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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 active duty servicemembers and veterans who fulfill specific duration ofactive 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 or who served at least 90 days of full-time National Guard duty, 30 of which were consecutive, and (3) spouses of veterans who died in actionservice, of service-connected disabilities, or who died while receiving (or werebeing 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 32).
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). 3). The fee is waived for veterans with service-connected disabilities. Borrowers are not required to make a down payment foron a VA-guaranteed loan, but the up-front fee is reduced if there is a down payment of 5% or more. Most borrowers (8074% of purchasers in FY2017FY2024) do not make a down payment.
In addition to guaranteeing loans from private lenders, the VA alsoVA makes direct loans to borrowers in certain circumstances. The original VA direct loan, which was targeted to veterans in rural areas, is now is currently 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 Another direct loan program, originally enacted as a demonstration program in 1992, serves Native American veterans, including veterans living inmembers of federally recognized tribes, Native Hawaiians, and veterans native to 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 the loan 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 or not he or she isthey are a veteran (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 briefly describes a home rehabilitation pilot program designed to help veterans who have low incomes or disabilities repair or modify their homes, and has a section that discusses the default and foreclosure of VA-guaranteed loans.
").
Loss mitigation processes may protect borrowers who face default or foreclosure (see Table 4). Available loss mitigation options for VA-guaranteed loans changed in the years during and after the COVID-19 pandemic. The VA Home Loan Program Reform Act (P.L. 119-31), enacted on July 18, 2025, and amended by Division G, Section 7307 of the Continuing Appropriations, Agriculture, Legislative Branch, Military Construction and Veterans Affairs, and Extensions Act, 2026 (P.L. 119-37), created a partial claim program to assist veterans who defaulted on their VA loans both during and after the pandemic.
Introduction
The U.S. Department of Veterans Affairs (VA) administers several programs that assist individual veterans in purchasing, constructing, 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, construction, improvements, or refinancing; and (2) providing direct loans for home purchases to Native American veterans, veterans with certain service-connected disabilities, 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 housingthe VA loan guaranty and direct loan 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.
VA also assists veterans with service-connected disabilities by extending grants so that eligible veterans can adapt housing to fit their needs through the Specially Adapted Housing (SAH) Program. (SAH is not discussed in this report, but a description can be found in CRS Report R44837, Benefits for Service-Disabled Veterans.) In addition, while VA provides housing assistance for veterans experiencing homelessness, 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.
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 sufferedoccur as a result of borrower default. VA-guaranteed loans are available for the purchase, construction, or repair/rehabilitation of a dwelling—defined to include homes with up to four units, single condominium units, and manufactured homes classified as real 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,; it was considered less expensive than a bonus, but still a way to provide benefits toserve the needs of veterans.21 Credit was seen as one of the areas where veterans were at a disadvantage compared to their non-veterannonveteran 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.32 The Servicemen'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 act 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 3
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.
4
Within a year, Congress amended the loan guaranty to addressrevisit some of the aspects of the program that did not seem to be workingwere seen to need updating (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
Over time, the loan guaranty has been expanded to include all veterans who served or are serving 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 ("aspects of the process involved in obtaining the VA loan guaranty ("Appraisals and Closing Costs"), coverage ("Veteran's Entitlement and the 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").
|
Spouses of Veterans and Same Sex Marriage In the Supreme Court decision Obergefell v. Hodges, issued June 26, 2015, the Supreme Court held that the Fourteenth Amendment requires a state to permit a marriage between two people of the same sex and to recognize a marriage between two people of the same sex when their marriage was lawfully licensed and performed out of state.6 This means that, because same-sex couples may now marry in all states, spouses may qualify for the VA loan program as long as they fulfill other statutory requirements. |
This section also includes data on the number and amount of loans guaranteed.
Borrower Eligibility
Eligibility for veterans' benefits, including the VA loan guaranty, is based, in part, on requirements regarding type of service (typically active duty), duration of service, and character of service. Character of service refers to the status under which a veteran is discharged, such as honorable or dishonorable. Character of service requirements for the VA loan guaranty are the same as for veterans' benefits generally, which provide that a veteran be discharged or released from service "under conditions other than dishonorable." 6 However, other eligibility criteria for the VA loan guaranty may differ from those for veterans' benefits more generally in some respects. For example, members of the National Guard and Reserve may qualify for the loan guaranty without active duty service under certain circumstances. In addition, there are financial criteria that veterans must fulfill to qualify for the loan guaranty. This section of the report discusses VA loan guaranty requirements regarding service type and duration, as well as financial requirements. Character of service requirements are not discussed in the report. (For more information about those requirements, see CRS Report R48907, Military Discharges: Character of Service and Eligibility for Department of Veterans Affairs (VA) Benefits.)veteran broadly"veteran" to include the following categories.
Eligibility Category
Active Dutyb Service during World War II (9/16/1940 to 7/25/1947)
P.L. 78-346
90 daysc
|
Eligibility Category |
|
| ||||
|
Active Dutyb Service during World War II (9/16/40 to 7/25/47) |
P.L. 78-346 |
90 daysc |
||||
| 1955)
P.L. 82-550 90 daysc |
90 daysc |
||||
|
90 daysc |
|||||
|
181 days |
|||||
|
Service Begun Aftere
|
| |||||
during the Persian Gulf War period (8/2/90 – present)
Service in the Selected Reserve |
Six years |
|||||
Released from Active Duty or Selected Reserve due to Service-Connected Disability (any service after 9/15/ | 1940)
P.L. 78-346 — |
— |
||||
Spouse of a Veteran who Died |
P.L. 81-475 |
— |
||||
k
P.L. 81-475 —
|
P.L. 91-584 — |
— |
||||
Surviving Spouse of Veteran Who Died While Receiving, or Was Entitled to Receive, Compensation for a Service-Connected Disability Rated Totally Disabling |
— |
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.
k,l
— Source: Table prepared by CRS based on 38 U.S.C. §§3701-3702, as well as sources described in table notes below.
a. Subsequent laws may have extended the period of service or otherwise modified eligibility requirements.
b. Active duty service refers to full time service in the
b. Eligibility for the loan guaranty is based on active duty service in the regular service (Army, Navy, Air Force, Marines, or Coast Guard.
c. A veteran qualifies if any part of his or her 90 days of service was during wartime.
e. P.L. 104-275 added to the definition of "Vietnam era" the dates of service in the country. P.L. 116-315, Section 2001, changed the earlier of the two dates from February 28, 1961, to November 1, 1955. See 38 U.S.C. §101(29).dMarine Corps, or Coast Guard). The term "active duty" is defined at 38 U.S.C. §101(21).
c. 38 U.S.C. §3702(a)(2)(A).
d. The term "Korean Conflict" is defined at 38 U.S.C. §101(9).
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' Affairs, Veterans' Disability Compensation, Housing, and Memorial Benefits Amendments of 1981, report to accompany S. 917, 97th Cong., 1st sess., July 16, 1981, S.Rept. 97-153, pp. 36-37.
fh.
g. 38 U.S.C. §3702(a)(2)(C).
h. 38 U.S.C. §5303A(b). P.L. 97-66 established minimum active duty service requirements for VA benefits generally at 24 months or the "full period" for which someone is called to active duty. Subsequently, the loan guaranty program statute was amended to more than 180 days for periods that do not include wartime (P.L. 100-322) and 90 days for the Persian Gulf War period (P.L. 102-25). See 38 U.S.C. §3702(a)(2)(C)-(D). The "Persian Gulf War period" is defined at 38 U.S.C. §101(33) and is ongoing as of the cover date of this report.
i. 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' Compensation Amendments of 1981, report to accompany H.R. 3995, 97th Cong., 1st sess., July 16, 1981, H.Rept. 97-179, pp. 20-21. P.L. 97-66 amended the law to apply to officers.
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.
j. The "selected reserve" is defined at 38 U.S.C. §3701(b)(5)(B).
k. Surviving spouses are subject to certain remarriage requirements. The term "surviving spouse" is defined at 38 U.S.C. §101 to mean someone who has not remarried.
iSee also 38 U.S.C. §103 for "special provisions relating to marriages."
l. 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.
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 further supplemented by the VA Lenders Handbook.1413 The underwriting standards consider a veteran's income, expenses, and credit history in determining whether he or she qualifieseligibility 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.14
17 The 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.1918 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.20
Loan guarantees are available for the purchase or construction of, or to make improvements (including energy efficiency improvements) to either a "dwelling"dwelling or farm residence.21 A dwelling20 A "dwelling" is defined in regulation as a building primarily used and occupied as a home (defined as a "place of residence"),2221 and that consists of no more than four single family units (under most circumstances),2322 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.24 For exampleVeterans must certify that they either occupy or will occupy the home within a reasonable time after loan closing.23 For instances where veterans are on active duty, their spouses or dependent children may satisfy the requirement for occupying the property within a reasonable time.24
A daily physical presence is not necessary to occupy the property as a home.25 However, the property should be near a borrower's place of employment, and, if their 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.2526 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.26
to the occupancy requirement exists for interest rate reduction refinancing loans (described in the "Interest Rate Reduction Refinancing Loan" section).
