VA HOME LOAN UPDATE 17 May 2008
Posted by Service Officer on May 17th, 2008
The current maximum VA guaranty for all loans in excess of $144,000, except regular refinance loans, is equal to 25% of the Freddie Mac conforming loan limit for a single family home, adjusted for the year involved. Presently this is $104,250 ($156,375 for Alaska, Hawaii, Guam and U.S. Virgin Islands). This means lenders making loans covered by a VA guaranty up to $417,000 ($625,500 in Alaska, Hawaii, Guam, and U.S. Virgin Islands) will receive at least a 25% guaranty. However, only $36,000 of a VA home loan guaranty can be used when the loan is being used to refinance a home loan, meaning that VA will not provide backing for a refinance loan in excess of $144,000. Additionally, present law limits regular refinance loans to 90% of the reasonable value of the dwelling, meaning that veterans without at least 10% equity cannot refinance their existing loan into a VA guaranteed home loan. On 30 APR the House Veterans’ Affairs Committee approved major improvements in this home loan program but details in the bill could delay or even prevent the initiative from becoming law. The home loan bill, Helping Our Veterans to Keep Their Homes Act HR 4884, would
• Increase the maximum loan available to veterans for new and refinanced homes to $729,750;
• Allow refinancing even if the homeowner has no equity; and
• Order a new streamlined process for buying condominiums with veterans’ home loans.
The committee chairman and chief sponsor of the bill Rep. Bob Filner (D-CA), said the update is a response to criticism that the VA loan program has become irrelevant because of the current $417,000 cap on new loans and the $147,000 limit on refinancing, and a requirement that homeowners have at least 10% equity in their home to qualify. The problem with the bipartisan bill, which passed the committee by voice vote, is that it also eliminates loan origination fees for all loans except for those related to refinancing, which Filner said is necessary to make the VA home loan program competitive.
Fees now range from 1.4 to 3% for regular loans, depending on the amount of down payment, and are just 0.5% when refinancing an existing VA loan to reduce the interest rate. All those fees would be eliminated, leaving just a 1% fee for someone refinancing a non-VA loan with a new loan from the VA program. Fees generate money intended to cover administrative costs of the loan program. Eliminating them would create a $1.4 billion to $1.8 billion hole in the VA budget that will prevent the bill from being taken up by the House unless lawmakers can find a way to make up the difference, said Rep. Steve Buyer, (R-IN) ranking Republican on the committee. Buyer offered an amendment to keep the current fees, which he said would guarantee the House could take up the bill right away, but his effort was defeated on a voice vote. Filner said he hoped to find a way to pass the bill without imposing fees for most home loan users. [Source: Marine Corps Times Rick Maze article Posted 1 May 08 ++]
