There may be fewer military boots on the ground overseas, but here at home this year there have been major campaigns in the housing market directed at veterans.
Not only has the Department of Veterans Affairs’ 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, even giving them hundreds of homes free of charge, with no mortgage attached.
The VA’s home-purchase financing program is now at record levels. The number of new loans to buy houses has more than doubled since 2007. Since 2011, when VA-backed mortgages represented about 3 percent of total home-purchase mortgage activity, they have soared to roughly 7 percent, according to the Mortgage Bankers Association.
For sales of newly built homes, the VA share is much larger — it was 14.5 percent in September compared with 16.7 percent 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, and flexible and generous credit underwriting that emphasizes the individual applicant rather than the algorithm-driven computer programs that dominate conventional lending. Plus VA interest rates are competitive, and maximum loan amounts go well into the jumbo range.
▪ Lenders increasingly recognize VA loans as good business. Despite having features traditionally connected with high risks of serious default and foreclosure — zero-down-payment borrowers during the housing boom often performed poorly — VA default rates are as good as or better than “prime” conventional market performance and far superior to FHA’s. The 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 find ways to solve whatever problem may exist.
▪ Demand is booming. There are now an estimated 22million 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 publicity, growing numbers of financial institutions are partnering with nonprofit groups to help veterans with housing needs. Bank of America alone has donated more than 1,500 houses to nonprofits that serve veterans. JPMorgan Chase has donated about 700, part of its commitment to give away at least 1,000. Wells Fargo has given $23million in mortgage-free homes to 150 veterans and families in 40 states.
Some of the nonprofits maintain listings of the homes they have available on their websites. The Military Warriors Support Foundation’s Homes 4 Wounded Heroes program displays a map showing the locations and photos of properties available across the country, along with guidelines for potential beneficiaries.
Operation Homefront has donated more than 450 mortgage-free houses to veterans and families during the past two years, and has 60 more ready to award.
Builders with mortgage affiliates also have jumped into the burgeoning housing-for-heroes movement. Pulte Group, a key player in the field, has committed to build at least 20 mortgage-free homes for wounded vets this year.
Kenneth Harney is executive director of the National Real Estate Development Center.