Purchase
VA-guaranteed loans can be used to purchase a dwelling. 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.27 Note, however, that aA 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 home28 or for placement of a manufactured home.29
In addition to purchasing propertya home, an eligible veteran may enter into a guaranteed loan for the construction of housing. When this occurs, the loan closes prior to construction, andThis may occur in one of two ways. In one option, a veteran enters into a non-VA construction loan, and then, once construction is complete, refinances the construction loan with a VA-guaranteed loan.30
Another option is a "one-time" VA construction loan that pays for construction and is maintained on the property as permanent financing. In this case, funds are placed in an escrow account and paid out as the construction progresses.30 As a home is built, a VA inspector is to inspect the progress in stages and confirm that the construction satisfies both VA minimum property requirements (MPRs) and the appraised value on which the loan is based.31 The loan guaranty is issued after the final inspection, and a borrower does not begin paying on the loan until construction is complete.32
A VA loan guaranty can be used to purchase a property that requires significant work (i.e., a fixer-upper).33 However, MPRs must be satisfied before VA will guarantee the loan.34 Among the MPRs are ensuring that major systems—including heating, water, roof, ventilation, electricity, etc.—are safe, structurally sound, and sanitary, and ensuring that the property is free of hazards and defective conditions, among other things.35 The cost of improvements are to be taken into account in determining the amount of the loan.36
A VA loan guaranty can be used for alterations, repairs, and improvements to a dwelling.35 Funds can be included as part of a loan for purchase or as a cash-out refinance, or they can be taken out as a supplemental VA loan if a veteran already owns the property and has an existing VA loan.36 In each case, a VA appraiser conducts an inspection and issues an appraisal based on the value of the home with repairs completed.37 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.3731 A veteran borrower does not begin paying on the loan until construction is complete.32 The amount of the loan is based on the appraised value as assessed through plans, specifications, or model homes.33 The VA loan guaranty certificate is issued after the property has undergone appropriate inspections and a final VA appraisal.34
Alterations, Repairs, Improvements
weatherizing, and furnace replacement.38
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 1996.39
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.40
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.41 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.42 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.43
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.44 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.45 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."46 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 "provides two ways in which manufactured housing can be classified and guaranteed. Guaranty under 38 U.S.C. §3710: Manufactured housing can be classified as a dwelling that may be guaranteed under the regular guaranty provisions if it is permanently affixed to a lot owned by the veteran and classified as real property under state law.40 According to U.S. Census data, in 2024, 18% of manufactured homes sold, leased, or placed on a site were titled as real property.41
Guaranty under 38 U.S.C. §3712: Manufactured housing can also be guaranteed under different statutory criteria if it is personal property.42 Manufactured housing classified as personal property 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,47 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 fee48 (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.49
In 2024, 78% of manufactured homes sold, leased, or placed on a site were titled as personal property.43 VA has not guaranteed new manufactured housing loans under Section 3712 of the law since 1996.44Refinancing 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 reduction refinancing loan or IRRRL),50,45 or to refinance generally with fewer restrictions.46 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' Housing Act of 1970 (P.L. 91-506).51 Manufactured housing loans became eligible for refinancing as part of the Veterans' Compensation and Program Improvements Amendments of 1984 (P.L. 98-223).
When a veteran refinances a loan that is already guaranteed by the VA as an IRRRL, generally the interest rate on the new loan shouldis to be lower than the loan being refinanced.5247 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 loanloan being refinanced, plus any closing costs, and the term of the new loan cannot exceed the original loan term by more than 10 years.53
48
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.5449 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.5550 In general, no appraisal and no new underwriting are required for an IRRRL,56 and, unlike purchase-money VA loans, closing costs may be financed as part of the loan.57
A veteran may also refinance withoutvia cash-out refinancing without some of the restrictions involved in an IRRRL. The VA considers a cash-out refinance to be the refinancing of any type of loan or lien, which that may result in additional funds being taken out against the value of the property (but does not have to).5852 The loan or lien being refinanced need not be VA-guaranteed, the new loan does not necessarily have to have a lower interest rate (except as described in the "Limitations on Refinancing" section), 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.59 However, there are requirements for cash-out refinancings that are not required for IRRRLs. A veteran must occupy the property as his or hertheir home after the refinancing, and, unlike the IRRRL, an appraisal, credit check, and underwriting are required.60
In addition to any limitations specific to IRRRL or cash-out refinancing, Congress has imposedthe law imposes certain requirements to prevent lenders from taking advantage of veterans through multiple refinancings taking place over a short period of time in order to capitalize on fees. Multiple refinancings, in turn, may have the potential to destabilize the Government National Mortgage Association (Ginnie Mae) pool of loans into which VA loans are securitized.6154 Congress put limitations into place as part of the Economic Growth, Regulatory Relief, and Consumer Protection Act (P.L. 115-174), enacted in 2018.55 The limitations do not apply to a cash-out refinancingrefinancings where the principal amount of the new loan exceeds the amount that was paid off.56
Among the limitations in P.L. 115-174 are the following:
VA-guaranteed loans make up a relatively small share of mortgage loans in the United States. According to the 2017 American Housing Survey, approximately 6.3% of primary mortgages outstanding were VA-guaranteed loans.65 Table 2 shows the number of loans that have been guaranteed by the VA from FY2000 through FY2017 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.66 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 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.")
|
Number of Loans in Year |
|
| |||||
|
Fiscal Year |
Purchase Loans |
|
|
Amount of Loans |
Amount Guaranteed |
Amount of Loans |
Amount Guaranteed |
|
2000 |
185,553 |
13,607 |
199,160 |
23.372 |
7.071 |
|
|
|
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 |
|
2014 |
271,701 |
166,697 |
438,398 |
99.574 |
25.274 |
389.272 |
101.506 |
|
2015 |
322,115 |
309,027 |
631,142 |
153.477 |
38.607 |
453.877 |
117.375 |
|
2016 |
353,002 |
352,472 |
705,474 |
178.657 |
44.647 |
517.184 |
132.782 |
|
2017 |
380,437 |
359,952 |
740,389 |
188.700 |
46.955 |
|
|
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. Through FY2014, the data on the cumulative volume of loans come from the VA Performance and Accountability Reports. From FY2015 on, cumulative volume of loans is reported in the VA Agency Financial Report.
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. Refinance loans include interest rate reduction refinancing loans and cash-out or other refinancing transactions.
c. The FY2000 Performance and Accountability Report did not provide information about the total loan volume.
d. As of the date of this report, data were not yet available on the cumulative volume of loans outstanding.
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.67 The single-family home loan limit in statute was initially pegged to the FHA insurance limit—$33,750 in 197068—then revised to follow the loan limits for savings and loans.69 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.70 While Congress did not amend the statute to increase the loan limit until 2008, the limit was changed administratively 27 times.71 As part of the Housing and Economic Recovery Act of 2008 (P.L. 110-289), Congress amended the Freddie Mac statute to raise the statutory conforming loan limit from $93,750 to $417,000, which was the level that had been established administratively for 2006 and 2007. P.L. 110-289 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.)72 Most recently, for 2018, the Freddie Mac limit was raised administratively to $453,100.73 |
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.74 (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.
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."75 The Freddie Mac conforming loan limit has most recently been set at $453,100 for single-family homes (for more information about the Freddie Mac conforming loan limit, see the text box).76 In addition, 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 $679,650).77 Note that for VA loans, the maximum guaranty amount is the same for 2-4 units of housing as it is for single units.78
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 $453,100), 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 (80% of purchase loans in FY2017 had no down payment),79 so the limits described here will apply to most veteran borrowers.
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.80 The statutory Freddie Mac conforming loan limit for these areas is 50% higher than the $453,100 limit for the rest of the country, resulting in a statutory conforming loan limit of $679,650.81 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 exceed $1 million (150% of $679,650). In 2018, two communities in Hawaii saw their limits exceed $679,650.82
|
Amount of Loan |
Limits on Guaranty |
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|
Home Loan Guaranty |
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reduced by previously used, unrestored entitlement 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. | ||||||||||||||||||
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 | ||||||||||||||||||
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), §3710(d)-(e), §and 3712(a),(c).
a. This effectively means that for loans between $90,000 and $144,000, the maximum guaranty is $36,000.
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, p. 7-20, http://www.benefits.va.gov/WARMS/docs/admin26/pamphlet/pam26_7/ch07.doc.
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 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 $453,100 for single-family properties.83 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.84 As a result, the effective maximum loan limit with no down payment corresponds to the "maximum guaranty amount" described in the previous section.
The term "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.85 The term "basic entitlement" is sometimes used to refer to entitlement up to $36,000, and the term "bonus entitlement" is used to refer to entitlement that exceeds $36,000. In general, due to the requirement that VA-guaranteed loans be used to purchase properties that a veteran will occupy as his or her home,86 unused entitlement cannot be used to purchase more than one home at a time.
Chapter 7, Topic 3.
Restoration of Entitlement
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.87103 These circumstances cover most situations where a veteran has ended the previous loan transaction in some way.
If 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.90
105Number and Amount of Loans Guaranteed
VA-guaranteed loans make up a relatively small share of mortgage loans in the United States. According to the 2023 American Housing Survey, approximately 7.4% of owner-occupied units had VA-insured loans.106 Figure 1 shows the number of guaranteed loans per year broken out by purchase and refinance loans, as well as the dollar amount of loans that VA has guaranteed per year, and the dollar amount guaranteed (VA does not guaranty the full loan amount).
During periods where interest rates have fallen, refinance loans make up a greater share of the total VA loans extended. In FY2020, the number of refinance loans more than tripled compared to FY2019, and then increased again by nearly 22% in FY2021. In FY2023 the number of refinance loans fell to its lowest level since FY2008.
FY2000-FY2024however, the programs differ in some of their specifics. Aside from the requirement that a borrower through the VAVA borrower meet service requirements, other features such as the amount of coverage, borrower fees, loan processing and underwriting, and terms of the loan, etc., vary between the two.
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.101 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.102
112
The NADL program is meant to address land ownership issues that can arise for veterans living on tribal land or similarly held land. Much of tribal land is held in trust by the federal government, either for a tribe or for individual Native Americans, and the land cannot be sold or transferred without federal approval.116 Further, land held by tribes or tribal members may have restrictions on alienation and encumbrance. Lenders could be reluctant to enter into mortgage arrangements where they would be unable to transfer the land in the event of a veteran's default.117 Prior to enactment of the NADL program, the Advisory Committee on Native American Veterans had been unable to find a single instance of a Native American veteran living on trust land benefitting from VA's loan guaranty program.118 Similar issues apply to residents of Hawaii and the territories, where land ownership may be restricted.119 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 could be in violation of law. Through the NADL program, VA provides avenues for addressing default and foreclosure. Until enactment of the Senator Elizabeth Dole 21st Century Veterans Healthcare and Benefits Improvement Act (P.L. 118-210), tribes and other entities were required to enter into a memorandum of understanding (MOU) with VA to participate in the NADL program.120 P.L. 118-210 expanded options so that VA may also rely on other federal agency agreements or determinations to guarantee, insure, or make loans on trust land.121 As of FY2024, VA had entered into MOUs with 114 tribal organizations (including three territories and the Department of Hawaiian Homelands).122 Through FY2024, VA had entered into 1,262 loans through the direct loan program, 40 of which were made in that year.123 The Direct Loan program for Native American veterans has had much of its participation in Hawaii and the territories.124 Further, overall participation of potentially eligible veterans is low. According to a Government Accountability Office (GAO) report published in 2022, over ten fiscal years, from FY2012-FY2021, less than 1% of veterans estimated to be potentially eligible for the program had entered into an NADL.125 At the time the NADL program was made permanent, reasons behind the lack of lending to Native American veterans in addition to lack of land ownership were thought to include low income, lack of infrastructure, and poor credit.126 These continue to be barriers.127 In addition, GAO identified issues that include lender concerns with legal barriers; land title issues; compliance with laws such as the Environmental Policy Act and Endangered Species Act; and the lack of infrastructure, expertise, and materials associated with rural locations.128 VA and Congress have taken actions that are meant to make the NADL more accessible.
