically to
provide mortgage assistance for Native American veterans. The direct loan program may also be
used by veteran borrowers who are Native Hawaiians, Alaska Natives, and those who are native
to American Samoa, Guam, and the Commonwealth of the Northern Mariana Islands (CNMI).
95
98
Prior to enactment of the direct loan program for Native American veterans, VA housing
assistance to Native American veterans was minimal. In fact, the Advisory Committee on Native
89
U.S. Congress, House Committee on Veterans’ Affairs, Subcommittee on Housing, Bills to Provide for Purchase of
Mobile Homes Under Veterans’ Administration Guaranty and Other Bills Related to Veterans’ Housing, 91st Cong., 2nd
sess., July 14 and 16, 1970, pp. 3461-3462.
90
38 U.S.C. §3711.
91
U.S. Veterans Administration, Annual Report 1981, May 1982, p. 71.
92
For example, the language in the FY2012 Consolidated Appropriations Act (P.L. 112-74) was “not to exceed
$500,000 in gross obligations for direct loans are authorized for specially adapted housing loans.” According to the
Conference Committee Report, the law “limits obligations for direct loans to not more than $500,000.” See H.Rept.
111-366.
93
U.S. Department of Veterans Affairs, FY2013 Congressional Budget Submission, Volume III, Benefits and Burial
Programs and Departmental Administration, pp. 2E-1 and 2E-6, http://www.va.gov/budget/docs/summary/
Fy2013_Volume_III-Benefits_Burial_Dept_Admin.pdf (hereinafter FY2013 VA Budget Justifications).
94
See U.S. Department of Veterans Affairs, M26-1 Guaranteed Loan Processing Manual, p. 10-15,
http://www.benefits.va.gov/warms/M26_1.asp.
95
38 U.S.C. §3765(3). The statute refers to “Pacific Islander” as one who is “who is indigenous to a United States
territory or possession located in the Pacific Ocean,” as defined by the Native American Programs Act of 1974, 42
U.S.C. §2992c(7). The three U.S. territories in the Pacific are American Samoa, Guam, and the Commonwealth of the
Northern Mariana Islands.
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assistance to Native American veterans was minimal. In fact, the Advisory Committee on Native American Veterans had been unable to find a single instance of a Native American veteran
benefitting from the loan guaranty program.
9699 While factors such as poverty and unemployment
among Native American veterans may have contributed to their lack of participation, the unique
nature of tribal land also presented obstacles to private lenders entering into mortgages. Much of
tribal land is held in trust by the federal government, either for a tribe or for individual Native
Americans (the latter situation is sometimes referred to as an allotment). Of the approximately 56
million acres of trust land, 45 million are held in trust for tribes and 11 million for individuals.
97
100 In the case of tribal trust land, the land may be assigned or leased to individual tribal members.
However, in neither case (tribal or individual trust) may the land be encumbered or transferred
without federal government approval.
98101 Lenders could be reluctant to enter into mortgage
arrangements where they would be unable to have the land transferred to them in the event of a
veteran’ veteran's default.
99
102
Similar issues apply to residents of American Samoa and CNMI, where land ownership is
restricted. In American Samoa, approximately 90% of land is communally held,
100103 it may not be
transferred without government approval, and it may not be transferred to anyone who is
“less
"less than one half Samoan.
”101"104 The CNMI Constitution restricts land ownership and long-term
interests (such as leases) to those of Northern Marianan descent.
102105 As with tribal land, a private
lender may not be willing to extend a loan where transfer of the land in the event of default would
violate territorial law. Guam does not have these restricted land ownership issues.
After finding that only 15 of 24,000 veterans living on trust land had participated in any sort of
housing benefit—all of whom received the Specially Adapted Housing benefit and none the loan
guaranty—Congress initially enacted a demonstration program to make loans to Native American
veterans that was included in the Veterans Home Loan Program Amendments of 1992 (
P.L. 102-547).106P.L. 102547).103 The program was made permanent as part of the Veterans
’' Housing Opportunity and
Benefits Improvement Act of 2006 (P.L. 109-233). In order to participate in the VA direct loan
program, and circumvent the issues of land ownership, a tribe must enter into a memorandum of
understanding (MOU) with the VA to provide avenues for addressing default and foreclosure.
96
U.S. Congress, Senate Committee on Veterans’ Affairs, Veterans Benefits and Health Care Act of 1989, report to
accompany S. 13, 101st Cong., 1st sess., September 13, 1989, S.Rept. 101-126 (Washington: GPO, 1989), pp. 290-291.
The Senate amended H.R. 901 (which would ultimately become P.L. 101-237) with provisions from S. 13.
97
U.S. Department of the Interior, DOI Trust Reform: As-Is Trust Business Model Report, March 21, 2003, p. 2-1,
http://www.ost.doi.gov/trust_reform/roadmap.html.
98
U.S. Department of Agriculture, Lending on Native American Lands: A Guide for Rural Development Staff, June
2006, p. 24, http://www.rurdev.usda.gov/rd/aian/LendingOnNativeLands_RD.pdf.
99
See U.S. Congress, Senate Committee on Veterans’ Affairs, Native American Veterans Home Loan Equity Act of
1992, report to accompany S. 2528, 102nd Cong., August 12, 1992, S.Rept. 102-378, p. 11. Quoting from an evaluation
of VA lending on tribal land, the report stated that “The inability to use tribal land as security for a mortgage loan is the
most significant factor in limiting access to the VA loan guaranty benefit that can be affected by VA.” S. 2528 was
incorporated into P.L. 102-547. See “Veterans Home Loan Program Revitalization Act of 1992,” House debate,
Congressional Record, vol. 138, part 22 (October 5, 1992), p. 32374.
100
See the Department of the Interior website, “Insular Area Summary for American Samoa,” http://www.doi.gov/oia/
Islandpages/asgpage.htm.
101
AM. SAMOA CODE ANN. §37.0204.
102
N.M.I. Const., Art. XII, Sec. 1.
103
Congress, in response to the concerns of the Advisory Committee on Native American Veterans, directed the
Departments of Veterans Affairs and Interior to look into the extent to which Native American veterans on trust land
participated in the loan guaranty program and release a report (see the Veterans’ Benefits Amendments of 1989 (P.L.
101-237)). The findings of the report are summarized in S.Rept. 102-378, p. 10.
Congressional Research Service
20
VA Housing: Guaranteed Loans, Direct Loans, and Specially Adapted Housing Grants
understanding (MOU) with the VA to provide avenues for addressing default and foreclosure. Typically individuals enter into long-term leases for use of trust land. The MOU requires that a
participating tribe set up a process through which a veteran borrower
’'s leasehold interest in a
property can be transferred to a lender, whether private or government, or their assignee in the
event of default.
104107 The tribe must also establish a procedure for evicting and foreclosing on the
veteran’ veteran's interest in the land and property.
As of FY2011
As of FY2013, the VA had entered into MOUs with
8384 tribes or Pacific Island territories.
105
108 Through
FY2011FY2013, the VA had entered into
869953 loans through the direct loan program,
4128 of which
were made in that year.
106109 The Direct Loan program for Native American veterans has had much
of its participation in Hawaii and the territories. Prior to the program being made permanent in
2006, the VA noted in hearing testimony that the program was most successful in American
Samoa, Guam, CNMI, and Hawaii, with 90% of loans at the time made in American Samoa and
Hawaii.
107110 Reasons behind the lack of lending to Native American veterans were thought to
include low income, lack of infrastructure, and poor credit.
108111 As of calendar year 2011, 90% of
loans were still made in American Samoa and Hawaii.
109
112
Table 4. Direct Loans for Native American Veterans, FY2000-
FY2011
Fiscal Year
Number of Loans
Amount of Loans
Made
During the Year
($ in millions)
2000
21
1.871
2001
20
1.544
2002
62
5.620
2003
120
10.637
2004
56
4.924
2005
38
3.266
2006
30
4.957
2007
53
7.378
2008
42
8.288
2009
99
15.725
2010
103
15.835
2011
41
7.492
Source: FY2013
Fiscal Year
|
Number of Loans
|
Amount of Loans Made During the Year($ in millions)
2000
|
21
|
1.871
|
2001
|
20
|
1.544
|
2002
|
62
|
5.620
|
2003
|
120
|
10.637
|
2004
|
56
|
4.924
|
2005
|
38
|
3.266
|
2006
|
30
|
4.957
|
2007
|
53
|
7.378
|
2008
|
42
|
8.288
|
2009
|
99
|
15.725
|
2010
|
103
|
15.835
|
2011
|
41
|
7.492
|
2012
|
32
|
6.213
|
2013
|
28
|
6.623
|
Source: U.S. Department of Veterans Affairs, Annual Benefits Reports
, FY2000 to FY2013.
Direct Loans Resulting from Borrower Delinquency or Default (Acquired and Vendee Loans)
, FY2000 to FY2011.
104
The MOU is available at http://www.benefits.va.gov/homeloans/docs/mou.pdf.
U.S. Department of Veterans Affairs, Annual Benefits Report FY2011, p. 63, http://www.vba.va.gov/REPORTS/abr/
2011_abr.pdf.
106
Ibid.
107
U.S. Congress, Senate Committee on Veterans’ Affairs, Pending Benefits-Related Legislation, 109th Cong., 1st sess.,
June 23, 2005, S.Hrg. 109-243, p. 27.
108
Ibid., p. 28.
109
E-mail communication from the VA, April 13, 2012.
105
Congressional Research Service
21
VA Housing: Guaranteed Loans, Direct Loans, and Specially Adapted Housing Grants
Direct Loans Resulting from Borrower Delinquency or Default
(Acquired and Vendee Loans)
The VA may also enter into a direct loan arrangement in two situations involving a veteran
’s
's delinquency and/or default on a guaranteed loan.
•
Acquired Loans: In situations where a veteran borrower with a guaranteed loan
has difficulty making payments, the VA may purchase the loan from the lender
(or current servicer) and continue to hold and service the loan.
110
•
113
Vendee Loans: In cases where a veteran defaults on a guaranteed loan and the
lender forecloses, the VA often acquires the property from the servicer and then
resells it. As part of the resale, the VA may enter into a direct loan with a
purchaser of the home, whether or not the purchaser is a veteran. The VA briefly
suspended the vendee loan program in 2003, but Congress reinstated it as part of
the Veterans Benefits Act (P.L. 108-183). The law also amended the statute to
require that, of the properties acquired and sold by the VA as the result of veteran
default, between 50% and 85% are to be financed by the VA as part of their
purchase.
111
114 After 2012, the VA again stopped entering into vendee loans due to the need for new regulations.115Generally, the VA has had the authority to bundle and sell pools of vendee loans.
112116 The loans are
sold to a trust, which in turn issues certificates that are backed by the mortgages and sold to
investors. The VA guarantees that investors in the certificates will receive
“"full and timely
”
" payments of principal and interest from the loans as well as against losses at foreclosure.
113 The
117 The bundled loans appear in the VA budget as
“"Guaranteed Loan Sales Securities.
”" The authority to
bundle and sell the loans had expired on December 31, 2011, but was reinstated through
December 31, 2016, as part of P.L. 112-154, enacted August 6, 2012.
The number of loans acquired by the VA, vendee loans entered into, and sales of vendee loans in
a given year depend on borrower defaults, purchaser interest in foreclosed VA homes, and
investor interest in VA securities. Table 5 shows the number of acquired loans, vendee loans
entered into, and vendee loans sold from FY1998 through
FY2011FY2014. As a result of the vendee loan
program suspension in 2003
and again in 2013, the number of vendee loans sold decreased during the following
years and has only recently begun to pick up again years. This has also resulted in the sale of fewer
vendee loans. In addition, the number of VA acquired loans has fallen in recent years. According
to the VA, there have been fewer acquired loans since the 1990s and early 2000s because both the
VA and loan servicers focused efforts on loan modification and other options to help borrowers
keep their homes, reducing the need for the VA to acquire loans.
114118 Efforts particularly increased
in 2008 and thereafter, when the VA offered new incentives for servicers to work with borrowers
(see the section of this report
“Options to Prevent Foreclosure”).
110
U.S. Department of Veterans Affairs, FY2011 Performance and Accountability Report, November 15, 2011, p. III13, http://www.va.gov/budget/docs/report/2011-VAPAR_FullWeb.pdf (hereinafter FY2011 Performance and
Accountability Report).
111
38 U.S.C. §§3733(a)(1) and (a)(7).
112
See FY2011 Performance and Accountability Report, pp. III-30 to III-31. Congress authorized the VA to guarantee
principal and interest payments on these certificates as part of P.L. 102-291, which is codified at 38 U.S.C. §3720(h).
113
FY2011 Performance and Accountability Report, p. III-31.
114
E-mail communication from the VA, April 13, 2012.
Congressional Research Service
22
VA Housing: Guaranteed Loans, Direct Loans, and Specially Adapted Housing Grants
"Options to Prevent Foreclosure").
Table 5. Guaranteed Loans Acquired by VA,
Vendee Loans Extended,
and Direct Loans Sold
Fiscal Year
Loans Acquired and
Serviced by VA
Vendee Loans
Entered Into by VA
as Part of
Property Sale
Vendee Loans Sold
by VA
1998
2,001
15,856
—a
1999
1,573
16,871
11,952
2000
4,256
13,698
18,434
2001
2,775
11,186
9,282
2002
2,693
8,786
11,714
2003
1,740
4,621
3,333
2004
1,171
3
3,397
2005
1,161
1,419
0
2006
1,150
788
0
2007
642
501
0
2008
386
626
2,532
2009
81
435
0
2010
36
1,081
2,190
2011
92
4,660
1,725
Source: VA Budget Justifications for Veterans Benefits Programs, FY2000-FY2013.
a.
