There may be fewer military boots on the ground overseas, but here at home major campaigns in the housing market have been directed this year at veterans.
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.
Some of the nonprofits maintain online listings of the homes they have available. 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: They must be a vet wounded in combat (Purple Heart recipients are given priority) or an unmarried Gold Star spouse from any American conflict; must be honorably discharged or retired from the military; and must not currently have a mortgage.
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. It takes a go-slow approach to transitioning veterans into ownership. For the first 12 to 24 months, the recipients legally are tenants of Operation Homefront. To receive the deed to the house, vets must pay property taxes, insurance and homeowner association fees; participate in a customized transition plan that includes financial counseling and set-asides of savings for long-term maintenance of the property; and allow periodic inspections.
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 new homes for wounded vets this year.
Ken Harney’s e-mail address is email@example.com.