FY2000-FY2024 Source: U.S. Department of Veterans Affairs Annual Benefits Reports, FY2000-FY2024. Direct loans are available to veterans with certain service-connected disabilities who require housing adaptations to fit their needs;132 the loans are made in conjunction with the Specially Adapted Housing grant program, which can be used by eligible veterans for home construction, improvements, or purchase.133 The law changed over time from making direct loans to veterans in areas where financing was less available (P.L. 81-475), to veterans living in rural areas (P.L. 85-857), and then to veterans with disabilities (P.L. 91-506). As of FY1981, after the increased availability of private loans in rural areas, direct loans for veterans for specially adapted housing became the only eligible use of funds.134 Currently, direct loans are limited to $500,000 in overall obligations for Specially Adapted Housing loans of not more than $33,000 apiece.135 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.136 VA may also enter into a direct loan arrangement in two situations involving a veteran's delinquency and/or default on a guaranteed loan. The costs of the VA guaranteed and direct loan programs are supported, in part, by fees paid by borrowers. VA loan fees were instituted as a regular requirement as part of the Omnibus Budget Reconciliation Act of 1982 (P.L. 97-253).139 The funding fee is a percentage of the loan amount, and veterans may finance the fee as part of the loan.140 VA loan fees are set in statute and are in effect for a period of time. For example, loan fees as of the cover date of this report are effective up to June 8, 2034. After that date, fees are set to decrease.141 There are several factors that determine the VA loan fee: For many years, members of the National Guard and Reserve paid different, higher fees than veterans who served on active duty. However, as of enactment of the Blue Water Navy Vietnam Veterans Act of 2019 (P.L. 116-23), fees are the same for both. Guaranteed Loans for Purchase, Construction, and Cash-Out Refinancing Loan Type Down Payment Initial Loan or Subsequent Loan to purchase or construct dwelling Less than 5% Initial
Less than 5% Subsequent
5%-10% Initial or Subsequent
10% or more Initial or Subsequent
NA Initial
NA Subsequent
Loan Type Manufactured Housing Loan
Interest Rate Reduction Refinancing Loan
Direct Loan for Specially Adapted Housing
Direct Loan for Native American Veterans
Assumption of Guaranteed Loan
Vendee Loan
Source: 38 U.S.C. §3729 and the VA Lenders Handbook, chapter 8.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 directDirect loans through the VA can be putVA fall into two broad categories. The first category involves loans that are targeted to specific veteran populations: one program is designed for Native American veterans, and the other program was created to address the needs of rural veterans, but has evolved to servecurrently serves 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.
Native American Direct Loan Program
Through the Native American Direct Loan (NADL) program, VA makes direct home loans to eligible Native American veterans to purchase, construct, improve, or refinance homes located on trust land. Eligible Native American veterans include borrowers who are members of federally recognized tribes, Native Hawaiians, Alaska Natives, and those who are native to American Samoa, Guam, and the Commonwealth of the Northern Mariana Islands (CNMI).114 The NADL program was initially enacted as a demonstration as part of the Veterans Home Loan Program Amendments of 1992 (P.L. 102-547) due to lack of participation among these populations in the VA loan guaranty program.115 The program was made permanent as part of the Veterans' Housing Opportunity and Benefits Improvement Act of 2006 (P.L. 109-233).
Direct Loans for Veterans with Certain Service-Connected Disabilities
The VA Loan Funding Fee
Fee as % of Loan Amount and Effective Date(Active Duty and Reservists)
April 7, 2023, toJune 8, 2034
June 9, 2034, and Thereafter
2 .15%
1 .40%
3 .30%
1 .25%
1 .50%
0 .75%
1 .25%
Cash out refinancinga
0 .50%
2 .15%
1 .40%
3 .30%
Other Guaranteed and Direct Loansb
1 .25%
Fee as % of Loan Amount (Active Duty and Reservists)
1 .00%
0 .50%
1 .00%
1 .25%
0 .50%
2 .25%
vendee loans."
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.103 The direct loan program was made available specifically for veterans living in rural areas in 1958, and for veterans with disabilities in 1970.104
As a result of the increased availability of private loan funds in rural areas, beginning in the FY1981 Department of Housing and Urban Development-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.105 Currently, direct loans are limited to $500,000 in obligations for Specially Adapted Housing loans of not more than $33,000 apiece.106 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.
While the VA loan guaranty program is available to Native American veterans,107 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). Eligibility is based on definitions in statute. The statute defines "Native American" as an Indian (as defined by the Indian Self-Determination and Education Assistance Act),108 a Native Hawaiian (as defined by the Hawaiian Homes Commission Act of 1920),109 a Native Alaskan (within the meaning of the Alaska Native Claims Settlement Act),110 and a Pacific Islander (within the meaning of the Native American Programs Act of 1974).111112
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 American Veterans had been unable to find a single instance of a Native American veteran benefitting from the loan guaranty program.113 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 presents 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.114 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.115 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's default.116
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,117 it may not be transferred without government approval, and it may not be transferred to anyone who is "less than one half Samoan."118 The CNMI Constitution restricts land ownership and long-term interests (such as leases) to those of Northern Marianan descent.119 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).120 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. 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.121 The tribe must also establish a procedure for evicting and foreclosing on the veteran's interest in the land and property.
As of FY2017, the VA had entered into MOUs with 98 tribes or Pacific Island territories.122 Through FY2017, the VA had entered into just over 1,000 loans through the direct loan program, 24 of which were made in that year.123 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.124 Reasons behind the lack of lending to Native American veterans were thought to include low income, lack of infrastructure, and poor credit.125
|
Fiscal Year |
Number of Loans |
|
|
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 |
|
2014 |
18 |
3.393 |
|
2015 |
18 |
3.817 |
|
2016 |
13 |
2.464 |
|
2017 |
24 |
4.979 |
Source: U.S. Department of Veterans Affairs, Annual Benefits Reports, FY2000 to FY2017.
The VA may also enter into a direct loan arrangement in two situations involving a veteran's delinquency and/or default on a guaranteed loan.
Generally, the VA has had the authority to bundle and sell pools of vendee loans.129 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.130 The bundled loans appear in the VA budget as "Guaranteed Loan Sales Securities."
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 FY2017. As a result of the vendee loan program suspension in 2003 and again in 2013, the number of vendee loans entered into decreased during the subsequent years and is currently at zero. 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.131 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").
|
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 |
|
|
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 |
|
3,333 |
|
2004 |
1,171 |
|
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 |
|
|
|
2014 |
24 |
9 |
0 |
|
2015 |
32 |
14 |
0 |
|
2016 |
38 |
0 |
0 |
|
2017 |
28 |
0 |
0 |
Source: VA Budget Justifications for Veterans Benefits Programs, FY2000-FY2019.
a. The number of vendee loans for FY1998 was not available.
b. 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).
c. According to VA budget justifications, the VA stopped vendee loan sales after 2012 so that regulations could be updated.
|
Federal Credit Reform Act of 1990 The FCRA (P.L. 101-508)132 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.133, proceeds from the rental or sale of foreclosed properties, collection of principal and interest payments made by borrowers, and any penalties paid by lenders. 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 feescould collect less in fees than initially expected. 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.
Federal Credit Reform Act of 1990 The FCRA (P.L. 101-508)144 changed the way in which the federal government budgets for loan and loan guaranty programs like those administered by 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.
Selected aspects of the VA loan guaranty in the federal budget and appropriations process are introduced below.
Subsidy Rate: 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 Factors that Affect the Subsidy Rate: Factors that can affect the subsidy rate 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)."subsidy rate"; each year the estimated subsidy rate appears inas part of the President's Budget Appendix for the Department of Veterans Affairsbudget.145 The four programs for which VA estimates subsidy rates are guaranteed loans, guaranteed loan sale securities, acquired loans, and vendee loans. The estimated subsidy rate of loans guaranteed or madeextended in a given fiscal year is based on the net present value of expected expenses in the event of borrower defaults (less any funds recovered) 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
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.
Reestimates of the Subsidy Rate: The initial estimated subsidy rate for each of these programsloan program 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.134 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). 146 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.
Account Structure: 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.135 (Note that direct147 (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 thatIn summary, appropriations appear in the on-budget Veterans Housing Benefit Program Fund (program account), while the off-budget financing and liquidating accounts reflect the specific income and expenses associated with particular loan cohorts.
The costs of the VA direct and loan guaranty programs are supported, in part, by fees paid by the borrowers. Veterans may finance the fees as part of the loan, and the guaranty is based on the loan amount, including the fees.136
Factors Determining VA Loan Fee: The amount of a borrower's fee is based on several factors: 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.137 (See Table 6.)
Waiver of VA Loan Fee: 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.138
Veterans were not always charged fees as part of the loan guaranty transaction and, in general, fees were not required prior to 1982.139 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.140 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."141 Despite objections from veterans groups,142 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 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 same VA loan fees have been in place since 2004, and most recently have been extended until September 30, 2027.143
|
Fee as % of Loan Amount |
||||||
|
Loan Type |
Down Payment |
First Loan or Subsequent |
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.
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. 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 provides grants to veterans and servicemembers with certain service-connected disabilities to assist them in constructing, purchasing, or remodeling homes to fit their needs.144 While Specially Adapted Housing loans are also available (see discussion in the "The Original Direct Loan for Veterans in Rural Areas, Now Limited to Veterans with Disabilities" section of this report), the majority of funds are distributed as grants that veterans and servicemembers need not pay back.