The number of vendee loans for FY1998 was not available.
Congressional Research Service
23
VA Housing: Guaranteed Loans, Direct Loans, and Specially Adapted Housing Grants
Funding for the VA Direct and Guaranteed
Loan Programs
Both the VA direct loan and loan guaranty
programs are funded through several sources.
These sources include congressional
appropriations, fees paid by borrowers,
proceeds from the rental or sale of foreclosed
properties, collection of principal and interest
payments made by borrowers, and any
penalties paid by lenders.116 An important
aspect of understanding how VA loans are
funded, apart from the sources of funding, is
how loans are accounted for in the federal
budget.
Federal Credit Reform Act of 1990
The FCRA (P.L. 101-508)115 changed the way in which
the federal government budgets for loan and loan
guaranty programs like those administered by the VA.
Prior to the FCRA, if a federal agency extended direct
loans to borrowers in a given fiscal year, the
disbursement of the principal balance of the loans was
recorded as an outlay in that year, and the budget did
not account for the fact that the government would
recoup principal and interest payments in future years.
Loan guarantees, by contrast, could appear costless in
the early years, or even income-generating if fees were
collected, but did not reflect potential costs due to
defaulted loans in the future.
In most federally funded grant programs, the
Beginning in 1992, the FCRA required agency budgets to
reflect the net present value of outflows and inflows of a
cost to the federal budget is the amount
loan over its lifetime. The estimated cash inflows and
appropriated, and federal involvement in
outflows of a program are discounted to the present
funding generally ends after the outlay of
fiscal year using a discount rate. A credit subsidy in the
funds. By contrast, the cost of loan programs
form of an appropriation from the federal government
may involve both an up-front outlay of funds
may be required to support loan programs when the net
present value is positive. Due to the uncertainty involved
as well as the recoupment of costs through
in making the net present value estimates, OMB and
payments of principal and interest, and/or
federal agencies re-estimate the credit subsidy each year
collection of fees and penalties, over the
to determine the actual subsidy required. Additional
lifetime of the loans. Loan programs may also
funding in subsequent years that may be required due to
suffer losses in subsequent years through
underestimates of the subsidy comes from “permanent
indefinite authority” provided through the FCRA rather
defaults or lower-than-expected collection of
than annual discretionary appropriations.
fees. As a result, it is not always possible to
Within their budgets, federal agencies account for loans
capture the budgetary effects of loans in one
entered into prior to 1992 separately, in a liquidating
particular year. Current government practice,
account.
instituted in 1992, is to determine the net
present value of loans over their lifetime and
to record this amount in the budget in the year the loans are extended. (See the text box for an
explanation of the law implementing this budget process.)
The concept of net present value is helpful both in understanding how funds are appropriated for
VA loans and in reading VA budget documents. The federal funding process is described briefly in
the following subsection of this report, “The VA Budget and Congressional Appropriations for VA
Loan Programs.” The two subsequent subsections describe loan fees paid by borrowers, and
funds obtained through loan payments and property sales.
115
The FCRA was part of the Omnibus Reconciliation Act of 1990. It is found under Title XIII, Budget Enforcement,
as Title V, Credit Reform.
116
Ibid.
Congressional Research Service
24
VA Housing: Guaranteed Loans, Direct Loans, and Specially Adapted Housing Grants
Sources of Funding for Loan Programs
The VA Budget and Congressional Appropriations for VA Loan Programs
The VA direct and guaranteed loan programs receive both discretionary and mandatory
appropriations from Congress. The discretionary funds pay for the administrative expenses of the
VA loan programs. The mandatory funding supports the loans themselves, and typically appears
in appropriations laws as “such sums as necessary.”
Mandatory funding for the loan guaranty and direct loan programs is expressed as a percentage of
the total loan volume. This is sometimes referred to as the “subsidy rate”; each year the estimated
subsidy rate appears in the President’s Budget Appendix for the Department of Veterans Affairs.
The estimated subsidy rate of loans guaranteed or made in a given fiscal year is based on the net
present value of expected expenses in the event of borrower defaults as well as expected income
through fees and other sources. If the estimated present value of payments by the VA for a cohort
of loans guaranteed or extended in a given fiscal year exceeds the estimated present value of fees
paid by borrowers, recoveries, and other collections, then the subsidy rate is positive (i.e., the
government subsidizes the loan program), and the program receives mandatory funding. If the net
present value of cash flows for a cohort of loans is expected to result in a surplus of funds (more
taken in than paid out), then the subsidy rate is negative (i.e., the program has excess revenue that
is returned to Treasury).
As part of the annual budget process, the VA estimates individual subsidy rates for each of the
four types of loans either made directly by the VA or guaranteed by the VA. The four programs
for which the VA estimates subsidy rates are guaranteed loans, guaranteed loan sale securities,
acquired loans, and vendee loans. The initial estimated subsidy rate for each of these programs
for a given fiscal year represents the net present value for that year’s cohort of loans. However,
the initial estimated subsidy rate may differ from the actual subsidy rate for the cohort of loans
over their lifetime. Projecting the net present value of cash flows is uncertain, so subsidy
reestimates are made by the VA each year, and additional mandatory funding is permanently
available by the FCRA to cover any shortfalls.117 Factors that can affect the subsidy rate (and
resulting mandatory appropriation) include changes in the interest rate used to determine the
present value of future funding streams, revisions in estimates of borrower default or prepayment
rates, the outcomes of property management decisions, and changes in the amount of fees actually
paid by borrowers (compared to what was expected). Due to reestimates, a negative subsidy rate
calculated in one year may be recalculated as positive in a subsequent year, resulting in an
increased amount of mandatory funding needed for a loan program. Or, if the subsidy rate is
recalculated as negative, funds are returned to Treasury.
Appropriations for VA direct and guaranteed loans are captured in one “on-budget” account,
called the Veterans Housing Benefit Program Fund, sometimes referred to as the program
account.118 (Note that direct loans for Native American veterans are funded separately.) In
117
The reestimates are part of the Supplemental Materials on the OMB Budget website. There are tables for reestimates
of direct loan subsidy rates and loan guarantee subsidy rates. See Office of Management and Budget, FY2013 Federal
Credit Supplement, pp. 73-74 for guaranteed loans and pp. 49-50 for direct loans, http://www.whitehouse.gov/sites/
default/files/omb/budget/fy2013/assets/cr_supp.pdf.
118
38 U.S.C. §3722. The fund was instituted in 1998 as part of P.L. 105-368, the Veterans Programs Enhancement Act.
Prior to this, the loan guaranty and direct loan programs had been funded through three accounts, the Guaranty and
(continued...)
Congressional Research Service
25
VA Housing: Guaranteed Loans, Direct Loans, and Specially Adapted Housing Grants
addition, several separate, off-budget accounts reflect inflows and outflows for direct and
guaranteed loan cohorts, depending on when the loans were extended. Funds for direct and
guaranteed loans made prior to 1992 are shown in a housing liquidating account, and funds for
loans extended after 1992 are shown in direct and guaranteed loan financing accounts. The
multiple accounts may be cause for confusion, so it is useful to keep in mind that appropriations
appear in the Veterans Housing Benefit Program Fund, while the financing and liquidating
accounts reflect the specific income and expenses associated with particular loan cohorts.
Fees from Borrowers
The costs of the VA direct and loan guaranty programs are supported, in part, by fees paid by the
borrowers. The amount of a borrower’s fee is based on the amount of down payment, if any;
whether the loan is extended through the loan guaranty or direct loan program; whether the
borrower had active duty service or was a reservist; when the loan closed; whether the loan is
purchase money or a refinance; whether the borrower is accessing the guaranty for the first time
or entering into a subsequent loan; and whether the property is purchased under the manufactured
housing portion of the loan guaranty statute.119 (See Table 6.) Fees may be waived for veterans
receiving compensation for a service-connected disability, for the surviving spouse of a
servicemember who died of a service-connected disability, or for the surviving spouse of a
veteran who died while receiving (or was entitled to receive) compensation for certain serviceconnected disabilities.120 Veterans may finance the fees as part of the loan, and the guaranty is
based on the loan amount, including the fees.121
Veterans were not always charged fees as part of the loan guaranty transaction and, in general,
fees were not required prior to 1982.122 When the loan guaranty program was created, it was
considered a benefit or entitlement for veterans. However, in 1982, the VA administrator wrote a
letter to the Speaker of the House, together with draft legislation, suggesting that the VA require
veterans to pay a 0.5% fee on the principal balance of each loan.123 The letter expressed concern
regarding the “costs to the taxpayers of operating the program,” and noted that “paying claims on
the approximately 3.7 percent of the loans resulting in foreclosure are significant.”124 Despite
objections from veterans groups,125 Congress instituted the fee as part of the Omnibus Budget
Fiscal Year
|
Loans Acquired and Serviced by VA
|
Vendee Loans Entered Into by VA as Part of Property Sale
|
Vendee Loans Sold by VA
|
1998
|
2,001
|
15,856
|
—a
1999
|
1,573
|
16,871
|
11,952
|
2000
|
4,256
|
13,698
|
18,434
|
2001
|
2,775
|
11,186
|
9,282
|
2002
|
2,693
|
8,786
|
11,714
|
2003
|
1,740
|
4,621
|
3,333
|
2004
|
1,171
|
3
|
3,397
|
2005
|
1,161
|
1,419
|
0
|
2006
|
1,150
|
788
|
0
|
2007
|
642
|
501
|
0
|
2008
|
386
|
626
|
2,532
|
2009
|
81
|
435
|
0
|
2010
|
36
|
1,081
|
2,190
|
2011
|
92
|
4,660
|
1,725
|
2012
|
418
|
2,293
|
1,757
|
2013
|
23
|
0b
0b
2014
|
24
|
9
|
0
|
Source: VA Budget Justifications for Veterans Benefits Programs, FY2000-FY2016.
a. The number of vendee loans for FY1998 was not available.
b. According to VA budget justifications, the VA stopped vendee loan sales after 2012 so that regulations could be updated.
Funding for the VA Direct and Guaranteed Loan Programs
Federal Credit Reform Act of 1990
The FCRA (P.L. 101-508)119 changed the way in which the federal government budgets for loan and loan guaranty programs like those administered by the VA. Prior to the FCRA, if a federal agency extended direct loans to borrowers in a given fiscal year, the disbursement of the principal balance of the loans was recorded as an outlay in that year, and the budget did not account for the fact that the government would recoup principal and interest payments in future years. Loan guarantees, by contrast, could appear costless in the early years, or even income-generating if fees were collected, but did not reflect potential costs due to defaulted loans in the future.
Beginning in 1992, the FCRA required agency budgets to reflect the net present value of outflows and inflows of a loan over its lifetime. The estimated cash inflows and outflows of a program are discounted to the present fiscal year using a discount rate. A credit subsidy in the form of an appropriation from the federal government may be required to support loan programs when the net present value is positive. Due to the uncertainty involved in making the net present value estimates, OMB and federal agencies re-estimate the credit subsidy each year to determine the actual subsidy required. Additional funding in subsequent years that may be required due to underestimates of the subsidy comes from "permanent indefinite authority" provided through the FCRA rather than annual discretionary appropriations.
Within their budgets, federal agencies account for loans entered into prior to 1992 separately, in a liquidating account.
|
Both the VA direct loan and loan guaranty programs are funded through several sources. These sources include congressional appropriations, fees paid by borrowers, proceeds from the rental or sale of foreclosed properties, collection of principal and interest payments made by borrowers, and any penalties paid by lenders.120 An important aspect of understanding how VA loans are funded, apart from the sources of funding, is how loans are accounted for in the federal budget.
In most federally funded grant programs, the cost to the federal budget is the amount appropriated, and federal involvement in funding generally ends after the outlay of funds. By contrast, the cost of loan programs may involve both an up-front outlay of funds as well as the recoupment of costs through payments of principal and interest, and/or collection of fees and penalties, over the lifetime of the loans. Loan programs may also suffer losses in subsequent years through defaults or lower-than-expected collection of fees. As a result, it is not always possible to capture the budgetary effects of loans in one particular year. Current government practice, instituted in 1992, is to determine the net present value of loans over their lifetime and to record this amount in the budget in the year the loans are extended. (See the text box for an explanation of the law implementing this budget process.)
The concept of net present value is helpful both in understanding how funds are appropriated for VA loans and in reading VA budget documents. The federal funding process is described briefly in the following subsection of this report, "The VA Budget and Congressional Appropriations for VA Loan Programs." The two subsequent subsections describe loan fees paid by borrowers, and funds obtained through loan payments and property sales.
Sources of Funding for Loan Programs
The VA Budget and Congressional Appropriations for VA Loan Programs
The VA direct and guaranteed loan programs receive both discretionary and mandatory appropriations from Congress. The discretionary funds pay for the administrative expenses of the VA loan programs. The mandatory funding supports the loans themselves, and typically appears in appropriations laws as "such sums as necessary."
Mandatory funding for the loan guaranty and direct loan programs is expressed as a percentage of the total loan volume. This is sometimes referred to as the "subsidy rate"; each year the estimated subsidy rate appears in the President's Budget Appendix for the Department of Veterans Affairs. The estimated subsidy rate of loans guaranteed or made in a given fiscal year is based on the net present value of expected expenses in the event of borrower defaults as well as expected income through fees and other sources. If the estimated present value of payments by the VA for a cohort of loans guaranteed or extended in a given fiscal year exceeds the estimated present value of fees paid by borrowers, recoveries, and other collections, then the subsidy rate is positive (i.e., the government subsidizes the loan program), and the program receives mandatory funding. If the net present value of cash flows for a cohort of loans is expected to result in a surplus of funds (more taken in than paid out), then the subsidy rate is negative (i.e., the program has excess revenue that is returned to the Treasury).
