Not only has the Department of Veterans Affairs’ VA home-loan program gained significant market share compared with competing private and government mortgage options, but big banks and mortgage companies have stepped up efforts to help returning veterans obtain decent and affordable housing, including by gifting them hundreds of homes free of charge, with no mortgage attached.
The VA’s home-purchase financing program is now at record levels. New loans to buy houses have more than doubled since 2007. Since 2011, when VA-backed mortgages represented about 3 percent of total home-purchase mortgage activity, they’ve soared to roughly a 7 percent share, according to the Mortgage Bankers Association. For sales of newly built homes, the VA share is much larger: 14.5 percent in September, compared with a 16.7 percent share for the other major federal housing finance program, FHA, the Federal Housing Administration.
So VA loans are housing’s hot product, but why? Lots of reasons:
●VA-guaranteed mortgages come with terms that no other financing source can match : zero down payment; flexible and generous credit underwriting that emphasizes the individual applicant rather than the algorithm-driven computer programs that dominate conventional lending. Also, VA interest rates are competitive and maximum loan amounts go well into the jumbo range.
●Lenders increasingly recognize VA loans as good business. Despite having features traditionally connected with high risks of serious default and foreclosure — zero-down-payment borrowers during the housing boom often performed poorly — VA’s default rates are as good as or better than “prime” conventional market performance and far superior to FHA’s. VA’s low rates of serious default are attributable in part to its intensive, hands-on servicing of mortgages. At the earliest hints that a borrower may be facing financial strains, VA servicers get in touch to begin finding ways of solving whatever problem may exist.
●Demand is booming. There are now an estimated 22 million veterans in this country, many of them with eligibility for VA loan benefits. In an era of extremely tight credit and underwriting in most segments of the marketplace, the VA program looks like an extended hand for creditworthy vets who don’t have large amounts of money to put down on a home purchase or are transitioning into regular employment in the mainstream economy.
Meanwhile, with relatively little national publicity, growing numbers of financial institutions are partnering with nonprofit groups to help veterans with housing needs. Organizations such as Operation Homefront, the Military Warriors Support Foundation, HomeStrong USA and Purple Heart Homes have given away hundreds of houses acquired through donations from Bank of America, JPMorgan Chase, Wells Fargo Home Mortgage, U.S Bank, SunTrust Mortgage and others. Bank of America alone has donated more than 1,500 houses to nonprofits that serve veterans, according to a spokesman. JPMorgan Chase has donated about 700, part of its commitment to give away at least 1,000. Wells Fargo has gifted $23 million worth mortgage-free homes to 150 veterans and families in 40 states.