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.145 The first, sometimes referred to as the Specially Adapted Housing (SAH) Grant (or Section 2101(a) grant, after the section of Title 38 of the U.S. Code), is targeted to veterans with mobility impairments, while the second, sometimes referred to as the Special Housing Adaptation (SHA) 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. A veteran or servicemember may use the SAH and SHA grants up to three times, as long as total funding does not exceed grant limits.146
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 permanent and total service-connected disabilities.
Veterans who have qualifying disabilities include the following:
In the Veterans' Disability Compensation and Housing Benefits Amendments of 1980 (P.L. 96-385), 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.152 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.
In 1980, 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 (which was $30,000).153 At the time the law was enacted, the portion of the program to assist blind veterans and those without use of their hands was limited to $5,000.
Since enactment, the Special Housing Adaptation Grant has been expanded to include veterans with severe burn injuries (P.L. 110-289). Eligibility is as follows:
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 temporarily in the homes of family members, whether the individuals meet disability requirements for Section 2101(a) or Section 2101(b).156 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.157 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).
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 took 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.158 In FY2019, as a result of the index adjustment, the levels were set at $85,645 for Section 2101(a) grants and $17,130 for Section 2101(b).159 The Section 2101(a) grant further provides that the grant not exceed a total percentage of the cost, generally 50% of the cost to acquire property or construct housing.160
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 P.L. 112-154, the TRA grants were not subject to annual adjustment. Pursuant to the cost of construction index adjustment, the limits in FY2019 are $37,597 and $6,713.161
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 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 or she was residing temporarily, the amount of that grant would reduce the total Section 2101(a) grant he or she would be eligible to receive if later purchasing their 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.
The grant can be restored in cases where a previous adapted home is "destroyed or substantially damaged in a natural or other disaster."162 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'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.
|
Location |
|
|
|
Veteran's or Servicemember's Own Home |
$85,645 |
$17,130 |
|
Family Member's Home (indefinite) |
NA |
$17,130 |
|
Family Member's Home (temporary) |
$37,597 |
$6,713 |
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 (SAH), Special Housing Adaptations (SHA), and Temporary Residence Adaptations (TRA) 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.
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.163 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.
|
Specially Adapted Housing Grants |
Special Housing Adaptation Grants |
|||
|
Fiscal Year |
Number of Grants |
|
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 |
|
2012 |
1,105 |
57.638 |
100 |
0.939 |
|
2013 |
977 |
51.621 |
122 |
1.198 |
|
2014 |
1,154 |
61.353 |
99 |
0.961 |
|
2015 |
1,648 |
94.996 |
161 |
1.875 |
|
2016 |
1,725 |
98.426 |
189 |
2.217 |
|
2017 |
1,732 |
95.848 |
194 |
2.308 |
Source: U.S. Department of Veterans Affairs, Annual Benefits Reports, FY1999-FY2017, available at http://www.vba.va.gov/REPORTS/abr/index.asp.
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.164 For some time, 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 cooperative of at least 50 years, or a life estate through a revocable trust. As mentioned in the VA direct loan program section, 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 updating the regulations defining an ownership interest (among other changes).165 Individuals may now qualify for a 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."166
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 and HUD Home Rehabilitation and Modification Pilot Congress authorized a pilot program to modify and rehabilitate homes of low-income veterans and veterans with disabilities in 2014, as part of the FY2015 National Defense Reauthorization Act (P.L. 113-291). The law directed the Secretary of the Department of Housing and Urban Development (HUD), in consultation with the VA Secretary, to develop the program, which was authorized at $4 million per year from FY2015 through FY2019. Congress appropriated funds for the pilot in each of the FY2016 through FY2018 appropriations bills, for a total of $13.7 million.167 HUD released a Notice of Funding Availability for the grants in April 2018, and eight grantees, receiving $7.4 million total, were announced in October 2018.168 The grant funds are available to nonprofit organizations that primarily serve veteran or low-income populations. Grant funds can be used for activities such as making home modifications to accommodate a veteran's disability, adding a bedroom or bathroom for a caregiver, rehabilitating homes that are in disrepair, and making energy efficient modifications. |
Delinquencies and foreclosures for all categories of loans increased about the same time that the country entered recession (December 2007).169 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%; at its peak, in the fourth quarter of 2010, it reached 4.64%.170 While foreclosures for all categories of loans increased after the beginning of the recession, the foreclosure and delinquency rates for VA-guaranteed loans were lower than the rates for FHA loans, as well as lower than the overall rates.171
Delinquency and foreclosure rates for VA loans were not always lower than FHA loans or loans in general.172 The VA has suggested a number of factors that could contribute to the 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.173 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.
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.174 These arrangements, or loss mitigation efforts, include repayment plans, forbearance agreements, loan modifications, sales for less than the amount owed ("compromise sales"), or deeds in lieu of foreclosure. Most of these efforts were introduced when VA revised its regulations in 2008.175
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" credit risk, at least 12 payments have been made since the loan closed, and a loan modification would reinstate the loan.176 On December 20, 2011, the VA published a final rule in the Federal Register modifying these regulations to further help encourage modifications.177 In cases where the conditions listed above have not been met, lenders can 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 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.178 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.179
"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.180 Through HAMP, homeowners whose mortgage payments exceed 31% of their incomes (in general),181 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.182
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 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 debt exceeds their homes' values.183 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,184 the attorney general for the District of Columbia, and five large mortgage servicers in March 2012. Under the agreement, $25 billion was made available to assist certain borrowers.185 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 was awarded to the states, some of which, about $1.5 billion, consists of payments to borrowers who lost their homes to foreclosure.186 For more information, see CRS Report R42919, Oversight and Legal Enforcement of the National Mortgage Settlement (available to congressional clients upon request to CRS).
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.187 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.188 In addition, the SCRA also generally declares invalid any foreclosure or home sale that takes place during this time period.
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.189 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.190 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.191 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,192 and the guaranty is limited to the borrower's total indebtedness minus the VA's purchase price.193
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 FY2016, the average time between VA acquisition of a foreclosed property and sale was six months.194 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)."
|
Fiscal Year |
|
|
|
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 |
|
2015 |
7,645 |
29,649 |
|
2016 |
7,273 |
40,811 |
Source: VA Performance and Accountability Reports, FY2002-FY2014. The reports are available on the VA website, http://www.va.gov/budget/report/index.asp. From FY2015 on, figures are reported in the VA Agency Financial Report.
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
| 1. |
38 C.F.R. §36.4301. |
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| 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. |
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| 3. |
Ibid. |
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| 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. |
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| 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. |
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| 6. |
Obergefell v. Hodges, 135 S. Ct. 2584 (2016). |
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| 7. |
38 U.S.C. §3702, §3701(b)(4). |
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| 8. |
38 U.S.C. §3701(b)(5). |
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| 9. |
Options in the Event of Delinquency, Default, and Foreclosure
Loan delinquency occurs when a borrower misses one or more loan payments.148 Servicers are to report loans to VA as being in default when they become 61 days delinquent and to engage in loss mitigation efforts to assist borrowers.149 If these efforts are unsuccessful, a loan may proceed to foreclosure. This section discusses available interventions and options in cases of delinquency and default. Loan servicers and VA can engage in loss mitigation efforts to help veterans who have had difficulty paying their mortgages resume payment and maintain their housing. In cases where saving the home may not be possible, there may be loss mitigation options where the property can be transferred without a foreclosure becoming part of a veteran borrower's credit record. As part of loss mitigation, VA may make incentive payments to servicers that are able to work out arrangements with borrowers.150 Loss mitigation arrangements for which servicers may qualify for incentives are specified in regulation by their "preferred order of consideration."151 Incentive payments are available for special forbearance, repayment plans, loan modifications, short sales, and deeds in lieu of foreclosure; the amounts vary based on intervention and servicer performance.152 Intervention Description References Loss Mitigation Options: Home Retention Special Forbearance Payments are suspended or reduced for a period of time. This is followed by repayment of delinquent amounts that have accumulated, either at the end of the forbearance period or through a repayment plan. 38 C.F.R. §36.4319 38 C.F.R. §36.4301 VA Manual M26-04, Chapter 5 Repayment Plan A borrower makes regular mortgage payments plus a portion of the delinquent amount. 38 C.F.R. §36.4319 38 C.F.R. §36.4301 VA Manual M26-04, Chapter 5 Traditional Loan Modification Changes are made to loan terms to make them more affordable. These can include reamortization of delinquent amounts (i.e., establishing a principal and interest schedule that incorporates delinquent amounts over the life of the loan), extension of the loan term, and changes in the interest rate. 38 C.F.R. §36.4315 VA Manual M26-04, Chapter 5 Disaster Loan Modification Similar to traditional loan modification, but offered after a federally declared disaster and without the need to complete a loss mitigation application. VA Manual M26-04, Chapters 5, 21 VA Purchase and Servicing If a servicer is ready to proceed to foreclosure, VA may evaluate loans on a case-by-case basis and opt to purchase and service the loan. VA may also opt to modify the loan to make payments manageable. Loans that VA purchases and services are then direct VA loans, referred to earlier in this report as "acquired loans." For more information, see the "Acquired and Vendee Loans" section. 38 U.S.C. §3732 38 C.F.R. §36.4320 VA Manual M26-04, Chapter 9 VA Partial Claim Program (VAPCP) 38 U.S.C. §3737 Loss Mitigation Options: Alternatives to Foreclosure Short Sale The property is sold for less than the amount owed and the servicer agrees to release the mortgage. 38 C.F.R. §36.4319 38 C.F.R. §36.4301 38 C.F.R. §36.4322(e) VA Manual M26-04, Chapter 5 Deed in Lieu of Foreclosure The deed is transferred to the servicer in exchange for the release of all obligations. 38 C.F.R. §36.4319 38 C.F.R. §36.4322(f) VA Manual M26-04, Chapter 5 VA COVID-Era Partial Claim Payment Program In place from July 27, 2021, to October 28, 2022, VA purchased the amount of indebtedness necessary to bring a loan current (not to exceed 30% of the loan) and filed a lien to be repaid at the end of the insured loan term. 38 C.F.R. §§36.4800 et seq. COVID-19 Refund Modification In place from July 27, 2021, to May 31, 2024, and similar to the COVID-Era Partial Claim Payment Program, but it also provided for a modification of the remaining loan balance to contribute to reduced payments. VA Loan Circulars 26-21-13 and 26-24-2 In place from May 31, 2024, to May 1, 2025, VA purchased and modified guaranteed loans that could not benefit from other interventions using the authority for purchasing and servicing mortgages. 38 U.S.C. §3732 38 C.F.R. §36.4320 VA Manual M26-04, Chapter 9, VA Loan Circular 26-25-2 Source: Table prepared by CRS based on the sources shown in the "References" column. 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.153 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.154 In addition, the SCRA generally declares invalid any foreclosure or home sale that takes place during this time period. When a property goes to foreclosure, VA will 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.158 If a servicer conveys a property to VA pursuant to statute, the guaranty is limited to the borrower's total indebtedness minus the net value of the property.159 Once VA has acquired properties through the process of foreclosure, it attempts to resell them. Purchasers need not be veterans. In FY2025, the average time between VA acquisition of a foreclosed property and sale was two months.160