As part of the annual budget process, the VA estimates individual subsidy rates for each of the four types of loans either made directly by the VA or guaranteed by the VA. The four programs for which the VA estimates subsidy rates are guaranteed loans, guaranteed loan sale securities, acquired loans, and vendee loans. The initial estimated subsidy rate for each of these programs for a given fiscal year represents the net present value for that year's cohort of loans. However, the initial estimated subsidy rate may differ from the actual subsidy rate for the cohort of loans over their lifetime. Projecting the net present value of cash flows is uncertain, so subsidy reestimates are made by the VA each year, and additional mandatory funding is permanently available by the FCRA to cover any shortfalls.121 Factors that can affect the subsidy rate (and resulting mandatory appropriation) include changes in the interest rate used to determine the present value of future funding streams, revisions in estimates of borrower default or prepayment rates, the outcomes of property management decisions, and changes in the amount of fees actually paid by borrowers (compared to what was expected). Due to reestimates, a negative subsidy rate calculated in one year may be recalculated as positive in a subsequent year, resulting in an increased amount of mandatory funding needed for a loan program. Or, if the subsidy rate is recalculated as negative, funds are returned to the Treasury.
Appropriations for VA direct and guaranteed loans are captured in one "on-budget" account, called the Veterans Housing Benefit Program Fund, sometimes referred to as the program account.122 (Note that direct loans for Native American veterans are funded separately.) In addition, several separate, off-budget accounts reflect inflows and outflows for direct and guaranteed loan cohorts, depending on when the loans were extended. Funds for direct and guaranteed loans made prior to 1992 are shown in a housing liquidating account, and funds for loans extended after 1992 are shown in direct and guaranteed loan financing accounts. The multiple accounts may be cause for confusion, so it is useful to keep in mind that appropriations appear in the Veterans Housing Benefit Program Fund, while the financing and liquidating accounts reflect the specific income and expenses associated with particular loan cohorts.
Fees from Borrowers
The costs of the VA direct and loan guaranty programs are supported, in part, by fees paid by the borrowers. The amount of a borrower's fee is based on the amount of down payment, if any; whether the loan is extended through the loan guaranty or direct loan program; whether the borrower had active duty service or was a reservist; when the loan closed; whether the loan is purchase money or a refinance; whether the borrower is accessing the guaranty for the first time or entering into a subsequent loan; and whether the property is purchased under the manufactured housing portion of the loan guaranty statute.123 (See Table 6.) Fees may be waived for veterans receiving compensation for a service-connected disability, for the surviving spouse of a servicemember who died of a service-connected disability, or for the surviving spouse of a veteran who died while receiving (or was entitled to receive) compensation for certain service-connected disabilities.124 Veterans may finance the fees as part of the loan, and the guaranty is based on the loan amount, including the fees.125
Veterans were not always charged fees as part of the loan guaranty transaction and, in general, fees were not required prior to 1982.126 When the loan guaranty program was created, it was considered a benefit or entitlement for veterans. However, in 1982, the VA administrator wrote a letter to the Speaker of the House, together with draft legislation, suggesting that the VA require veterans to pay a 0.5% fee on the principal balance of each loan.127 The letter expressed concern regarding the "costs to the taxpayers of operating the program," and noted that "paying claims on the approximately 3.7 percent of the loans resulting in foreclosure are significant."128 Despite objections from veterans groups,129 Congress instituted the fee as part of the Omnibus Budget Reconciliation Act of 1982 (P.L. 97-253
). The fee was to be in effect for transactions entered into from FY1983 through FY1985, with an exemption for veterans with service-connected disabilities. Congress continued the fee beyond FY1985, and after the fee was raised to 1% as ). The fee was to be in effect for transactions entered into
(...continued)
Indemnity Fund, and two liquidating accounts.
119
38 U.S.C. §3729.
120
38 U.S.C. §3729(c) and P.L. 112-154.
121
38 U.S.C. §3729(a). See also, VA Lenders Handbook, p. 3-11.
122
The Veterans’ Readjustment Benefits Act of 1966 (P.L. 89-358) imposed a fee of 0.5% on veterans who served
during the post-Korean War era, but this fee was withdrawn four years later as part of the Veterans’ Housing Act of
1970 (P.L. 91-506).
123
The letter and draft legislation were made part of the House Veterans’ Affairs Committee report for H.R. 6782, a
bill where the section regarding loan fees was eventually incorporated into the Omnibus Budget Reconciliation Act of
1982 (P.L. 97-253). See CQ Almanac 1982, 38th ed., Reconciliation Savings: $130 Billion by 1985, 1983, pp. 199-204,
http://library.cqpress.com/cqalmanac/cqal82-1164004. The VA administrator letter is at U.S. Congress, House
Committee on Veterans’ Affairs, Veterans’ Disability Compensation and Survivors’ Benefits Amendments of 1982,
report to accompany H.R. 6782, 97th Cong., 2nd sess., July 23, 1982, H.Rept. 97-660, pp. 49-50.
124
Ibid.
125
See, for example, U.S. Congress, House Committee on Veterans’ Affairs, Subcommittee on Housing and Memorial
Affairs, VA Home Loan Guaranty Program, 97th Cong., 2nd sess., March 23, 1982.
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VA Housing: Guaranteed Loans, Direct Loans, and Specially Adapted Housing Grants
from FY1983 through FY1985, with an exemption for veterans with service-connected
disabilities. Congress continued the fee beyond FY1985, and after the fee was raised to 1% as
part of the Deficit Reduction Act of 1984 (P.L. 98-369), Congress began to institute the more
complicated fee schedule that exists today, with fees varying based on amount of down payment
and whether the veteran received a loan guaranty or direct loan (Veterans
’' Benefits Amendments
of 1989, P.L. 101-237
).
).
The most recent changes to borrowers
’' fees occurred as part of P.L. 112-56, which was enacted on
November 21, 2011. Prior to the enactment of P.L. 112-56, fees for both active duty and reserve
veterans entering into purchase money guaranteed loans were scheduled to be reduced starting on
October 1, 2011, pursuant to the Veterans Benefits Act of 2003 (P.L. 108-183). However, the
Veterans Health Care Facilities Capital Improvement Act of 2011 (P.L. 112-37), enacted on
October 5, 2011, initially extended the existing, higher fees implemented in P.L. 108-183 through
November 18, 2011. Then, P.L. 112-56 further extended existing fees through October 1, 2016.
126
130
The fees in P.L. 112-56 took effect on the date of enactment. For loans that closed from October 1
through October 5, and from November 18
through November 21, the VA issued guidance stating
that the lower fees in P.L. 108-183 applied.
127131 In August of 2012, the existing fees were further
extended through October 1, 2017, as part of P.L. 112-154
.
.
Table 6. Current Loan Guaranty Fees
Effective Until October 1, 2017
Fee as % of Loan Amount
Loan Type
Loan to Purchase or
Construct Dwelling
(38 U.S.C. §3710(a))
Cash-Out Refinancing
Loan (38 U.S.C. §3710)
Manufactured Housing
Loan to Purchase or
Construct or for CashOut Refinancing (38
U.S.C. §3712)
Down Payment
First Loan
or
Subsequent
Active Duty
Reservist
Less than 5%
First
2.15%
2.40%
Less than 5%
Subsequent
3.30%
3.30%
5%-10%
First or
Subsequent
1.50%
1.75%
10% or more
First
1.25%
1.50%
NA
First
2.15%
2.40%
NA
Subsequent
3.30%
3.30%
Any
Either
1.00%
1.00%
126
Note that prior to the extension of existing fees in P.L. 108-183, in August 2011 the Restoring GI Bill Fairness Act
of 2011 (P.L. 112-26) changed fees for subsequent loans with less than 5% down payment for both active duty veterans
and reservists.
127
See U.S. Department of Veterans Affairs, VA Circular 26-11-15, Updated Funding Fee Changes, October 6, 2011,
http://www.benefits.va.gov/HOMELOANS/circulars/26_11_15.pdf and VA Circular 26-11-19, Funding Fee Update as
of November 22, 2011, November 22, 2011, http://www.benefits.va.gov/homeloans/circulars/26_11_19.pdf.
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VA Housing: Guaranteed Loans, Direct Loans, and Specially Adapted Housing Grants
Fee as % of Loan Amount
Loan Type
Down Payment
First Loan
or
Subsequent
Active Duty
Reservist
Interest Rate
Reduction Refinancing
Loan (38 U.S.C. §3710,
§3712, and §3762)
NA
Either
0.50%
0.50%
Direct Loan for
Specially Adapted
Housing (38 U.S.C.
§3711)
Any
Either
1.00%
1.00%
Direct Loans for
Native American
Veterans to Purchase
or Construct (38
U.S.C. §3762)
Any
Either
1.25%
1.25%
Assumption of
Guaranteed Loan (38
U.S.C. §3714)
Any
Either
0.50%
0.50%
Vendee Loan (38
U.S.C. §3733(a))
Any
Either
2.25%
2.25%
Source: 38 U.S.C. §3729 as amended by P.L. 112-26, P.L. 112-56, and P.L. 112-154 and the VA Lenders Handbook,
p. 8-21.
Collection of Loan Payments and Property Sales
In its direct loan portfolio, the VA owns some loans on which it collects principal and interest
payments (acquired loans), and it also sells properties that it has acquired through foreclosure and
enters into direct loans with the borrowers (vendee loans). In addition, the VA has the authority to
pool and sell loans to investors. (This authority had expired at the end of 2011, but was reinstated
Loan Type
|
Down Payment
|
First Loan or Subsequent
|
Fee as % of Loan Amount
|
Active Duty
|
Reservist
|
Loan to Purchase or Construct Dwelling (38 U.S.C. §3710(a))
|
Less than 5%
|
First
|
2.15%
|
2.40%
|
Less than 5%
|
Subsequent
|
3.30%
|
3.30%
|
5%-10%
|
First or Subsequent
|
1.50%
|
1.75%
|
10% or more
|
First or Subsequent
|
1.25%
|
1.50%
|
Cash-Out Refinancing Loan (38 U.S.C. §3710)
|
First
|
2.15%
|
2.40%
|
Subsequent
|
3.30%
|
3.30%
|
Manufactured Housing Loan to Purchase or Construct or for Cash-Out Refinancing (38 U.S.C. §3712)
|
Either
|
1.00%
|
1.00%
|
Interest Rate Reduction Refinancing Loan (38 U.S.C. §3710, §3712, and §3762)
|
Either
|
0.50%
|
0.50%
|
Direct Loan for Specially Adapted Housing (38 U.S.C. §3711)
|
Either
|
1.00%
|
1.00%
|
Direct Loans for Native American Veterans to Purchase or Construct (38 U.S.C. §3762)
|
Either
|
1.25%
|
1.25%
|
Assumption of Guaranteed Loan (38 U.S.C. §3714)
|
Either
|
0.50%
|
0.50%
|
Vendee Loan (38 U.S.C. §3733(a))
|
Either
|
2.25%
|
2.25%
|
Source: 38 U.S.C. §3729 and the VA Lenders Handbook, p. 8-21.
Collection of Loan Payments and Property Sales
In its direct loan portfolio, the VA owns some loans on which it collects principal and interest payments (acquired loans), and it also sells properties that it has acquired through foreclosure and enters into direct loans with the borrowers (vendee loans). In addition, the VA has the authority to pool and sell loans to investors. (This authority had expired at the end of 2011, but was reinstated in August 2012 as part of P.L. 112-154). Each of these transactions results in income to the VA,
although the income may not be sufficient to counteract losses. For example, because the VA
guarantees payment of principal and interest on the loans that it sells, borrower default may result
in greater outflows than inflows.
The Specially Adapted Housing Program
The Specially Adapted Housing Program provides grants to veterans and servicemembers with
certain service-connected disabilities to assist them in constructing, purchasing, or remodeling
homes to fit their needs.
128132 While Specially Adapted Housing loans are available (see discussion
in the
“"The Original Direct Loan for Veterans in Rural Areas, Now Limited to Veterans with
Disabilities” Disabilities" section of this report), the majority of funds are distributed as grants that veterans
and servicemembers need not pay back.
128
The Specially Adapted Housing Program is codified at 38 U.S.C. §§2101-2107.
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VA Housing: Guaranteed Loans, Direct Loans, and Specially Adapted Housing Grants
The Specially Adapted Housing Program, which was introduced in 1948 in P.L. 80-702, initially
targeted veterans with a total service-connected disability causing paralysis in the legs or lower
body. Over the years, Congress amended the law to expand the range of disabilities eligible for
assistance, to make family members
’' homes eligible for adaptation (P.L. 109-233), to include
active duty servicemembers with service-connected disabilities (P.L. 110-289), to expand benefits
to individuals residing outside the United States (P.L. 110-289), and to include loans as well as
grants (P.L. 96-526
).
).
Within the Specially Adapted Housing Program are two grant programs for veterans and active
duty servicemembers, which are discussed in separate subsections, below.
129133 The first, sometimes
referred to as the Specially Adapted Housing Grant (or Section 2101(a) grant, after the section of
the U.S. Code), is targeted to veterans with mobility impairments, while the second, sometimes
referred to as the Special Housing Adaptation Grant (or Section 2101(b) grant) assists veterans
who are blind or who have lost the use of their hands. The grant limits for the first category of
adapted housing are higher than for the second, and both types of adapted housing are available to
veterans with severe burn injuries.
