A House subcommittee voted April 23 to update the veterans home loan program to expand availability of government-backed mortgages to service members, cut loan fees and stall foreclosure on mortgages for troops returning from deployment.
The House Veterans' Affairs economic opportunity panel passed two bills — one that would provide increased foreclosure protection, mostly for National Guard and reserve members who have been mobilized, and another that would expand the loan program by:
• Increasing the maximum loan available to $625,500, a 50 percent increase from the current limit of $417,000.
• Setting a flat 1 percent fee for all loans.
• Expanding opportunities to refinance existing loans with Veterans Affairs Department-backed loans.
Rep. Bob Filner, D-Calif., chairman of the House Veterans' Affairs Committee, is the chief sponsor of both bills.
Home ownership is the American dream, but "for many service members and veterans, that part of the American dream can become a nightmare when coupled with frequent deployments, the high cost of purchasing a home and rising interest rates," Filner said.
One of his bills, HR 4884, would remove two obstacles that make it difficult for someone with a non-VA loan to use the VA loan program for refinancing. It would scrap a requirement that the owner have at least 10 percent equity in a home and also eliminate a $144,000 cap on refinancing, an amount too low to be of much help to people fleeing high interest rates.
The Helping Our Veterans to Keep Their Homes Act would eliminate a complex fee structure in which service members and veterans can pay between 1 percent and 3.3 percent of the value of a loan, depending on the size of their down payment and on whether they have used the loan program before, whether they are in the reserves, the active forces or are veterans, and other factors.
VA supports some of the changes but opposes the fee cuts, saying the money it charges could discourage people from making down payments and lead to riskier loans.
The subcommittee also passed HR 4883, another Filner bill that would bar foreclosure of property owned by service members for one year after their release from active duty.
The bill, which amends the legal and financial protections of Servicemembers' Civil Relief Act, would apply only to property owned before beginning military service, and would apply mainly to National Guard and reserve members who run into financial problems while mobilized.
Under current law, they are protected from foreclosure while on active duty, but only for the first 90 days after release from active duty.
Ronald Chamrin, assistant director of the American Legion's Economic Commission, said the foreclosure protection provides "an extended period of time to become employed, correct all their finances and assist them in the transition process.
"In the most unfortunate of circumstances, lenders are unwilling to negotiate and assist veterans who are in default status even though these veterans are in a good position to correct the situation," he said.
Filner said the current VA loan program is "not sufficient to meet the needs of our veterans.
"Too often, the loan amount is insufficient to purchase a home, does not offer alternatives for veterans with less than perfect credit, and does not incorporate younger veterans that may lack the necessary financial track record to prove they are a good risk," he said.