FY2001-FY2025 Notes: Properties as of the end of the fiscal year. The Performance and Accountability Reports do not indicate exactly what the foreclosure process entails. Number of Loans in Year Fiscal Year Purchase Loans Amount of Loans Amount Guaranteed Amount of Loans Amount Guaranteed 2000 185,553 13,607 199,160 23.372 7.071 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 2014 271,701 166,697 438,398 99.574 25.274 389.272 101.506 2015 322,115 309,027 631,142 153.477 38.607 453.877 117.375 2016 353,002 352,472 705,474 178.657 44.647 517.184 132.782 2017 380,437 359,952 740,389 188.700 46.955 596.467 152.789 2018 383,115 227,398 610,513 161.296 39.940 663.656 168.665 2019 384,497 240,049 624,546 175.639 43.478 712.316 180.280 2020 428,422 818,395 1,246,817 375.347 93.719 816.039 206.820 2021 444,050 997,695 1,441,745 447.192 111.968 862.241 218.648 2022 410,365 335,726 746,091 256.577 63.978 940.907 237.575 2023 320,274 80,421 400,695 144.596 35.891 994.698 250.336 2024 298,330 118,046 416,376 155.429 38.954 1,040.796 261.752 2025 — — — — — 1,097.894 275.443 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. Through FY2014, the data on the cumulative volume of loans come from the VA Performance and Accountability Reports. From FY2015 on, cumulative volume of loans is reported in the VA Agency Financial Report. Notes: As of the cover date of this report, VA had not released an Annual Benefits Report for FY2025. 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 (hereinafter, "The Historical Development of Veterans' Benefits in the United State"). The Historical Development of Veterans' Benefits in the United States. 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. P.L. 78-346, §500. The Historical Development of Veterans' Benefits in the United States, pp. 162-163. See the definition of "veteran" at 38 U.S.C. §101(2): "The term 'veteran' means a person who served in the active military, naval, air, or space service, and who was discharged or released therefrom under conditions other than dishonorable." See also the VA loan guaranty statute and regulations at 38 U.S.C. §3702(c) and 38 C.F.R. §36.4301. 38 U.S.C. §3702, §3701(b)(4). Reservists were made eligible as part of the Veterans Home Loan Program Amendments of 1992 (P.L. 102-547). Until 2021, reservists qualified by serving for at least six years. In 2020, the law was changed to also include 90 days cumulative full-time National Guard duty with 30 days consecutive. See the Johnny Isakson and David P. Roe, M.D. Veterans Health Care and Benefits Improvement Act of 2020 (P.L. 116-315). Provisions are codified at 38 U.S.C. §3701(b)(5), (7). Full-time National Guard duty is defined at 10 U.S.C. §101(d)(5). 38 U.S.C. §3701(b)(2)-(3). | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 10. |
38 U.S.C. §3701(b)(2)-(3). |
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| 11. | 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. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Eligibility for spouses of veterans who died while receiving compensation was added to the law as part of P.L. 112-154, Honoring America's Veterans and Caring for Camp Lejeune Families Act of 2012. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
38 U.S.C. §3702(a)(2). | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
See 38 U.S.C. §3710(g) VA was directed to apply these standards as part of the Veterans' Benefits Improvement and Health-Care Authorization Act of 1986, P.L. 99-576, Section 402. 38 C.F.R. §36.4340(d). 38 C.F.R. §36.4340(f). 38 C.F.R. §36.4340(e). For example, in the Northeast region, $1,025 is considered sufficient monthly residual income for a family of four for loans of more than $80,000. See U.S. Department of Veterans Affairs, "Loan Guaranty: Credit Standards," 62 Federal Register 53963, October 17, 1997, https://www.govinfo.gov/content/pkg/FR-1997-10-17/pdf/97-27564.pdf. 38 C.F.R. §36.4340(g). Ibid. 38 U.S.C. §3710. 38 C.F.R. §36.4301. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 15. |
38 C.F.R. §36.4340(d). |
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| 16. |
38 C.F.R. §36.4340(f). |
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| 17. |
VA Lenders Handbook, p. 4-55. |
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| 18. |
38 C.F.R. §36.4340(e). |
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| 19. |
38 C.F.R. §36.4340(g). |
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| 20. |
Ibid. |
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| 21. |
38 U.S.C. §3710. |
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| 22. |
38 C.F.R. §36.4301. |
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| 23. | Ibid. There is an exception for a dwelling owned by more than one veteran—in that case there may be an | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 24. |
VA Lenders Handbook, p. 3-14. |
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| 25. |
Ibid. |
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| 26. | 38 U.S.C. §3704(c). A reasonable time is typically 60 days. VA Lenders Handbook, Chapter 3, Topic 5b. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 27. |
38 C.F.R. §36.4301. |
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| 28. |
Ibid., definition of "residential property." |
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| 29. |
38 U.S.C. §3710(a)(9)(A)(ii). |
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| 30. |
U.S. Department of Veterans Affairs, "VA Loan Circular 26-18-7, Construction/Permanent Home Loans," April 6, 2018, https://www.benefits.va.gov/HOMELOANS/documents/circulars/26_18_7.pdf. |
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| 31. |
VA Lenders Handbook, chapter 10, p. 10-19. |
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| 32. |
VA Loan Circular 26-18-7, Construction/Permanent Home Loans, pp. 5-6. |
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| 33. |
U.S. Department of Veterans Affairs, "VA Loan Circular 26-18-6, Loans for Alteration and Repair," April 5, 2018, https://www.benefits.va.gov/HOMELOANS/documents/circulars/26_18_6.pdf. |
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| 34. |
Ibid. |
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| 35. |
See VA Lenders Handbook, chapter 12. |
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| 36. |
VA Loan Circular 26-18-6, Loans for Alteration and Repair, p. 2. |
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| 37. |
VA Lenders Handbook, Chapter 3, Topic 5. Ibid. 38 C.F.R. §36.4301. The U.S. Code does not specify the purchase of land for the construction of a home as an eligible use of funds. However, previous versions of the U.S. Code used the term "residential property" in the description of loans eligible to be guaranteed. See, for example, 38 U.S.C. §694a(a) (1952). The U.S. Code no longer uses the term "residential property" in this context, but loan guaranty regulations define the term to include "Any land to be purchased out of the proceeds of a loan for the construction of a dwelling, and on which such dwelling is to be erected." 38 C.F.R. §36.4301. 38 U.S.C. §3710(a)(9)(A)(ii). VA Lenders Handbook, Chapter 7, Topic 2a. Ibid., Chapter 7, Topic 2h. Ibid., Chapter 7, Topic 2k. Ibid., Chapter 10, Topic 9d. Ibid., Chapter 7, Topic 2e. 38 U.S.C. §3710(a)(4). See also VA Lenders Handbook, Chapter 7, Topic 4. For supplemental loans, see 38 C.F.R. §36.4359 and the VA Lenders Handbook, Chapter 7, Topic 5. For more information on cash-out refinancing, see the "Refinancing Loans" section of this report. VA Lenders Handbook, Chapter 10, Topic 23 and Topic 9m. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
For a complete list of acceptable improvements, see 38 U.S.C. §3710(d). 38 U.S.C. §3710(a)(9); 38 C.F.R. §36.4301. Manufactured housing was made eligible for the loan guaranty as part of the Veterans' Compensation and Program Improvements Amendments of 1984, (P.L. 98-223). U.S. Census Bureau, Manufactured Housing Survey, Annual Tables of New Manufactured Homes: 2014 - 2024, Selected Characteristics by Region, June 2025, https://www2.census.gov/programs-surveys/mhs/tables/time-series/Annual_Char.xlsx. Just over 3.5% of manufactured homes were not titled. 38 U.S.C. §3712; 38 C.F.R. §§36.4201 et seq. The separate loan guaranty for manufactured housing was created as part of the Veterans' Housing Act of 1970, P.L. 91-506. See footnote 41. Communication with the Department of Veterans Affairs, May 8, 2026. During the 1990s, VA insured a decreasing number of manufactured housing units per year, as reported in the VA Annual Reports. From FY1971 through FY1990, 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, 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. 38 U.S.C. §3710(a)(8) and (a)(9)(B)(i). The IRRRL was made an eligible use of the VA loan as part of the Veterans' Disability Compensation and Housing Benefits Amendments of 1980 (P.L. 96-385). Manufactured housing classified as real property was made eligible for the IRRRL as part of the Veterans' Compensation and Program Improvements Amendments of 1984 (P.L. 98-223). See 38 U.S.C. §3710(a)(9)(B)(i). 38 U.S.C. §3710(a)(5). The ability to refinance existing loans became part of the loan guaranty law in the Veterans' Housing Act of 1970 (P.L. 91-506). Manufactured housing classified as real property was made eligible as part of the Veterans' Compensation and Program Improvements Amendments of 1984 (P.L. 98-223). See 38 U.S.C. §3710(a)(9)(B)(ii). | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 39. |
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. |
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| 40. |
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. |
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| 41. |
VA Lenders Handbook, p. 12-20. |
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| 42. |
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. |
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| 43. |
U.S. Census Bureau, Selected Characteristics of New Manufactured Homes Placed: By Region - 2010, p. 1, http://www.census.gov/const/mhs/char10.pdf. |
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| 44. |
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. |
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| 45. |
Report of the President's Committee on the Vietnam Veteran, Washington, DC, 1970, p. 33. |
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| 46. |
Ibid. |
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| 47. |
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. |
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| 48. |
38 U.S.C. §3712(c)(5). |
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| 49. |
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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| 50. |
38 U.S.C. §3710(a)(8) and (a)(9)(i). |
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| 51. |
38 U.S.C. §3710(a)(5). |
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| 52. |
38 U.S.C. §3710(e). |
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Ibid. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 54. | . 38 U.S.C. §3710(e)(1)(C). | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
VA Lenders Handbook, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ibid., Chapter 6, Topic 3a-c. Ibid., Chapter 6, Topic 4a. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 58. |
VA Lenders Handbook, p. 6-17. |
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| 59. |
Ibid., p. 10-10. |
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| 60. |
Ibid., p. 6-18. |
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| 61. | See, for example, Statement of Jeffrey London, Director of VA's Loan Guaranty Service, before the House Veterans' Affairs Committee, Subcommittee on Economic Opportunity, Home Loan Churning Practices and How Veteran Homebuyers are Being Affected, 115th Cong., 2nd sess., January 10, 2018, http://docs.house.gov/meetings/VR/VR10/20180110/106744/HHRG-115-VR10-Wstate-LondonJ-20180110.pdf. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 62. |
38 U.S.C. §3709(b). |