Specially Adapted Housing Grants, 38 U.S.C. Section 2101(a)
The original law authorizing the Specially Adapted Housing Program was enacted to assist
veterans who had lost use of their legs due to either spinal cord disease or injury. The law
originally provided for grants of up to $10,000 for veterans to build homes with features adapted
to their disabilities, to purchase homes that were already adapted, or to purchase homes without
adaptations and then modify them. Since the program was introduced, the grant limit has
increased (see
“"Grant Limits
”") and the original disability requirement was modified and expanded
to include veterans and servicemembers with a broader range of mobility impairments resulting
from service-connected disabilities:
129
•
Those who have lost or lost the use of
bothboth lower extremities and require the aid
of braces, crutches, canes, or a wheelchair for locomotion (P.L. 86-239).
•
Veterans and servicemembers who have lost or lost the use of one or more lower
extremities where the loss so affects balance and propulsion as to require the aid
of braces, crutches, canes, or a wheelchair for ambulating (P.L. 112-154). The
disability must have occurred on or after September 11, 2001, and eligible
individuals must be approved for assistance under this provision by the end of
FY2013.
•
FY2015 (P.L. 113-175).
Veterans and servicemembers with blindness in both eyes and who have lost or
lost the use of at least one lower extremity (P.L. 86-239).
•
Those who have lost or lost the use of one lower extremity together with one of
two conditions resulting in the requirement that the veteran or servicemember use
a cane, crutches, braces, or wheelchair for locomotion:
•
residuals of an organic disease or injury (P.L. 91-22), or
•
the loss or loss of use of one upper extremity (P.L. 95-117
);
);
The first is addressed in 38 U.S.C. §2101(a) and the second in 38 U.S.C. §2101(b).
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VA Housing: Guaranteed Loans, Direct Loans, and Specially Adapted Housing Grants
•
Veterans and servicemembers who have lost or lost the use of both upper
extremities such that they cannot use their arms at or above the elbows (
P.L. 108-454).
P.L. 108454).
•
Veterans and servicemembers with severe burn injuries (P.L. 110-289). VA
regulations define this to mean
“"full thickness or subdermal burns
”" reducing
mobility in two or more extremities or at least one extremity and the trunk of the
body.
130
134In 2013 the VA issued regulations specifying that the disability requirements for the Specially Adapted Housing Program are satisfied for veterans with service-connected amyotrophic lateral sclerosis (ALS).135 Since 2008, there is a presumption of service connection for ALS.136
Special Housing Adaptation Grants, 38 U.S.C. Section 2101(b)
In the Veterans
’' Disability Compensation and Housing Benefits Amendments of 1980 (P.L.
9638596-385), Congress expanded the Specially Adapted Housing Program to include veterans who may
need to modify their homes, but not to the degree required for veterans eligible for the Section
2101(a) grant. This portion of the program is sometimes referred to as the
“"Special Housing
Adaptation Grant.
”
"
The impetus to expand the Specially Adapted Housing Program grew out of the concern that the
needs of totally blind veterans were not being met.
131137 Unless blind veterans were also without use
of a lower extremity, they did not qualify for the Specially Adapted Housing Program, and while
they could receive home modifications through VA
’'s home health program, the modifications
were limited to $2,500. Congress was concerned that the health program
’'s home modifications
were not sufficient to serve veterans who were blind, so it requested a study of the needs of blind
veterans as part of P.L. 96-22, the Veterans
’' Health Care Amendments of 1979.
132138 While the report
did not contain definitive data about the modification needs of blind veterans, the same year that
the report was released, Congress enacted the Veterans
’' Disability Compensation and Housing
Benefits Amendments of 1980 (P.L. 96-385), which created a new category in the Specially
Adapted Housing Program for veterans who had blindness in both eyes with 5/200 visual acuity
or less, as well as those who had lost or lost use of both hands. The Senate Veterans
’' Affairs
Committee noted that home adaptation needs for these veterans might not be as extensive as those
with mobility issues, and they did not warrant grant amounts at the same level.
133139 At the time the
law was enacted, Specially Adapted Housing Grants were limited to $30,000; the portion of the
program to assist blind veterans and those without use of their hands was limited to $5,000 in
1980.
Since enactment, the Special Housing Adaptation Grant has been expanded to include veterans
with severe burn injuries (P.L. 110-289). According to VA regulations, a veteran qualifies for the
grant if (1) the burns are considered
“"deep partial thickness burns
”" and result in limitation in
motion of two or more extremities or at least one extremity and the trunk of the body, (2) the
burns are considered
“"full thickness or subdermal burns
” and result in limitation in motion of one
130
38 C.F.R. §3.809.
See U.S. Congress, Senate Committee on Veterans’ Affairs, Veterans’ Disability Compensation and Housing
Benefits Amendments of 1980, report to accompany S. 2649, 96th Cong., 2nd sess., July 30, 1980, S.Rept. 96-876, pp.
24-26.
132
The resulting report was published as a committee print, U.S. Congress, House Committee on Veterans’ Affairs, The
Needs of Veterans Who Are Totally Blind from Service-Connected Causes for Home Modifications, committee print,
prepared by Veterans’ Administration, 96th Cong., 2nd sess., January 11, 1980, H.Prt. 96-56.
133
U.S. Congress, Senate Committee on Veterans’ Affairs, Veterans’ Disability Compensation and Housing Benefits
Amendments of 1980, report to accompany S. 2649, 96th Cong., 2nd sess., July 30, 1980, S.Rept. 96-876, pp. 25-26.
131
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VA Housing: Guaranteed Loans, Direct Loans, and Specially Adapted Housing Grants
" and result in limitation in motion of one or more extremities or the trunk of the body, or (3) the veteran has residuals of an inhalation
injury.
134140 In addition, as part of P.L. 112-154, the visual acuity standard was modified to be in line
with the VA visual impairment standard for disability compensation, which was changed from
5/200 to 20/200 as part of the Dr. James Allen Veteran Vision Equity Act (P.L. 110-157
).
).
Use of Grants to Modify the Home of a Family Member
The law provides that veterans may use the Special Housing Adaptation grant (§2101(b)) to
modify homes of family members in cases where a veteran or servicemember plans to continue
living there. In addition, a separate provision in the law, enacted in 2006, specifically provides the
authority to give these grants to veterans or servicemembers living
temporarilytemporarily in the homes of
family members, whether the individuals meet disability requirements for Section 2101(a) or
Section 2101(b).
135141 This is sometimes referred to as the Temporary Residence Adaptation (TRA)
grant.
The TRA grant was set up as a five-year pilot program and enacted as part of the Veterans
’
' Housing Opportunity and Benefits Improvement Act of 2006 (P.L. 109-233). There was concern
that many injured veterans returning from Operation Iraqi Freedom and Operation Enduring
Freedom did not have homes of their own and were instead returning to family members
’
homes.136' homes.142 The grants for veterans and servicemembers living temporarily in the homes of family
members allow individuals to access a portion of the full grant to which they are entitled. The
program is authorized through December 31, 2022 (P.L. 112-154
).
Grant Limits
).
Grant Limits
When the Specially Adapted Housing and Special Housing Adaptation grant programs were
created, the Section 2101(a) grant had a limit of $10,000, while the Section 2101(b) limit was set
at $5,000. Over the years, Congress increased the statutory limits, most recently to $63,780 and
$12,756, respectively (P.L. 112-154); the new limits
taketook effect one year after enactment of P.L.
112-154, in August 2013. In addition, the Housing and Economic Recovery Act of 2008 (P.L.
110-289) provided that the VA Secretary shall annually adjust the levels based on a residential
home cost-of-construction index, to be established by the Secretary.
137143 Most recently,
starting in FY2015, as in 2013, as
a result of this index adjustment, the levels were set at $
64,96070,465 for Section 2101(a) grants and
$12,922 $14,093 for Section 2101(b).
138
144
The limits for the TRA grants were initially set at $14,000 for Section 2101(a)-eligible recipients
and $2,000 for Section 2101(b)-eligible recipients. In August 2012, as part of P.L. 112-154
, the limits were increased to $28,000 and $5,000, respectively. The law also provided that the maximum TRA grants be increased using the same cost of construction index that is used to increase the maximum grants for a veteran's or servicemember's own home. Prior to enactment of , the
134
38 C.F.R. §3.809a.
38 U.S.C. §2102A.
136
U.S. Congress, House Committee on Veterans’ Affairs, Veterans Housing and Employment Improvement Act of
2005, report to accompany H.R. 3665, 109th Cong., 1st sess., November 1, 2005, H.Rept. 109-263, p. 13.
137
The cost of construction index is to reflect the average change in construction costs from year to year. The VA chose
an existing index, the Turner Building Cost Index. See U.S. Department of Veterans Affairs, “Loan Guaranty:
Assistance to Eligible Individuals in Acquiring Specially Adapted Housing; Cost-of-Construction Index,” 74 Federal
Register 48658, September 24, 2009.
138
See VA Circular 26-12-8, “Annual Increase in Construction Cost Index and Specially Adapted Housing Grants,”
October 2, 2012, http://www.benefits.va.gov/homeloans/documents/circulars/26_12_8.pdf.
135
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VA Housing: Guaranteed Loans, Direct Loans, and Specially Adapted Housing Grants
limits were increased to $28,000 and $5,000, respectively. The law also provided that the
maximum TRA grants be increased using the same cost of construction index that is used to
increase the maximum grants for a veteran’s or servicemember’s own home. Prior to enactment
of P.L. 112-154, the TRA grants were not subject to annual adjustment. Pursuant to the cost of
construction index adjustment, the limits
for 2013 are $28,518 and $5,092.139
starting in FY2015 are $30,934 and $5,523.145
A veteran may qualify for more than one housing grant under the Specially Adapted Housing
Program. For example, a veteran or servicemember could make some improvements to his or her
home using a Section 2101(a) grant, and receive an additional grant later, as long as the total of
all grants did not exceed the
$64,960 cap. However, grants used in one component of the program
count against the maximum grant for another component. For example, if a veteran received a
TRA grant to improve the home of a parent with whom he was residing temporarily, the amount
of that grant would reduce the total Section 2101(a) grant he would be eligible to receive if he
later purchased his own home. Similarly, a veteran or servicemember who receives a Section
2101(b) grant, and who later qualifies for a Section 2101(a) grant, would have the maximum
grant reduced by the amount already used.
As part of the Honoring America
’'s Veterans and Caring for Camp Lejeune Families Act of 2012
( (P.L. 112-154), a provision was added to the law to protect veterans where a previously adapted
home is
“"destroyed or substantially damaged in a natural or other disaster.
”" The law provides that,
where a damaged home was being used and occupied by a veteran or servicemember, he or she
may receive funds to acquire another suitable home. It makes assistance available as if a veteran
or servicemember had not already received assistance, and the assistance does not count toward a
veteran’ veteran's maximum benefit. The law sets the maximum benefit at the lesser of (1) the cost (as
determined by VA) to repair or replace the property that is in excess of any insurance coverage; or
(2) the statutory grant maximums for Section 2101(a), Section 2101(b), or the TRA grants,
whichever is applicable.
Table 7. Specially Adapted Housing Grant Limits
, 2012
Location
Veteran’s or Servicemember’s Own Home
Family Member’s Home (indefinite)
Family Member’s Home (temporary)
§2101(a)
Specially Adapted
Housing Grant
§2101(b)
Special Housing
Adaptation Grant
$64,960
$12,992
NA
$12,992
$28,518
$5,092
Source:
Effective October 1, 2014
Location
|
§2101(a)Specially Adapted Housing Grant
§2101(b)Special Housing Adaptation Grant
Veteran's or Servicemember's Own Home
|
$70,465
|
$14,093
|
Family Member's Home (indefinite)
|
NA
|
$14,093
|
Family Member's Home (temporary)
|
$30,934
|
$5,523
|
Source: 38 U.S.C. §2102, 38 U.S.C. §2102A, P.L. 112-154, and Department of Veterans Affairs,
“"Annual Increase
in Construction Cost Index and Specially Adapted Housing Grants.
”
"
The number and amount of Section 2101(a) and Section 2101(b) grants made in recent years are
in Table 8, below. Funding for the Specially Adapted Housing Program is mandatory funding
provided through the Readjustment Benefits portion of the Veterans Benefits Administration
budget. Grants are available to veterans and servicemembers based on eligibility rather than
amounts appropriated. The appropriation does not contain a specific allocation for Specially
Adapted Housing grants. Instead, the VA estimates the amount that will be obligated as part of its
Congressional Budget Justifications, which is subsumed in the total for Readjustment Benefits.
139
Ibid.
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VA Housing: Guaranteed Loans, Direct Loans, and Specially Adapted Housing Grants
The number and dollar amount of Specially Adapted Housing (§2101(a)) grants nearly doubled
from FY2007 to FY2008, and have remained higher than in previous years since that time. In
addition to an increase in need due to veterans returning from the wars in Iraq and Afghanistan,
VA cited broadened eligibility as a factor contributing to the increases in grants distributed.
140 The
146 The Housing and Economic Recovery Act of 2008 (P.L. 110-289) made a number of changes to the
grants, among them making active duty servicemembers eligible for the grants, including severe
burn injuries as an eligible disability, and increasing maximum grants from $50,000 to $60,000
for Section 2101(a) grants, and from $10,000 to $12,000 for Section 2101(b) grants. The
increases applied to veterans who had previously received grant assistance.
Table 8. Specially Adapted Housing and Special Housing Adaptation Grants
FY2000-FY2011
Specially Adapted Housing
Grants
Amount of
Grants in
Year
($ in millions)
Special Housing Adaptation
Grants
Number of
Grants
Amount of
Grants in
Year
($ in millions)
Fiscal Year
Number of
Grants
2000
509
21.308
65
0.507
2001
456
19.600
49
0.510
2002
475
23.365
56
0.459
2003
435
20.467
58
0.518
2004
450
22.008
51
0.484
2005
526
25.742
61
0.580
2006
503
24.176
45
0.412
2007
585
24.235
68
0.675
2008
1,058
36.000
70
0.760
2009
1,189
51.547
81
0.750
2010
1,421
64.972
128
1.165
2011
1,135
54.833
100
0.897
Source: FY2000-FY2013
Fiscal Year
|
Specially Adapted Housing Grants
|
Special Housing Adaptation Grants
|
Number of Grants
|
Amount of Grants in Year($ in millions)
Number of Grants
|
Amount of Grants in Year($ in millions)
2000
|
509
|
21.308
|
65
|
0.507
|
2001
|
456
|
19.600
|
49
|
0.510
|
2002
|
475
|
23.365
|
56
|
0.459
|
2003
|
435
|
20.467
|
58
|
0.518
|
2004
|
450
|
22.008
|
51
|
0.484
|
2005
|
526
|
25.742
|
61
|
0.580
|
2006
|
503
|
24.176
|
45
|
0.412
|
2007
|
585
|
24.235
|
68
|
0.675
|
2008
|
1,058
|
36.000
|
70
|
0.760
|
2009
|
1,189
|
51.547
|
81
|
0.750
|
2010
|
1,421
|
64.972
|
128
|
1.165
|
2011
|
1,135
|
54.833
|
100
|
0.897
|
2012
|
1,105
|
57.638
|
100
|
0.939
|
2013
|
977
|
51.621
|
122
|
1.198
|
Source: U.S. Department of Veterans Affairs, Annual Benefits Reports, FY1999-
FY2011FY2013, available at
http://www.vba.va.gov/REPORTS/abr/index.asp
.
.
Special Considerations on Trust Lands
In order to qualify for the maximum available assistance through the Section 2101(a) grant, a
veteran or servicemember must have an ownership interest in the property being purchased or
modified.
141147 Until recently, the allowable forms of ownership were somewhat limited. An
ownership interest, defined in regulation, included a fee simple interest, a lease or interest in a
140
U.S. Department of Veterans Affairs, FY2009 Performance and Accountability Report, November 16, 2009, p. II-4,
http://www.va.gov/budget/report/index.asp.
141
38 C.F.R. §36.4405.
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VA Housing: Guaranteed Loans, Direct Loans, and Specially Adapted Housing Grants
cooperative of at least 50 years, or a life estate through a revocable trust. As mentioned in the
section about the VA direct loan program, individuals living on Native American trust land may
not have a traditional interest in property, and individuals living in American Samoa and the
Commonwealth of the Northern Mariana Islands may not own property unless they meet nativity
requirements.
In 2010, the VA, recognizing the limitations facing veterans or servicemembers living on trust
land or in the territories, issued a final rule that updated the regulations defining an ownership
interest (among other changes).
142148 Individuals may now qualify for the Section 2101(a) grant if
they have a life estate (without the limitation of a revocable trust), the functional equivalent of a
life estate (such as a long-term lease or land installment contract), a lease pursuant to a
memorandum of understanding between a tribe and the VA, or a beneficial interest in property
located outside of the United States, defined as
“"an interest deemed by the Secretary as one that
provides (or will provide) an eligible individual a meaningful right to occupy a housing unit as a
residence.
”143
"149
Veterans or servicemembers using the Section 2101(b) grants may qualify for the full grant if they
live in the home of a family member, so ownership interests may not be as important. For
example, a veteran who does not meet the nativity requirements for property ownership in the
territories may have a spouse who does.
VA Actions in Event of Delinquency, Default,
and Foreclosure
and Foreclosure
Delinquencies and foreclosures for all categories of loans
, including VA-guaranteed loans, have
increased in recent years. Beginning increased about the same time that the country entered recession
(December 2007)
,144 the.150 The housing market began to experience difficulties, with the percentage of
all loans past due and the percentage of loans in foreclosure both beginning to grow. In the first
quarter of 2007, the overall foreclosure rate was 1.28%;
by the third quarter of 2012, the rate was
4.07%.145 During the same period, the percentage of loans 90 days or more past due increased
from 0.98% to 2.96%. The peak for loans 90 days or more past due was 5.02%at its peak, in the
firstfourth quarter
of 2010,
and foreclosuresit reached 4.64%
in the fourth quarter of 2010.
.151 While foreclosures for all categories of loans
have increased
sinceafter the beginning of the recession,
the foreclosure and delinquency rates for VA-guaranteed loans
have beenwere lower than the rates for
FHA loans, as well as lower than the overall rates.
146 During the period from the first quarter of
142
U.S. Department of Veterans Affairs, “Loan Guaranty: Assistance to Eligible Individuals in Obtaining Specially
Adapted Housing ,” 75 Federal Register 56875-56880, September 17, 2010. In advance of the final rule, the VA had
issued guidance broadening property ownership categories. See U.S. Department of Veterans Affairs, Circular 26-08-5,
Expansion of the Types of Ownership Interests Permissible Under the Specially Adapted Housing (SAH) Grant
Program, March 10, 2008, http://www.benefits.va.gov/homeloans/circulars/26_08_5.pdf.
143
38 C.F.R. §36.4401.
144
National Bureau of Economic Research, Determination of the December 2007 Peak in Economic Activity,
December 11, 2008, http://www.nber.org/cycles/dec2008.pdf.
145
Mortgage Bankers Association, National Delinquency Survey, First Quarter 2007, data as of March 31, 2007, p. 3,
and National Delinquency Survey, Third Quarter 2012, data as of September 30, 2012, p. 3.
146
The Mortgage Bankers Association releases quarterly National Delinquency Surveys with delinquency and
(continued...)
Congressional Research Service
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VA Housing: Guaranteed Loans, Direct Loans, and Specially Adapted Housing Grants
2007 through the third quarter of 2012152 For example, during the period from the first quarter of 2007 through the fourth quarter of 2010, the foreclosure rate for VA-guaranteed loans increased
from 1.05% to 2.
2135%, and for FHA loans from 2.19% to
4.08%.147 The rate for loans 90 days or
more past due for VA loans increased from 1.52% to 2.21%, and for FHA loans from 3.34% to
4.37%. 3.30%.153
Foreclosure and delinquency rates for VA loans have not always been lower than FHA
loans or loans in general.
148154 The VA has suggested a number of factors that could contribute to the
recently exhibited lower default rates
experienced in the aftermath of the recession, including underwriting practices, oversight of lenders, and
a robust default servicing program where the VA gets directly involved with borrowers and
servicers, if necessary.
149155 The increased popularity of subprime loans leading up to the recession
may also have contributed to comparably lower rates for VA loans by moving veterans away from
VA loans.
Options to Prevent Foreclosure
A number of options may exist for veterans who entered into mortgages through the VA Loan
Guaranty Program and find themselves facing delinquency or foreclosure.
Servicer Workouts: One way in which the VA Loan Guaranty Program attempts to prevent
properties from going to foreclosure is to encourage servicers to work out agreements with
borrowers. In cases where veterans are delinquent on VA-guaranteed loans, the VA may make
incentive payments to servicers that are able to work out arrangements with borrowers to prevent
foreclosure.
150156 These arrangements, or loss mitigation efforts, include repayment plans,
forbearance agreements, loan modifications, sales for less than the amount owed (
“compromise
sales”"compromise sales"), or deeds in lieu of foreclosure. Most of these efforts were introduced when VA revised its
regulations in 2008.
151
Under existing157
Under VA regulations, a lender may enter into a loan modification with a borrower
without prior VA approval in circumstances where the borrower is in default, the reasons for loan
default have been resolved and are not expected to recur, the borrower is a
“reasonable”"reasonable" credit
risk, at least 12 payments have been made since the loan closed, and a loan modification would
reinstate the loan.
152 On February 7158 On December 20, 2011, the VA published
an interima final rule in the Federal
Register modifying these regulations to further help encourage modifications.
153 In cases where
(...continued)
foreclosure data that includes subprime loans, prime loans, FHA loans, and VA loans. From 2002 to the present, the
VA foreclosure rate has been lower than the FHA foreclosure rate; since 2007, the VA foreclosure rate has been lower
than the rate for all loans; and since the end of 2010, the VA loan foreclosure rate has been lower than fixed-rate prime
loans.
147
Mortgage Bankers Association, National Delinquency Surveys, see footnote 145.
148
See, for example, Historical Statistics of the United States, Table Dc1255-1270, Mortgage foreclosures and
delinquencies: 1926-1979, http://hsus.cambridge.org/HSUSWeb/toc/tableToc.do?id=Dc1255-1270, and Mortgage
Bankers Association Historical National Delinquency Survey Data.
149
Statement of Thomas J. Pamperin, VA Associate Deputy Under Secretary for Policy and Program Management,
U.S. Congress, House Committee on Veterans’ Affairs, Subcommittee on Economic Opportunity, Hearing on the Loan
Guaranty Program, 111th Cong., 2nd sess., May 20, 2010, pp. 22-23.
150
38 C.F.R. §36.4319.
151
U.S. Department of Veterans Affairs, “Loan Guaranty: Loan Servicing and Claims Procedures Modifications,” 73
Federal Register 6294-6368, February 1, 2008.
152
38 C.F.R. §36.4315.
153
U.S. Department of Veterans Affairs, “Loan Guaranty Revised Loan Modification Procedures,” 76 Federal Register
6555-6559, February 7, 2011.
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VA Housing: Guaranteed Loans, Direct Loans, and Specially Adapted Housing Grants
159 In cases where the conditions listed above have not been met, lenders
will be able tocan request approval from the
VA to modify loans nonetheless. In addition, maximum interest rates for modified loans will be
tied to the Freddie Mac weekly maximum interest rate (to make it easier to re-pool and securitize
modified loans with loans having similar interest rates), and legal fees and foreclosure costs can
now be added to the principal balance of a modified loan.
VA Servicing: The VA may intervene to assist with loss mitigation efforts if the servicer has been
unwilling or unable to work with the borrower, or if the VA has determined that the loan servicing
is inadequate.
154160 If loss mitigation is unsuccessful, the VA may purchase the loan and take over
servicing; however, this occurs rarely, and only if the circumstances causing delinquency were
temporary and the veteran is able to resume payments.
155
“161
"HAMP-Style
”" Modifications: In 2009, the Obama Administration introduced the Home
Affordable Modification Program (HAMP), an initiative to help borrowers who are behind on
their mortgage payments.
156162 Through HAMP, homeowners whose mortgage payments exceed
31% of their incomes (in general),
157163 and who face additional hardships that make it difficult to
remain current on their mortgages, may work with their loan servicers to modify their loans so
that they are affordable. Technically, VA loans are not included as part of the HAMP program, but
the VA has issued guidance requiring loan servicers to determine whether borrowers are eligible
for
“"HAMP-style
”" modifications before proceeding with foreclosure or similar alternatives.
158
164
Where a borrower has missed payments and loss mitigation efforts have been unsuccessful, loan
servicers are to evaluate the borrower to see if the loan could be modified through methods such
as reduced interest rates or forebearance on principal payments to a point where the payments are
at or below 31% of borrower income. If necessary, the VA will adjust its guaranty for larger loan
amounts. Unlike HAMP (where loans must have originated on or before January 1, 2009), any
VA-guaranteed loan is potentially eligible. If a lender and borrower enter into a modified loan,
unlike HAMP, there is no trial period, and any reduced interest rate lasts for the life of the loan.
Mortgages That Are Underwater, But Current: In addition to increased foreclosures, the
downturn in the economy has resulted in situations where some borrowers may have mortgages
that exceed the value of their homes, sometimes referred to as being
“"underwater.
”" This makes it
difficult to refinance mortgages to take advantage of lower interest rates because lenders
generally do not want to lend more than a home
’'s appraised value. In cases where borrowers are
current on their mortgage payments, but owe more than their homes are worth, they may qualify
for an interest rate reduction refinancing loan (IRRRL) through the VA, despite the fact that their
154
U.S. Department of Veterans Affairs, VA Loan Electronic Reporting Interface VA Servicer Guide, July 31, 2009, p.
87, http://www.benefits.va.gov/homeloans/docs/va_servicer_guide.pdf.
155
38 C.F.R. §36.4320.
156
For more information about HAMP and other foreclosure prevention initiatives, see CRS Report R40210,
Preserving Homeownership: Foreclosure Prevention Initiatives, by Katie Jones.
157
Until June 1, 2012, in order to participate in HAMP, borrowers were required to have mortgage payments that
exceeded 31% of their income. However, the Obama Administration announced “HAMP Tier II” on March 9, 2012, in
order to try to assist additional borrowers. Beginning June 1, 2012, borrowers may have mortgage payments that make
up less than 31% of their income and still qualify for HAMP. See Making Home Affordable Supplemental Directive 1202, March 9, 2012, https://www.hmpadmin.com/portal/programs/docs/hamp_servicer/sd1202.pdf.
158
U.S. Department of Veterans Affairs, Circular 26-10-6, Revised VA Making Home Affordable Program, May 24,
2010, http://www.benefits.va.gov/homeloans/circulars/26_10_6.pdf.
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VA Housing: Guaranteed Loans, Direct Loans, and Specially Adapted Housing Grants
for an interest rate reduction refinancing loan (IRRRL) through the VA, despite the fact that their debt exceeds their homes
’' values.