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| 63. |
38 U.S.C. §3709(a). |
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| 64. |
38 U.S.C. §3709(c). |
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| 65. |
U.S. Census Bureau, American Housing Survey: 2017 Summary Tables, Additional Mortgage Characteristics—Owner-Occupied Units, https://www.census.gov/programs-surveys/ahs/data.html. For the way in which "primary mortgage" status is determined, see American Housing Survey 2017 Definitions, pp. A-34 to A-35, http://www2.census.gov/programs-surveys/ahs/2017/2017%20AHS%20Definitions.pdf?#. |
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| 66. |
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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| 67. |
For more information about Freddie Mac and the conforming loan limits, see CRS Report RS22172, The Conforming Loan Limit. |
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| 68. |
P.L. 91-351, §305. The FHA statute was amended in 1969 to raise the limit to $33,000 (P.L. 91-152). |
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| 69. |
P.L. 93-383, §805. The federal savings and loan limits on mortgage lending were codified at 12 U.S.C. §1464(c) (1976). |
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| 70. |
P.L. 96-399, §313. |
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| 71. |
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. |
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| 72. |
This limit was the lower of 125% of the area median home price or 175% of the Freddie Mac limit (or $729,750). |
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| 73. |
Federal Housing Finance Agency, "FHFA Announces Maximum Conforming Loan Limits for 2018," press release, November 28, 2017, https://www.fhfa.gov/Media/PublicAffairs/Pages/FHFA-Announces-Maximum-Conforming-Loan-Limits-for-2018.aspx. |
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| 74. |
38 U.S.C. §3703. |
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| 75. |
38 U.S.C. §3703(a)(1)(C). |
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| 76. |
12 U.S.C. §1454. |
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| 77. |
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. |
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| 78. |
The maximum guaranty amount is "the dollar amount that is equal to 25 percent of the Freddie Mac conforming loan limit limitation determined under section 305(a)(2) of the Federal Home Loan Mortgage Corporation Act (12 U.S.C. 1454(a)(2)) for a single-family residence, as adjusted for the year involved." 38 U.S.C. §3703(a)(1)(C). The Freddie Mac statute, in turn, is written so that "single-family" refers to a one-family unit. |
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| 79. |
U.S. Department of Veterans Affairs, FY2017 Annual Benefits Report, Home Loan Guaranty section, p. 8, https://www.benefits.va.gov/REPORTS/abr/docs/FY17-Loan-Guaranty.pdf. |
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| 80. |
12 U.S.C. §1454(a)(2)(C). |
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| 81. |
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. |
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| 82. |
VA loan circular 26-17-41 refers to the Federal Housing Finance Agency loan limits for 2018, https://www.fhfa.gov/DataTools/Downloads/Documents/Conforming-Loan-Limits/FullCountyLoanLimitList2018_HERA-BASED_FINAL_FLAT.XLSX. |
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| 83. |
The Ginnie Mae Mortgage Backed Securities Guide, January 25, 2018, p. 9-1, https://www.ginniemae.gov/issuers/program_guidelines/MBSGuideLib/Chapter_09.pdf. |
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| 84. |
VA Lenders Handbook, p. 3-9. |
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| 85. |
38 U.S.C. §3703(a). |
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| 86. |
VA Lenders Handbook, pp. 3-12 and 3-14. |
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| 87. |
38 U.S.C. §3702(b). |
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| 88. |
Ibid. See also VA Lenders Handbook, p. 2-15. |
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| 89. |
VA Lenders Handbook, p. 2-15. |
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| 90. |
Ibid., p. 3-9. |
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| 91. |
See CRS Report RS20530, FHA-Insured Home Loans: An Overview. |
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| 92. |
Ibid. |
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| 93. |
38 C.F.R. §36.4313. |
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| 94. |
See VA Lenders Handbook, p. 8-7. |
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| 95. |
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. |
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| 96. |
CRS Report R42875, FHA Single-Family Mortgage Insurance: Financial Status of the Mutual Mortgage Insurance Fund (MMI Fund). |
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| 97. |
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. |
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| 98. |
38 U.S.C. §3731(a). |
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| 99. |
VA Lenders Handbook, chapter 15. |
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| 100. |
24 C.F.R. Part 200, Subpart G. |
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| 101. |
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. |
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| 102. |
See Section 2113 of P.L. 110-289. |
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| 103. |
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. |
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| 104. |
See P.L. 85-857 and P.L. 91-506. |
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| 105. |
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. |
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| 106. |
Provisions are codified at 38 U.S.C. §3709 and regulations are at 38 C.F.R. §36.4306. 38 U.S.C. §3709(d)(1). 38 U.S.C. §3709(a). 38 U.S.C. §3709(b). 38 U.S.C. §3709(c). For VA loans, see 38 U.S.C. §3714. Assumptions became eligible under the VA loan guaranty as part of P.L. 84-898, An Act to Amend Title III of the Servicemen's Readjustment Act of 1944, as amended, and for other purposes. 38 U.S.C. §3702(b)(2). 38 C.F.R. §36.4313. U.S. Department of Veterans Affairs, Loan Circular 26-24-5, VA Assumption Locality Variance, Exhibit A, February 26, 2024, https://www.benefits.va.gov/HOMELOANS/documents/circulars/26-24-05-exhibita.pdf. Fees range from $386 (Midwest region) to $463 (West region). VA released a loan circular with requirements for second loans made to complete an assumption. See U.S. Department of Veterans Affairs, Loan Circular 26-24-17, Secondary Borrowing Requirements on Assumption Transactions, August 11, 2024, https://www.benefits.va.gov/HOMELOANS/documents/circulars/26-24-17.pdf. U.S. Department of Veterans Affairs, Congressionally Mandated Report: Recommendations for Improving Appraisal Delivery Times, April 2023, https://benefits.va.gov/HOMELOANS/documents/congressionalreports/2023-cmr-recommendations-for-improving-appraisal-delivery-times.pdf. U.S. Department of Veterans Affairs, "Loan Guaranty: Minimum Property Requirements for VA-Guaranteed and Direct Loans," 88 Federal Register 85863, December 11, 2023, https://www.federalregister.gov/documents/2023/12/11/2023-27068/loan-guaranty-minimum-property-requirements-for-va-guaranteed-and-direct-loans. See VA guidance documents, Qualification Requirements, https://www.benefits.va.gov/HOMELOANS/documents/docs/fee-appraiser-qualification-requirements.pdf, accessed April 9, 2026. See 38 U.S.C. §3731 and 38 C.F.R. §36.4342. Guidance is available in the VA Lenders Handbook and VA Loan Circulars. The term "designated appraiser" is defined in regulation at 38 C.F.R. §36.4301. The five-year requirement is in regulation at 38 C.F.R. §36.4342. However, VA, its Qualification Requirements guidance document, has stated that "Since newly appointed appraisers will be in a probationary status for 2 years, a newly appointed appraiser will only need 3 years of experience as they will have 2 more years when the probationary period ends." See footnote 67 38 U.S.C §3731(b)(3). This provision was added to the law as part of the Blue Water Navy Vietnam Veterans Act of 2019 (P.L. 116-23). See U.S. Department of Veterans Affairs, Loan Circular 26-19-31, Assisted Appraisal Processing Program (AAPP), November 15, 2019, https://benefits.va.gov/homeloans/documents/circulars/26_19_31.pdf. For more information, see "VA Appraisal Fee Schedules and Timeliness Requirements" on VA's website at https://www.benefits.va.gov/HOMELOANS/appraiser_fee_schedule.asp. 38 U.S.C. §3731(f). More detail is provided in the VA Lenders Handbook, Chapter 15. The practice began during COVID-19 and has continued since then. See U.S. Department of Veterans Affairs, Loan Circular 26-22-13, Procedures for Alternative Valuation Methods, July 27, 2022, https://www.benefits.va.gov/HOMELOANS/documents/circulars/26_22_13.pdf. 38 U.S.C. §3604(a), 38 U.S.C. §3610(b)(4), and 38 C.F.R. §36.4351. VA Lenders Handbook, Chapter 12, Topic 1. 38 U.S.C. §3710(b)(5) and 38 C.F.R. §36.4301. See also VA Lenders Handbook, Chapter 13, Topic 1. For example, see the VA website at https://www.benefits.va.gov/homeloans/escape-clause.asp. 38 C.F.R. §36.4303(k). VA Lenders Handbook, Chapter 10, Topic 8. See also, U.S. Department of Veterans Affairs, Loan Circular 26—03-11, New Procedures for Improving Communication With Fee Appraisers and Streamlining Reconsiderations of Value, December 22, 2003, https://www.benefits.va.gov/HOMELOANS/documents/circulars/26_03_11.pdf. 38 U.S.C. §3731(d), (e); VA Lenders Handbook, Chapter 10, Topic 22. 38 C.F.R. §36.4313. 38 U.S.C. §3729(a)(2) and 38 C.F.R. §36.4313(a). Loans to refinance can include all closing costs in the loan. 38 C.F.R. §36.4313(d)(1), VA Lenders Handbook, Chapter 8, Topic 2c. 38 C.F.R. §36.4313(d)(2). VA Lenders Handbook, Chapter 8, Topic 2d. 38 U.S.C. §3703(c)(4), 38 C.F.R. §36.4312(b). VA Lenders Handbook, Chapter 8, Topic 3c. See, for example, Michael V. Sanders, "A Sea Change in Commission Structure," Valuation Magazine, issue no. 2 (2024), pp. 18-21. Sandra Block, "New Rules Are Shaking Up the Residential Real Estate Market," Kiplinger Personal Finance, November 2024, pp. 9-10. U.S. Department of Veterans Affairs, "VA updates home loan benefits, helping Veterans remain competitive in the housing market," press release, June 11, 2024, https://news.va.gov/132094/va-updates-home-loan-competitive-housing-market/. U.S. Department of Veterans Affairs, Temporary Local Variance for Certain Buyer-Broker Charges, June 11, 2024, https://www.benefits.va.gov/HOMELOANS/documents/circulars/26-24-14.pdf. The circular was issued pursuant to the regulatory provision allowing the VA authorize "proper local variances" for reasonable and customary fees. 38 C.F.R. §36.4313(d)(1)(ix). VA Lenders Handbook, Chapter 8, Topic 5. The term entitlement is not defined in statute or regulation, but is used in certain sections of the law. 38 U.S.C. §3703. Prior to enactment of the Blue Water Navy Vietnam Veterans Act of 2019 (P.L. 116-23), the maximum guaranty for loans above $144,000 was limited by the Freddie Mac conforming loan limits. See footnote 100. 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. It varies by county. See U.S. Federal Housing Finance Agency, "FHFA Announces Conforming Loan Limit Values for 2026," press release, November 25, 2025, https://www.fhfa.gov/news/news-release/fhfa-announces-conforming-loan-limit-values-for-2026. VA Lenders Handbook, Chapter 3, Topic 1a. 38 U.S.C. §3702(b). Ibid. See also VA Lenders Handbook, Chapter 2, Topic 6. For more explanation of one-time restoration, see VA Lenders Handbook, Chapter 2, Topic 6b. U.S. Census Bureau, 2023 American Housing Survey Tables, Mortgage Characteristics, Owner-Occupied Units, Type of Federal Mortgage Insurance, https://www.census.gov/programs-surveys/ahs.html (accessed April 9, 2026). The Blue Water Navy Vietnam Veterans Act of 2019 (P.L. 116-23) made changes to VA loan fees, including removing the Freddie Mac limits for most loans. U.S. Department of Housing and Urban Development, Handbook 4000.1, FHA Single Family Housing Policy Handbook, version revised November 26, 2025, Appendix 1, p. 1760, https://www.hud.gov/sites/default/files/OCHCO/documents/40001-hsgh-Update-17.pdf (hereinafter, "FHA Single Family Housing Policy Handbook"). An exception might exist for veterans who do not have full entitlement available. See the "Veteran's Entitlement and the Amount of Coverage Provided by the Loan Guaranty" section. Borrowers with credit scores below 580 who qualify for an FHA loan are required to make a higher down payment. FHA Single Family Housing Policy Handbook, p. 177. FHA Single Family Housing Policy Handbook, p. 376. For more information, see CRS Report R42875, FHA Single-Family Mortgage Insurance: Financial Status of the Mutual Mortgage Insurance Fund (MMI Fund). 24 C.F.R. 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| 107. |
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. |
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| 108. |
25 U.S.C. §5304. An "Indian" means a person who is a member of an Indian tribe. An "Indian tribe" is "any Indian tribe, band, nation, or other organized group or community, including any Alaska Native village or regional or village corporation as defined in or established pursuant to the Alaska Native Claims Settlement Act ... which is recognized as eligible for the special programs and services provided by the United States to Indians because of their status as Indians." |