159165 Because an IRRRL does not require an appraisal, it is
possible that some lenders may be willing to enter into a refinancing loan even where the loan
exceeds the current property value.
Agreement Between State Attorneys General and Large Mortgage Servicers: VA borrowers
who are delinquent and/or underwater may also be eligible for assistance through an agreement
reached between 49 state attorneys general,
160166 the attorney general for the District of Columbia,
and five large mortgage servicers in March 2012. Under the agreement, $25 billion
is to bewas made
available to assist certain borrowers.
161167 In order to qualify for assistance, loans cannot have been
purchased by Fannie Mae or Freddie Mac (and VA loans are not purchased by Fannie Mae or
Freddie Mac), and they must be serviced by Bank of America, JPMorgan Chase, Wells Fargo,
Citigroup, or Ally Financial. Pursuant to the settlement, the servicers must commit a minimum of
$17 billion for foreclosure prevention, including principal reduction, and they must commit
another $3 billion to assist underwater homeowners. Another $5 billion
is to bewas awarded to the
states, some of which, about $1.5 billion, will consist of payments to borrowers who lost their
homes to foreclosure.
162
168 For more information, see CRS Report R42919, Oversight and Legal Enforcement of the National Mortgage Settlement, by [author name scrubbed].
Servicemembers Civil Relief Act: Another potential protection for borrowers may come through
the Servicemembers Civil Relief Act (SCRA), which provides financial protections for active
duty servicemembers, including home mortgage protections.
163169 The act may assist veterans who
entered into mortgages (including VA loans) prior to being called to active duty, and who are
having trouble making their mortgage payments. In cases where a lender brings an action against
a borrower for a mortgage obligation during a period of active duty, or within nine months after,
the SCRA gives courts the authority to stay the proceedings.
164170 In addition, the SCRA also
generally declares invalid any foreclosure or home sale that takes place during this time period.
VA Actions in the Event of Foreclosure
If arrangements cannot be worked out to avoid foreclosure and properties proceed to sale, in most
instances, loan servicers acquire the property at foreclosure sale and, in turn, sell it to the VA.
165
171 Whether a transfer to the VA occurs depends on the property value and the amount owed by the
veteran borrower; each of these values is determined prior to the foreclosure sale.
166 The
159
VA Circular 26-10-6 states that veterans who are current on their VA-guaranteed loans should be evaluated for the
IRRRL.
160
Oklahoma was not a party to the agreement.
161
U.S. Department of Justice, “Federal Government and State Attorneys General Reach $25 Billion Agreement with
Five Largest Mortgage Servicers to Address Mortgage Loan Servicing and Foreclosure Abuses,” press release,
February 9, 2012, http://www.justice.gov/opa/pr/2012/February/12-ag-186.html.
162
For more information, see the website devoted to the settlement, http://www.nationalmortgagesettlement.com/.
163
For more information, see CRS Report RL34575, The Servicemembers Civil Relief Act (SCRA): An Explanation, by
R. Chuck Mason.
164
50 U.S.C. Appendix §533.
165
Veterans Benefits Administration Powerpoint Presentation, “Loan Guaranty Program Overview.”
166
38 U.S.C. §3732(c) gives the VA the authority to purchase property from the loan servicer where the net value of
the property exceeds the unguaranteed portion of the loan. Further, pursuant to 38 C.F.R. §36.4323(b), the VA may
acquire properties even where the net value does not exceed the unguaranteed portion of the debt. However, in these
cases, the servicer must waive the amount of the indebtedness that exceeds the net value (i.e., the servicer will not
pursue the veteran borrower for the deficiency) for the VA to be able to accept the transfer.
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VA Housing: Guaranteed Loans, Direct Loans, and Specially Adapted Housing Grants
procedures that the VA goes through in order to determine when it will acquire a property, and for
how much, were set up to ensure that the VA would not spend more than the amount for which
the loan was guaranteed.167 When a property goes to foreclosure, the VA will also pay the lender’s
claim against the guaranty. If the total indebtedness has been reduced over the life of the loan,
then the guaranty is prorated,168 and the guaranty is limited to the borrower’s total indebtedness
minus the VA’s purchase price.169
Veterans who default on guaranteed loans are liable to the VA for losses suffered, and, in general,
cannot have entitlement restored and obtain a new loan unless the loss is repaid to the VA.170 The
VA may waive the debt in cases where it determines collection “would be against equity and good
conscience.”171 A veteran must request a waiver within one year of being notified about the debt.
Circumstances that might result in a waiver could include job loss, disability, or other financial
hardship. The VA may also accept a compromise payment and settle a debt for less than the
amount owed.172
Table 9, below, shows the number of properties with VA-guaranteed loans that are at some point
in the foreclosure process, as well as foreclosed properties held in the VA inventory over the past
decade. Since 2008, when the housing market began to experience difficulties, the number of
homes with VA loans in foreclosure has increased, growing from about 4,700 homes in
foreclosure in FY2007 to more than 9,000 in FY2008, 17,000 in FY2009, and exceeding 20,000
in each year from FY2010 through FY2012. Once the VA has acquired properties through the
process of foreclosure, it attempts to resell them. In doing so, purchasers need not be veterans. In
FY2012, the average time between VA acquisition of a foreclosed property and sale was eight
months.173 For more information about disposition of property, see the earlier section of this
report entitled “Direct Loans Resulting from Borrower Delinquency or Default (Acquired and
Vendee Loans).”
Table 9. VA Loans in Foreclosure Process and Foreclosed Properties in VA Inventory,
FY2001-FY2012
Properties in the
Foreclosure Processb
Fiscal Year
Foreclosed Properties
Held in VA Inventorya
2001
14,543
8,425
2002
11,981
10,986
2003
11,832
10,513
167
See U.S. Congress, conference report to accompany H.R. 4170, 98th Cong., 2nd sess., June 23, 1984, H.Rept. 98-861,
pp. 1374-1375.
168
See 38 U.S.C. §3703(b): “The liability of the United States under any guaranty, within the limitations of this
chapter, shall decrease or increase pro rata with any decrease or increase of the amount of the unpaid portion of the
obligation.” But “[i]n no event may the liability of the United States under a guaranteed loan exceed the amount
guaranteed with respect to that loan under section 3703 (b) of this title.” 38 U.S.C. §3732(c)(9).
169
38 U.S.C. §3732(c)(5). The VA pays the “net value” for the property—its fair market value minus costs the VA
would incur while holding the property.
170
38 U.S.C. §3702(b).
171
38 U.S.C. §5302(b).
172
38 U.S.C. §3720(a).
173
FY2012172 The procedures that the VA goes through in order to determine when it will acquire a property, and for how much, were set up to ensure that the VA would not spend more than the amount for which the loan was guaranteed.173 When a property goes to foreclosure, the VA will also pay the lender's claim against the guaranty. If the total indebtedness has been reduced over the life of the loan, then the guaranty is prorated,174 and the guaranty is limited to the borrower's total indebtedness minus the VA's purchase price.175
Table 9, below, shows the number of properties with VA-guaranteed loans that are at some point in the foreclosure process, as well as foreclosed properties held in the VA inventory over the past decade. Since 2008, when the housing market began to experience difficulties, the number of homes with VA loans in foreclosure has increased, growing from about 4,700 homes in foreclosure in FY2007 to more than 9,000 in FY2008, 17,000 in FY2009, and exceeding 20,000 in each year since then with the exception of FY2013. Once the VA has acquired properties through the process of foreclosure, it attempts to resell them. In doing so, purchasers need not be veterans. In FY2014, the average time between VA acquisition of a foreclosed property and sale was nine months.176 For more information about disposition of property, see the earlier section of this report entitled "Direct Loans Resulting from Borrower Delinquency or Default (Acquired and Vendee Loans)."
Table 9. VA Loans in Foreclosure Process and Foreclosed Properties in VA Inventory, FY2001-FY2014
Fiscal Year
|
Foreclosed Properties Held in VA Inventorya
Properties in the Foreclosure Processb
2001
|
14,543
|
8,425
|
2002
|
11,981
|
10,986
|
2003
|
11,832
|
10,513
|
2004
|
15,539
|
10,355
|
2005
|
7,288
|
6,597
|
2006
|
6,490
|
4,703
|
2007
|
6,975
|
4,696
|
2008
|
7,605
|
9,077
|
2009
|
8,464
|
17,000
|
2010
|
10,835
|
20,500
|
2011
|
7,322
|
22,000
|
2012
|
10,400
|
23,400
|
2013
|
11,100
|
18,800
|
2014
|
8,180
|
29,900
|
Source: VA Performance and Accountability Reports, FY2002-FY2014. The reports are available on the VA website, http://www.va.gov/budget/report/index.asp.
a. Properties as of the end of the fiscal year.
b. The Performance and Accountability Reports do not indicate exactly what the "foreclosure process" entails.
Footnotes
1.
|
38 C.F.R. §36.4301.
|
2.
|
U.S. Congress, House Veterans' Affairs Committee, The Historical Development of Veterans' Benefits in the United States, A Report on Veterans' Benefits in the United States, committee print, prepared by The President's Commission on Veterans' Pensions, 84th Cong., 2nd sess., May 9, 1956, H.Prt. 84-244 (Washington: GPO, 1956), p. 161.
|
3.
|
Ibid.
|
4.
|
U.S. Congress, House Committee on World War Veterans' Legislation, Providing Federal Government Aid for the Readjustment in Civilian Life of Returning World War II Veterans, report to accompany S. 1767, 78th Cong., 2nd sess., May 5, 1944, H.Rept. 1418, p. 2.
|
5.
|
U.S. Congress, House Conference Committee, Providing Federal Government Aid for the Readjustment to Civilian Life of Returning World War II Veterans, report to accompany S. 1767, 78th Cong., 2nd sess., June 12, 1944, H.Rept. 1624, pp. 162-163.
|
6.
|
38 U.S.C. §101(2). For more information about who is a veteran, see CRS Report R42324, Who is a "Veteran"?—Basic Eligibility for Veterans' Benefits, by [author name scrubbed].
|
7.
|
Reservists were made eligible as part of the Veterans Home Loan Program Amendments of 1992 (P.L. 102-547).
|
8.
|
The disability must meet one of three duration requirements: (1) it was continuously rated totally disabling for 10 or more years immediately preceding death; (2) it was continuously rated totally disabling for at least five years from the date of discharge from active duty; or (3) it was continuously rated totally disabling for not less than one year immediately preceding death, and the veteran had been a prisoner of war who died after September 30, 1999.
|
9.
|
38 U.S.C. §3702(a)(2).
|
10.
|
38 U.S.C. §101(3), (31).
|
11.
|
Letter from Eric H. Holder, Jr., U.S. Attorney General, to the Honorable John Boehner, Speaker of the U.S. House of Representatives, September 4, 2013, http://www.justice.gov/iso/opa/resources/557201394151530910116.pdf.
|
12.
|
38 U.S.C. §103(c).
|
13.
|
See Table 1 in CRS Report R43961, Social Security and Same-Sex Marriage: Frequently Asked Questions, by [author name scrubbed], [author name scrubbed], and [author name scrubbed].
|
14.
|
See 38 U.S.C. §3710(g) and 38 C.F.R. §36.4340. Further guidance is at U.S. Department of Veterans Affairs, Lenders Handbook – VA Pamphlet 26-7, revised June 28, 2010, chapter 4, http://www.benefits.va.gov/warms/pam26_7.asp (hereinafter VA Lenders Handbook).
|
15.
|
38 C.F.R. §36.4340(d).
|
16.
|
38 C.F.R. §36.4340(f).
|
17.
|
VA Lenders Handbook, p. 4-55.
|
18.
|
38 C.F.R. §36.4340(e).
|
19.
|
38 C.F.R. §36.4340(g).
|
20.
|
Ibid.
|
21.
|
38 U.S.C. §3710.
|
22.
|
38 C.F.R. §36.4301.
|
23.
|
Ibid. There is an exception for a dwelling owned by more than one veteran—in that case there may be an extra unit for each additional veteran owner. For example, if three veterans owned a property together, it could consist of six units as long as three of the six units were occupied by the veteran owners.
|
24.
|
VA Lenders Handbook, p. 3-14.
|
25.
|
Ibid.
|
26.
|
38 U.S.C. §3704(c). P.L. 112-154 amended the law to allow dependent children to satisfy the occupancy requirement.
|
27.
|
38 C.F.R. §36.4301.
|
28.
|
Ibid., definition of "residential property."
|
29.
|
38 U.S.C. §3710(a)(9)(A)(ii).
|
30.
|
VA Lenders Handbook, Chapter 12.
|
31.
|
See VA response to questions for the record, U.S. Congress, House Committee on Veterans' Affairs, Subcommittee on Economic Opportunity, Hearing on the Loan Guaranty Program, 111th Cong., 2nd sess., May 20, 2010, p. 66.
|
32.
|
For a complete list of acceptable improvements, see 38 U.S.C. §3710(d).
|
33.
|
During the 1990s, the VA insured a decreasing number of manufactured housing units per year as reported in the VA Annual Reports. From FY1971 through FY1990, the VA guaranteed 112,786 manufactured home loans. U.S. Department of Veterans Affairs, FY1990 Annual Report of the Secretary of Veterans Affairs, March 1991, p. 29. In FY1991, the VA insured 313 loans, with this number decreasing to 126 in FY1992, 67 in FY1993, 24 in FY1994, 23 in FY1995, and 9 in FY1996, the last year in which manufactured home loans were separately noted in either the VA Annual Reports or the VA Annual Benefits Reports.
|
34.