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| 109. |
P.L. 67-34. "The term 'native Hawaiian' means any descendant of not less than one-half part of the blood of the races inhabiting the Hawaiian Islands previous to 1778." |
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| 110. |
43 U.S.C. §1602. " 'Native' means a citizen of the United States who is a person of one-fourth degree or more Alaska Indian (including Tsimshian Indians not enrolled in the Metlaktla [1] Indian Community) Eskimo, or Aleut blood, or combination thereof. The term includes any Native as so defined either or both of whose adoptive parents are not Natives. It also includes, in the absence of proof of a minimum blood quantum, any citizen of the United States who is regarded as an Alaska Native by the Native village or Native group of which he claims to be a member and whose father or mother is (or, if deceased, was) regarded as Native by any village or group." |
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| 111. |
42 U.S.C. §2992c(7). "[T]he term 'Native American Pacific Islander' means an individual who is indigenous to a United States territory or possession located in the Pacific Ocean, and includes such individual while residing in the United States." The three U.S. territories in the Pacific are American Samoa, Guam, and the Commonwealth of the Northern Mariana Islands. |
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| 112. |
38 U.S.C. §3765(3). |
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| 113. |
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. |
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| 114. |
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. |
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| 115. |
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. |
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| 116. |
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. |
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| 117. |
See the Department of the Interior website, "Insular Area Summary for American Samoa," http://www.doi.gov/oia/Islandpages/asgpage.htm. |
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| 118. |
Am. Samoa Code Ann. §37.0204. |
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| 119. |
N.M.I. Const., Art. XII, Sec. 1. |
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| 120. | 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 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 121. |
The MOU is available at http://www.benefits.va.gov/homeloans/docs/mou.pdf. |
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| 122. |
U.S. Department of Veterans Affairs, Annual Benefits Report FY2017, Loan Guaranty section p. 5, https://www.benefits.va.gov/REPORTS/abr/docs/FY17-Loan-Guaranty.pdf. |
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| 123. |
Ibid. |
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| 124. |
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. As of calendar year 2011, 90% of loans were still made in American Samoa and Hawaii. Email communication from the VA, April 13, 2012. |
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| 125. |
Ibid., p. 28. |
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| 126. |
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). |
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| 127. |
38 U.S.C. §§3733(a)(1) and (a)(7). |
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| 128. |
U.S. Department of Veterans Affairs, FY2019 Congressional Budget Justifications, Volume III, p. VBA-111, https://www.va.gov/budget/docs/summary/fy2019VAbudgetvolumeIIIbenefitsBurialProgramsAndDeptmentalAdministration.pdf. |
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| 129. |
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). Congress removed the date limit associated with paying principal and interest as part of P.L. 115-251. |
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| 130. |
FY2011 Performance and Accountability Report, p. III-31. |
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| 131. |
Email communication from the VA, April 13, 2012. |
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| 132. |
The FCRA was part of the Omnibus Reconciliation Act of 1990. It is found under Title XIII, Budget Enforcement, as Title V, Credit Reform. |
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| 133. |
Ibid. |
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| 134. |
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. |
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| 135. |
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. |
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| 136. |
38 U.S.C. §3729(a). See also, VA Lenders Handbook, p. 3-11. |
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| 137. |
38 U.S.C. §3729. |
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| 138. |
38 U.S.C. §3729(c) and P.L. 112-154. |
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| 139. |
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). |
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| 140. |
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. |
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| 141. |
Ibid. |
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| 142. |
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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| 143. |
First, the Veterans Health Care Facilities Capital Improvement Act of 2011 (P.L. 112-37), enacted on October 5, 2011, extended the existing, higher fees through November 18, 2011. Next, P.L. 112-56, enacted on November 21, 2011, further extended existing fees until October 1, 2016. P.L. 112-154 extended fees through October 1, 2017; P.L. 113-146 extended them until September 30, 2024; and P.L. 115-46 extended them through September 30, 2027. |
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| 144. |
The Specially Adapted Housing Program is codified at 38 U.S.C. §§2101-2107. |
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| 145. |
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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| 146. |
38 U.S.C. §2102(d). |
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| 147. |
38 C.F.R. §3.809. |
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| 148. |
38 U.S.C. §2101(a)(2)(A)(ii). |
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| 149. |
38 U.S.C. §2101(a)(4). Note that through FY2018, the law limited the fiscal years through which veterans were eligible under these criteria. P.L. 115-251 eliminated the limiting language. |
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| 150. |
U.S. Department of Veterans Affairs, "Specially Adapted Housing Eligibility for Amyotrophic Lateral Sclerosis Beneficiaries," 78 Federal Register 72573-72576, December 3, 2013. |
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| 151. |
38 C.F.R. §3.318. |
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| 152. |
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. |
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| 153. |
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. |
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| 154. |
P.L. 112-154 changed the visual acuity standard 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). |
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| 155. |
38 C.F.R. §3.809a. |
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| 156. |
38 U.S.C. §2102A. |
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| 157. |
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. |
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| 158. |
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. |
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| 159. |
VA Loan Circular 26-18-19, "Annual Increase in Construction Cost Index and Specially Adapted Housing (SAH), Special Housing Adaptations (SHA), and Temporary Residence Adaptations (TRA) Grants," September 27, 2018, https://www.benefits.va.gov/homeloans/documents/circulars/26_18_19.pdf. |
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| 160. |
38 U.S.C. §2102(a). |
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| 161. |
Ibid. |
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| 162. |
38 U.S.C. §2109. This provision was added to the law as part of P.L. 112-154. |
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| 163. |
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. |
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| 164. |
38 C.F.R. §36.4405. |
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| 165. |
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. |
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| 166. |
38 C.F.R. §36.4401. |
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| 167. |
Funds were appropriated through HUD's Self-Help and Assisted Homeownership Opportunity Program in P.L. 114-113, P.L. 115-31, and P.L. 115-141 |
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| 168. |
The Notice of Funding Availability is available at https://www.hud.gov/sites/dfiles/SPM/documents/Veterans%20Hsg%20Reb%20Mod%20Pilot%20Program%20NOFA.pdf, and the grant announcement is available at "HUD and VA Secretaries Announce Housing Initiatives to Support Homeless Veterans," press release, October 3, 2018, https://www.hud.gov/press/press_releases_media_advisories/HUD_No_18_113. |
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| 169. |
National Bureau of Economic Research, Determination of the December 2007 Peak in Economic Activity, December 11, 2008, http://www.nber.org/cycles/dec2008.pdf. |
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| 170. |
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. |
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| 171. |
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 2.35%, and for FHA loans from 2.19% to 3.30%. Mortgage Bankers Association, National Delinquency Surveys. See footnote 170. |
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| 172. |
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. |
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| 173. |
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. |
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| 174. |
38 C.F.R. §36.4319. |
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| 175. |
U.S. Department of Veterans Affairs, "Loan Guaranty: Loan Servicing and Claims Procedures Modifications," 73 Federal Register 6294-6368, February 1, 2008. |
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| 176. |
38 C.F.R. §36.4315. |
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| 177. |
U.S. Department of Veterans Affairs, "Loan Guaranty Revised Loan Modification Procedures," 76 Federal Register 78827-78829, December 20, 2011. |
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| 178. |
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| 179. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 180. |
For more information about HAMP and other foreclosure prevention initiatives, see CRS Report R40210, Preserving Homeownership: Foreclosure Prevention Initiatives. |
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| 181. |
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. |
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| 182. |
Updated guidance was issued by the U.S. Department of Veterans Affairs via Circular 26-17-10, Department of Veterans Affairs Affordable Modification, April 7, 2017, http://benefits.va.gov/HOMELOANS/documents/circulars/26_17_10.pdf. Guidance was originally released in Circular 26-14-22, VA Making Home Affordable Program, September 2, 2014, http://www.benefits.va.gov/homeloans/documents/circulars/26_14_22.pdf. |
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| 183. |
VA Circular 26-14-22 states that veterans who are current on their VA-guaranteed loans should be evaluated for the IRRRL. |
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| 184. |
Oklahoma was not a party to the agreement. |
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| 185. |
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. |
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| 186. |
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| 187. |
For more information, see CRS Report R45283, The Servicemembers Civil Relief Act (SCRA): Section-by-Section Summary. |
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| 188. |
50 U.S.C. Appendix §533. |
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| 189. |
Veterans Benefits Administration Powerpoint Presentation, "Loan Guaranty Program Overview." |
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| 190. |
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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| 191. |
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. |
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| 192. |
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). |
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| 193. |
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. |
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| 194. |
U.S. Department of Veteran Affairs, FY2016 Agency Financial Report, November 15, 2016, p. 65, https://www.va.gov/finance/docs/afr/2016VAafrFullWeb.pdf. |
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For more information, see CRS Report R48360, Tribal Lands: Overview and Issues for Congress.