|
This definition is from the manufactured housing portion of the regulations at 38 C.F.R. §36.4202. The definition of manufactured housing for the regular home loan guaranty at 38 C.F.R. §36.4301 is substantially the same.
|
35.
|
VA Lenders Handbook, p. 12-20.
|
36.
|
For state laws governing the titling of manufactured housing as well as the conversion of housing titled as a motor vehicle to real property, see the Fannie Mae website, https://www.efanniemae.com/sf/guides/ssg/relatedsellinginfo/manufachousing/titlingmanufhsing.jsp.
|
37.
|
U.S. Census Bureau, Selected Characteristics of New Manufactured Homes Placed: By Region - 2010, p. 1, http://www.census.gov/const/mhs/char10.pdf.
|
38.
|
U.S. Congress, Senate Labor and Public Welfare Committee, Extension of Veterans' Home Loan Entitlements and Inclusion of Mobile Home Purchases, report to accompany S. 3656, 91st Cong., 2nd sess., September 23, 1970, S.Rept. 91-1230, p. 13. When the Veterans' Housing Act (H.R. 16710) was considered and passed by the Senate, the bill was amended by and replaced with S. 3656, the companion bill to H.R. 16710, which contained a similar version of the loan guaranty program. See "Veterans' Housing Act of 1970," Senate debate, Congressional Record, vol. 116 (September 25, 1970), pp. 33781-33783.
|
39.
|
Report of the President's Committee on the Vietnam Veteran, Washington, DC, 1970, p. 33.
|
40.
|
Ibid.
|
41.
|
38 U.S.C. §3712(d). The maximum loan terms are: single-wide, about 20 years for home and lot; double-wide, a maximum of 25 years for home and lot; or lot purchase, approximately 15 years.
|
42.
|
38 U.S.C. §3712(c)(5).
|
43.
|
Email communication from the VA, May 17, 2012. Regarding appraisals, manufactured housing dealers often sold manufactured homes with furniture included, but beginning in the 1980s, the furniture could no longer be included in appraised value.
|
44.
|
38 U.S.C. §3710(a)(8) and (a)(9)(i).
|
45.
|
38 U.S.C. §3710(a)(5).
|
46.
|
38 U.S.C. §3710(e).
|
47.
|
Ibid.
|
48.
|
38 U.S.C. §3710(e)(1)(C).
|
49.
|
U.S. Congress, House Committee on Veterans' Affairs, Veterans' Housing Rehabilitation and Program Improvement Act of 1987, report to accompany H.R. 2672, 100th Cong., 1st sess., July 30, 1987, H.Rept. 100-257, p. 15.
|
50.
|
VA Lenders Handbook, p. 6-2.
|
51.
|
Ibid., p. 3-3.
|
52.
|
Ibid., p. 10-10.
|
53.
|
Ibid., p. 6-18.
|
54.
|
U.S. Census Bureau, American Housing Survey: 2013 Detailed Tables, October 16, 2014, Table C-14B-00, Additional Mortgage Characteristics—Owner-Occupied Units, http://www2.census.gov/programs-surveys/ahs/2013/AHS_2013_National_Tables_v1.1.xls. For the way in which "primary mortgage" status is determined, see American Housing Survey 2013 Definitions, p. A-28, http://www2.census.gov/programs-surveys/ahs/2013/2013%20Definitions.pdf.
|
55.
|
Statement of Tim S. Embree, Iraq and Afghanistan Veterans of America, U.S. Congress, House Committee on Veterans' Affairs, Subcommittee on Economic Opportunity, Hearing on the Loan Guaranty Program, 111th Cong., 2nd sess., May 20, 2010, pp. 51-52.
|
56.
|
For more information about Freddie Mac and the conforming loan limits, see CRS Report RS22172, The Conforming Loan Limit, by [author name scrubbed] and [author name scrubbed].
|
57.
|
P.L. 91-351, §305. The FHA statute was amended in 1969 to raise the limit to $33,000 (P.L. 91-152).
|
58.
|
P.L. 93-383, §805. The federal savings and loan limits on mortgage lending were codified at 12 U.S.C. §1464(c) (1976).
|
59.
|
P.L. 96-399, §313.
|
60.
|
Federal Housing Finance Agency, History of Conforming Loan Limits, http://www.fhfa.gov/webfiles/860/loanlimitshistory07.pdf. Limits were increased in each year with the exception of 1990.
|
61.
|
P.L. 111-5 returned the limit for high-cost areas to the level first instituted in 2008 as part of the Economic Stimulus Act of 2008 (P.L. 110-185).
|
62.
|
38 U.S.C. §3703.
|
63.
|
38 U.S.C. §3703(a)(1)(C).
|
64.
|
12 U.S.C. §1454.
|
65.
|
This is based on the provision in the Freddie Mac statute for areas where 115% of median home prices exceed the conforming loan limit. 12 U.S.C. §1454(a)(2)(C). See the text box for more information.
|
66.
|
U.S. Department of Veterans Affairs, FY2013 Annual Benefits Report, Home Loan Guaranty section, p. 8, http://www.benefits.va.gov/REPORTS/abr/ABR-Combined-FY13-09262014.pdf.
|
67.
|
U.S. Department of Veterans Affairs, VA Circular 26-08-19, Implementation of Loan Guaranty Provisions of P.L. 110-389, October 16, 2008, p. 2, http://www.benefits.va.gov/homeloans/docs/26_08_19.pdf.
|
68.
|
2013 VA County Loan Limits, http://www.benefits.va.gov/HOMELOANS/documents/docs/2013_county_loan_limits.pdf and the 2014 Revised VA Effective Loan Limits, February 28, 2014 to December 31, 2014, http://benefits.va.gov/HOMELOANS/documents/docs/2014_county_loan_limits.pdf.
|
69.
|
12 U.S.C. §1454(a)(2)(C).
|
70.
|
The higher conforming loan limit for Alaska, Hawaii, and Guam was introduced in 1980 (P.L. 96-399). The U.S. Virgin Islands was added to the list in 1992 (P.L. 102-550). See also, U.S. Congress, Conference Report, report to accompany S. 2719, 96th Cong., 2nd sess., September 26, 1980, H.Rept. 96-1420, p. 117.
|
71.
|
2014 Revised VA Effective Loan Limits, February 28, 2014 to December 31, 2014, http://benefits.va.gov/HOMELOANS/documents/docs/2014_county_loan_limits.pdf.
|
72.
|
The Ginnie Mae Mortgage Backed Securities Guide, August 1, 2011, p. 9-1, http://www.ginniemae.gov/guide/pdf/chap09.pdf.
|
73.
|
VA Lenders Handbook, p. 3-9.
|
74.
|
38 U.S.C. §3703(a).
|
75.
|
VA Lenders Handbook, pp. 3-12 and 3-14.
|
76.
|
38 U.S.C. §3702(b).
|
77.
|
Ibid. See also VA Lenders Handbook, p. 2-15.
|
78.
|
VA Lenders Handbook, p. 2-15.
|
79.
|
Ibid., p. 3-9.
|
80.
|
See CRS Report RS20530, FHA-Insured Home Loans: An Overview, by [author name scrubbed].
|
81.
|
Ibid.
|
82.
|
38 C.F.R. §36.4313.
|
83.
|
See VA Lenders Handbook, p. 8-7.
|
84.
|
U.S. Department of Housing and Urban Development, Handbook 4155.2, Lender's Guide to the Single Family Mortgage Insurance Process, p. 6-A-12, http://portal.hud.gov/hudportal/documents/huddoc?id=4155-2_6_secA.pdf.
|
85.
|
CRS Report R42875, FHA Single-Family Mortgage Insurance: Financial Status of the Mutual Mortgage Insurance Fund (MMI Fund), by [author name scrubbed].
|
86.
|
38 U.S.C. §3731 requires the VA Secretary to set up a process for approving appraisers that includes a testing process and recommendations from other appraisers, and to develop and maintain a list of approved appraisers.
|
87.
|
VA Lenders Handbook, chapter 15.
|
88.
|
See Section 2(1)(B)(ii)(I). Just prior to the enactment of P.L. 107-326, veteran borrowers qualified for a principle balance of 100% of the first $25,000 of the appraised value, compared to 97% for non-veteran borrowers. In addition, the maximum principle balance on amounts above $125,000 was 90% for non-veteran borrowers, compared to 95% for veteran borrowers.
|
89.
|
See Section 2113 of P.L. 110-289.
|
90.
|
U.S. Congress, Senate Committee on Banking and Currency, Housing Act of 1950, report to accompany S. 2246, 81st Cong., 2nd sess., February 24, 1950, S.Rept. 81-1286, p. 92.
|
91.
|
The old U.S. Code Section, 38 U.S.C. §694l (1952), was replaced by 38 U.S.C. §1811 (1958). See the table of contents for Title 38 of the U.S. Code 1958 version.
|
92.
|
U.S. Congress, House Committee on Veterans' Affairs, Subcommittee on Housing, Bills to Provide for Purchase of Mobile Homes Under Veterans' Administration Guaranty and Other Bills Related to Veterans' Housing, 91st Cong., 2nd sess., July 14 and 16, 1970, pp. 3461-3462.
|
93.
|
38 U.S.C. §3711.
|
94.
|
U.S. Veterans Administration, Annual Report 1981, May 1982, p. 71.
|
95.
|
For example, the language in the FY2012 Consolidated Appropriations Act (P.L. 112-74) was "not to exceed $500,000 in gross obligations for direct loans are authorized for specially adapted housing loans." According to the Conference Committee Report, the law "limits obligations for direct loans to not more than $500,000." See H.Rept. 111-366.
|
96.
|
U.S. Department of Veterans Affairs, FY2016 Congressional Budget Submission, Volume III, Benefits and Burial Programs and Departmental Administration, pp. VBA-119 and VBA-125, http://www.va.gov/budget/docs/summary/Fy2016-VolumeIII-BenefitsBurialProgramsAndDeptmentalAdministration.pdf.
|
97.
|
See U.S. Department of Veterans Affairs, M26-1 Guaranteed Loan Processing Manual, pp. 10-15, http://www.benefits.va.gov/warms/M26_1.asp.
|
98.
|
38 U.S.C. §3765(3). The statute refers to "Pacific Islander" as one who is "who is indigenous to a United States territory or possession located in the Pacific Ocean," as defined by the Native American Programs Act of 1974, 42 U.S.C. §2992c(7). The three U.S. territories in the Pacific are American Samoa, Guam, and the Commonwealth of the Northern Mariana Islands.
|
99.
|
U.S. Congress, Senate Committee on Veterans' Affairs, Veterans Benefits and Health Care Act of 1989, report to accompany S. 13, 101st Cong., 1st sess., September 13, 1989, S.Rept. 101-126 (Washington: GPO, 1989), pp. 290-291. The Senate amended H.R. 901 (which would ultimately become P.L. 101-237) with provisions from S. 13.
|
100.
|
U.S. Department of the Interior, DOI Trust Reform: As-Is Trust Business Model Report, March 21, 2003, p. 2-1, http://www.ost.doi.gov/trust_reform/roadmap.html.
|
101.
|
U.S. Department of Agriculture, Lending on Native American Lands: A Guide for Rural Development Staff, June 2006, p. 24, http://www.rurdev.usda.gov/rd/aian/LendingOnNativeLands_RD.pdf.
|
102.
|
See U.S. Congress, Senate Committee on Veterans' Affairs, Native American Veterans Home Loan Equity Act of 1992, report to accompany S. 2528, 102nd Cong., August 12, 1992, S.Rept. 102-378, p. 11. Quoting from an evaluation of VA lending on tribal land, the report stated that "The inability to use tribal land as security for a mortgage loan is the most significant factor in limiting access to the VA loan guaranty benefit that can be affected by VA." S. 2528 was incorporated into P.L. 102-547. See "Veterans Home Loan Program Revitalization Act of 1992," House debate, Congressional Record, vol. 138, part 22 (October 5, 1992), p. 32374.
|
103.
|
See the Department of the Interior website, "Insular Area Summary for American Samoa," http://www.doi.gov/oia/Islandpages/asgpage.htm.
|
104.
|
Am. Samoa Code Ann. §37.0204.
|
105.
|
N.M.I. Const., Art. XII, Sec. 1.
|
106.
|
Congress, in response to the concerns of the Advisory Committee on Native American Veterans, directed the Departments of Veterans Affairs and Interior to look into the extent to which Native American veterans on trust land participated in the loan guaranty program and release a report (see the Veterans' Benefits Amendments of 1989 (P.L. 101-237)). The findings of the report are summarized in S.Rept. 102-378, p. 10.
|
107.
|
The MOU is available at http://www.benefits.va.gov/homeloans/docs/mou.pdf.
|
108.
|
U.S. Department of Veterans Affairs, Annual Benefits Report FY2013, Loan Guaranty section p. 5, http://benefits.va.gov/REPORTS/abr/ABR-LoanGuaranty-FY13-09262014.pdf.
|
109.
|
Ibid.
|
110.
|
U.S. Congress, Senate Committee on Veterans' Affairs, Pending Benefits-Related Legislation, 109th Cong., 1st sess., June 23, 2005, S.Hrg. 109-243, p. 27.
|
111.
|
Ibid., p. 28.
|
112.
|
E-mail communication from the VA, April 13, 2012.
|
113.
|
U.S. Department of Veterans Affairs, FY2011 Performance and Accountability Report, November 15, 2011, p. III-13, http://www.va.gov/budget/docs/report/2011-VAPAR_FullWeb.pdf (hereinafter FY2011 Performance and Accountability Report).
|
114.
|
38 U.S.C. §§3733(a)(1) and (a)(7).
|
115.