See 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.
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, DC: GPO, 1989), pp. 290-291. The Senate amended H.R. 901 (which would ultimately become P.L. 101-237) with provisions from S. 13.
For example, Hawaiian Homelands are held in trust and can be made available to Native Hawaiian residents. Kristen Corey et al., Housing Needs of Native Hawaiians: A Report from the Assessment of American Indian, Alaska Native, and Native Hawaiian Housing Needs, U.S. Department of Housing and Urban Development, May 2017, p. 41, https://www.huduser.gov/portal/sites/default/files/pdf/HNNH.pdf. In American Samoa, most land is communally held, it may not be transferred without government approval, and law prohibits the transfer of land to people who do not have specific blood and familial ties to American Samoa. Am. Samoa Code Ann. §37.0204. The CNMI Constitution restricts land ownership and long-term interests (such as leases of more than 55 years) to those of Northern Marianan descent. N.M.I. Const., Article XII, Section 1.
A sample MOU is available at https://www.benefits.va.gov/HOMELOANS/documents/docs/VA_NADL_MOU_template.docx, accessed, April 24, 2025.
38 U.S.C. §3762(b).
U.S. Department of Veterans Affairs, Veterans Benefits Administration Annual Benefits Report Fiscal Year 2024, p. 195, https://www.benefits.va.gov/REPORTS/abr/docs/2024-loan-guaranty.pdf (hereinafter, "FY2024 VA Annual Benefits Report"). VA has a list of entities with MOUs on its website, https://www.benefits.va.gov/homeloans/nadl_mou.asp.
FY2024 VA Annual Benefits Report, p. 195.
U.S. Government Accountability Office, Native American Veterans: Improvements to VA Management Could Help Increase Mortgage Loan Program Participation, GAO-22-104627, April 19, 2022, p. 11, https://www.gao.gov/assets/730/720116.pdf (hereinafter, "GAO Report").
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.
See, for example, U.S. Department of Veterans Affairs Advisory Committee on Tribal and Indian Affairs, 1st Annual Report and Recommendations, January 4, 2023, p. 8, https://department.va.gov/wp-content/uploads/2023/04/report-annual-va-tribal-and-indian-affaira-advisory-committee-20230104.pdf; and Listokin David et al., Mortgage Lending on Tribal Land: A Report From the Assessment of American Indian, Alaska Native, and Native Hawaiian Housing Needs, U.S. Department of Housing and Urban Development, January 19, 2017, pp. 15-16, https://www.huduser.gov/portal/sites/default/files/pdf/NAHSG-Lending.pdf.
GAO Report, pp. 43-45.
U.S. Department of Veterans Affairs, "VA lowers interest rates, makes housing more affordable for Native American Veterans," press release, March 22, 2023, https://news.va.gov/press-room/va-lowers-interest-rates-makes-housing-more-affordable-for-native-american-veterans/.
U.S. Department of Veterans Affairs, "VA program helps Native American Veterans buy, build or refinance homes on trust land," press release, November 28, 2023, https://news.va.gov/126582/va-program-native-american-veterans-trust-land/.
U.S. Department of Veterans Affairs, FY2026 Budget Submission Burial and Benefit Programs and Department Administration, vol. 3, May 2025, p. 222, https://department.va.gov/wp-content/uploads/2025/06/2026-Volume-3-Burial-and-Benefits-Programs-and-Department-Administration.pdf.
38 U.S.C. §3711(i).
For more information about the Specially Adapted Housing Program, see CRS Report R44837, Benefits for Service-Disabled Veterans.
In the FY1981 Department of Housing and Urban Development-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.
For example, the FY2026 Consolidated Appropriations Act (P.L. 119-37) provided "not to exceed $500,000 in gross obligations for direct loans are authorized for specially adapted housing loans." The loan limit is specified in statute at 38 U.S.C. §3711(d)(3).
38 U.S.C. §3711(d)(1).
38 C.F.R. §36.4320. See also U.S. Department of Veterans Affairs, VA Manual M26-04 VA Servicer Handbook, updated December 16, 2025, Chapter 9, Paragraphs 9.01-9.02, https://www.knowva.ebenefits.va.gov/system/templates/selfservice/va_ssnew/help/customer/locale/en-US/portal/554400000001018/topic/554400000027296/M26-04-VA-Servicer-Handbook (hereinafter, "VA Manual M26-04").
38 U.S.C. §§3733(a)(1) and (a)(8).
An exception occurred when 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). The fee instituted as part of P.L. 97-253 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 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).
38 U.S.C. §3729(a).
Congress has regularly enacted legislation to extend the date at which loan fees are set to decrease as a method of decreasing estimated direct spending as calculated by the Congressional Budget Office. For example, see Congressional Budget Office, Cost Estimate, H.R. 3504, Ryan Kules Specially Adaptive Housing Improvement Act of 2019, July 22, 2019, pp. 2-3, https://www.cbo.gov/system/files/2019-07/hr3504.pdf. As of the cover date of this report, the date at which lower fees are to take effect was most recently extended in section 503 of the Elizabeth Dole 21st Century Veterans Healthcare and Benefits Improvement Act (P.L. 118-210).
38 U.S.C. §3729(c).
Congressional Budget Office, The Role of the Department of Veterans Affairs in the Single-Family Mortgage Market, September 14, 2021, p. 7, https://www.cbo.gov/system/files/2021-09/57024-VA.pdf.
The FCRA was part of the Omnibus Reconciliation Act of 1990. It is found under Title XIII, Budget Enforcement, as Title V, Credit Reform.
For example, see the Federal Credit Supplement Tables for FY2026, https://www.govinfo.gov/app/details/BUDGET-2027-FCS, The Congressional Budget Office also estimates subsidy rates for federal loan programs, including VA loans. See Congressional Budget Office, Estimates of the Cost of Federal Credit Programs in 2026, January 2026, https://www.cbo.gov/system/files/2026-01/61645-Federal-Credit-Programs.pdf.
The reestimates are part of the Federal Credit Supplement on the OMB Budget website. There are tables for reestimates of direct loan subsidy rates and loan guarantee subsidy rates. For example, see Office of Management and Budget, FY2026 Federal Credit Supplement, pp. 90-92 for guaranteed loans and pp. 59-61 for direct loans, https://www.govinfo.gov/content/pkg/BUDGET-2026-FCS/pdf/BUDGET-2026-FCS.pdf.
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.
VA Manual 26-04, Chapter 4
38 C.F.R. §36.4317(c) and 38 C.F.R. §3650(f).
38 C.F.R. §36.4319.
38 C.F.R. §36.4319. See also VA Manual M26-04, Chapter 5.
38 C.F.R. §36.4318.
For more information, see CRS Report R45283, The Servicemembers Civil Relief Act (SCRA): Section-by-Section Summary.
50 U.S.C. §3953.
38 U.S.C. §3732(c).
The statute gives VA the authority to purchase property from a loan servicer where the property's net value (fair market value minus VA's costs to acquire and dispose of the property) exceeds the unguaranteed portion of the loan. 38 U.S.C. §3732(c)(4). Further, pursuant to 38 C.F.R. §36.4323(b), 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 VA to be able to accept the transfer.
See U.S. Congress, conference report to accompany H.R. 4170, Deficit Reduction Act of 1984, 98th Cong., 2nd sess., June 23, 1984, H.Rept. 98-861, p. 1375.
38 U.S.C. §3732(c)(5). Net value is fair market value minus VA's costs to acquire and dispose of the property.
U.S. Department of Veteran Affairs, FY2025 Agency Financial Report, January 16, 2026, p. 49, https://department.va.gov/wp-content/uploads/2026/01/2025-Department-of-Veterans-Affairs-FY-2025-Agency-Financial-Report-AFR-Final.pdf.