|
U.S. Department of Veterans Affairs, FY2016 Congressional Budget Justifications, Volume III, p. VBA-120, http://www.va.gov/budget/docs/summary/Fy2016-VolumeIII-BenefitsBurialProgramsAndDeptmentalAdministration.pdf.
|
116.
|
See FY2011 Performance and Accountability Report, pp. III-30 to III-31. Congress authorized the VA to guarantee principal and interest payments on these certificates as part of P.L. 102-291, which is codified at 38 U.S.C. §3720(h).
|
117.
|
FY2011 Performance and Accountability Report, p. III-31.
|
118.
|
E-mail communication from the VA, April 13, 2012.
|
119.
|
The FCRA was part of the Omnibus Reconciliation Act of 1990. It is found under Title XIII, Budget Enforcement, as Title V, Credit Reform.
|
120.
|
Ibid.
|
121.
|
The reestimates are part of the Supplemental Materials on the OMB Budget website. There are tables for reestimates of direct loan subsidy rates and loan guarantee subsidy rates. See Office of Management and Budget, FY2013 Federal Credit Supplement, pp. 73-74 for guaranteed loans and pp. 49-50 for direct loans, http://www.whitehouse.gov/sites/default/files/omb/budget/fy2013/assets/cr_supp.pdf.
|
122.
|
38 U.S.C. §3722. The fund was instituted in 1998 as part of P.L. 105-368, the Veterans Programs Enhancement Act. Prior to this, the loan guaranty and direct loan programs had been funded through three accounts, the Guaranty and Indemnity Fund, and two liquidating accounts.
|
123.
|
38 U.S.C. §3729.
|
124.
|
38 U.S.C. §3729(c) and P.L. 112-154.
|
125.
|
38 U.S.C. §3729(a). See also, VA Lenders Handbook, p. 3-11.
|
126.
|
The Veterans' Readjustment Benefits Act of 1966 (P.L. 89-358) imposed a fee of 0.5% on veterans who served during the post-Korean War era, but this fee was withdrawn four years later as part of the Veterans' Housing Act of 1970 (P.L. 91-506).
|
127.
|
The letter and draft legislation were made part of the House Veterans' Affairs Committee report for H.R. 6782, a bill where the section regarding loan fees was eventually incorporated into the Omnibus Budget Reconciliation Act of 1982 (P.L. 97-253). See CQ Almanac 1982, 38th ed., Reconciliation Savings: $130 Billion by 1985, 1983, pp. 199-204, http://library.cqpress.com/cqalmanac/cqal82-1164004. The VA administrator letter is at U.S. Congress, House Committee on Veterans' Affairs, Veterans' Disability Compensation and Survivors' Benefits Amendments of 1982, report to accompany H.R. 6782, 97th Cong., 2nd sess., July 23, 1982, H.Rept. 97-660, pp. 49-50.
|
128.
|
Ibid.
|
129.
|
See, for example, U.S. Congress, House Committee on Veterans' Affairs, Subcommittee on Housing and Memorial Affairs, VA Home Loan Guaranty Program, 97th Cong., 2nd sess., March 23, 1982.
|
130.
|
Note that prior to the extension of existing fees in P.L. 108-183, in August 2011 the Restoring GI Bill Fairness Act of 2011 (P.L. 112-26) changed fees for subsequent loans with less than 5% down payment for both active duty veterans and reservists.
|
131.
|
See U.S. Department of Veterans Affairs, VA Circular 26-11-15, Updated Funding Fee Changes, October 6, 2011, http://www.benefits.va.gov/HOMELOANS/circulars/26_11_15.pdf and VA Circular 26-11-19, Funding Fee Update as of November 22, 2011, November 22, 2011, http://www.benefits.va.gov/homeloans/circulars/26_11_19.pdf.
|
132.
|
The Specially Adapted Housing Program is codified at 38 U.S.C. §§2101-2107.
|
133.
|
The first is addressed in 38 U.S.C. §2101(a) and the second in 38 U.S.C. §2101(b).
|
134.
|
38 C.F.R. §3.809.
|
135.
|
U.S. Department of Veterans Affairs, "Specially Adapted Housing Eligibility for Amyotrophic Lateral Sclerosis Beneficiaries," 78 Federal Register 72573-72576, December 3, 2013.
|
136.
|
38 C.F.R. §3.318.
|
137.
|
See U.S. Congress, Senate Committee on Veterans' Affairs, Veterans' Disability Compensation and Housing Benefits Amendments of 1980, report to accompany S. 2649, 96th Cong., 2nd sess., July 30, 1980, S.Rept. 96-876, pp. 24-26.
|
138.
|
The resulting report was published as a committee print, U.S. Congress, House Committee on Veterans' Affairs, The Needs of Veterans Who Are Totally Blind from Service-Connected Causes for Home Modifications, committee print, prepared by Veterans' Administration, 96th Cong., 2nd sess., January 11, 1980, H.Prt. 96-56.
|
139.
|
U.S. Congress, Senate Committee on Veterans' Affairs, Veterans' Disability Compensation and Housing Benefits Amendments of 1980, report to accompany S. 2649, 96th Cong., 2nd sess., July 30, 1980, S.Rept. 96-876, pp. 25-26.
|
140.
|
38 C.F.R. §3.809a.
|
141.
|
38 U.S.C. §2102A.
|
142.
|
U.S. Congress, House Committee on Veterans' Affairs, Veterans Housing and Employment Improvement Act of 2005, report to accompany H.R. 3665, 109th Cong., 1st sess., November 1, 2005, H.Rept. 109-263, p. 13.
|
143.
|
The cost of construction index is to reflect the average change in construction costs from year to year. The VA chose an existing index, the Turner Building Cost Index. See U.S. Department of Veterans Affairs, "Loan Guaranty: Assistance to Eligible Individuals in Acquiring Specially Adapted Housing; Cost-of-Construction Index," 74 Federal Register 48658, September 24, 2009.
|
144.
|
VA Circular 26-14-34, "Annual Increase in Construction Cost Index and Specially Adapted Housing (SAH), Special Housing Adaptations (SHA), and Temporary Residence Adaptations (TRA) Grants," October 29, 2014, http://www.benefits.va.gov/homeloans/documents/circulars/26_14_34.pdf.
|
145.
|
Ibid.
|
146.
|
U.S. Department of Veterans Affairs, FY2009 Performance and Accountability Report, November
15, 2012, p. III-35, http://www.va.gov/budget/docs/
report/2012-VAPAR_FullWeb.pdf.
Congressional Research Service
38
VA Housing: Guaranteed Loans, Direct Loans, and Specially Adapted Housing Grants
Fiscal Year
Foreclosed Properties
Held in VA Inventorya
Properties in the
Foreclosure Processb
2004
15,539
10,355
2005
7,288
6,597
2006
6,490
4,703
2007
6,975
4,696
2008
7,605
9,077
2009
8,464
17,000
2010
10,835
20,500
2011
7,322
22,000
2012
10,400
23,400
Source: VA Performance and Accountability Reports, FY2002-FY2012. The reports are available on the VA website,
http://www.va.gov/budget/report/index.asp.
a.
Properties as of the end of the fiscal year.
b.
The Performance and Accountability Reports do not indicate exactly what the “foreclosure process” entails.
Author Contact Information
Libby Perl
Specialist in Housing Policy
eperl@crs.loc.gov, 7-7806
Congressional Research Service
39
16, 2009, p. II-4, http://www.va.gov/budget/report/index.asp.
147.
|
38 C.F.R. §36.4405.
|
148.
|
U.S. Department of Veterans Affairs, "Loan Guaranty: Assistance to Eligible Individuals in Obtaining Specially Adapted Housing," 75 Federal Register 56875-56880, September 17, 2010. In advance of the final rule, the VA had issued guidance broadening property ownership categories. See U.S. Department of Veterans Affairs, Circular 26-08-5, Expansion of the Types of Ownership Interests Permissible Under the Specially Adapted Housing (SAH) Grant Program, March 10, 2008, http://www.benefits.va.gov/homeloans/circulars/26_08_5.pdf.
|
149.
|
38 C.F.R. §36.4401.
|
150.
|
National Bureau of Economic Research, Determination of the December 2007 Peak in Economic Activity, December 11, 2008, http://www.nber.org/cycles/dec2008.pdf.
|
151.
|
Mortgage Bankers Association, National Delinquency Survey, First Quarter 2007, data as of March 31, 2007, p. 3, and National Delinquency Survey, First Quarter 2014, data as of March 31, 2014, p. 10.
|
152.
|
The Mortgage Bankers Association releases quarterly National Delinquency Surveys with delinquency and foreclosure data that includes subprime loans, prime loans, FHA loans, and VA loans. From 2002 through 2014, the VA foreclosure rate has been lower than the FHA foreclosure rate; from 2007 through 2013, the VA foreclosure rate has been lower than the rate for all loans; and since 2010, the VA loan foreclosure rate has been lower than prime loans.
|
153.
|
Mortgage Bankers Association, National Delinquency Surveys. See footnote 151.
|
154.
|
See, for example, Historical Statistics of the United States, Table Dc1255-1270, Mortgage foreclosures and delinquencies: 1926-1979, http://hsus.cambridge.org/HSUSWeb/toc/tableToc.do?id=Dc1255-1270, and Mortgage Bankers Association Historical National Delinquency Survey Data.
|
155.
|
Statement of Thomas J. Pamperin, VA Associate Deputy Under Secretary for Policy and Program Management, U.S. Congress, House Committee on Veterans' Affairs, Subcommittee on Economic Opportunity, Hearing on the Loan Guaranty Program, 111th Cong., 2nd sess., May 20, 2010, pp. 22-23.
|
156.
|
38 C.F.R. §36.4319.
|
157.
|
U.S. Department of Veterans Affairs, "Loan Guaranty: Loan Servicing and Claims Procedures Modifications," 73 Federal Register 6294-6368, February 1, 2008.
|
158.
|
38 C.F.R. §36.4315.
|
159.
|
U.S. Department of Veterans Affairs, "Loan Guaranty Revised Loan Modification Procedures," 76 Federal Register 78827-78829, December 20, 2011.
|
160.
|
U.S. Department of Veterans Affairs, VA Loan Electronic Reporting Interface VA Servicer Guide, July 31, 2009, p. 87, http://www.benefits.va.gov/homeloans/docs/va_servicer_guide.pdf.
161.
|
38 C.F.R. §36.4320.
162.
|
For more information about HAMP and other foreclosure prevention initiatives, see CRS Report R40210, Preserving Homeownership: Foreclosure Prevention Initiatives, by [author name scrubbed].
|
163.
|
Until June 1, 2012, in order to participate in HAMP, borrowers were required to have mortgage payments that exceeded 31% of their income. However, the Obama Administration announced "HAMP Tier II" on March 9, 2012, in order to try to assist additional borrowers. Beginning June 1, 2012, borrowers may have mortgage payments that make up less than 31% of their income and still qualify for HAMP. See Making Home Affordable Supplemental Directive 12-02, March 9, 2012, https://www.hmpadmin.com/portal/programs/docs/hamp_servicer/sd1202.pdf.
|
164.
|
U.S. Department of Veterans Affairs, Circular 26-14-22, VA Making Home Affordable Program, September 2, 2014, http://www.benefits.va.gov/homeloans/documents/circulars/26_14_22.pdf.
|
165.
|
VA Circular 26-14-22 states that veterans who are current on their VA-guaranteed loans should be evaluated for the IRRRL.
|
166.
|
Oklahoma was not a party to the agreement.
|
167.
|
U.S. Department of Justice, "Federal Government and State Attorneys General Reach $25 Billion Agreement with Five Largest Mortgage Servicers to Address Mortgage Loan Servicing and Foreclosure Abuses," press release, February 9, 2012, http://www.justice.gov/opa/pr/2012/February/12-ag-186.html.
|
168.
|
For more information, see the website devoted to the settlement, http://www.nationalmortgagesettlement.com/.
169.
|
For more information, see CRS Report RL34575, The Servicemembers Civil Relief Act (SCRA): An Explanation, by [author name scrubbed].
|
170.
|
50 U.S.C. Appendix §533.
|
171.
|
Veterans Benefits Administration Powerpoint Presentation, "Loan Guaranty Program Overview."
|
172.
|
38 U.S.C. §3732(c) gives the VA the authority to purchase property from the loan servicer where the net value of the property exceeds the unguaranteed portion of the loan. Further, pursuant to 38 C.F.R. §36.4323(b), the VA may acquire properties even where the net value does not exceed the unguaranteed portion of the debt. However, in these cases, the servicer must waive the amount of the indebtedness that exceeds the net value (i.e., the servicer will not pursue the veteran borrower for the deficiency) for the VA to be able to accept the transfer.
|
173.
|
See U.S. Congress, conference report to accompany H.R. 4170, 98th Cong., 2nd sess., June 23, 1984, H.Rept. 98-861, pp. 1374-1375.
|
174.
|
See 38 U.S.C. §3703(b): "The liability of the United States under any guaranty, within the limitations of this chapter, shall decrease or increase pro rata with any decrease or increase of the amount of the unpaid portion of the obligation." But "[i]n no event may the liability of the United States under a guaranteed loan exceed the amount guaranteed with respect to that loan under section 3703 (b) of this title." 38 U.S.C. §3732(c)(9).
|
175.
|
38 U.S.C. §3732(c)(5). The VA pays the "net value" for the property—its fair market value minus costs the VA would incur while holding the property.
|
176.
|
FY2014 Performance and Accountability Report, November 17, 2014, p. III-37, http://www.va.gov/budget/docs/report/2014-VAparPartIII.pdf.
|