Since the start of the Home Loan Program of the U.S. Veterans Affairs Department in 1944, more than 19 million military personnel and veterans have acquired their homes under the program. Over the four year period from 2007 to 2010, the number of servicemen and servicewomen who purchased homes through the VA program surged sharply by 63 percent.
Last year, the number of VA home loans shot up by 82 percent to more than 325,000 loans, equivalent to about $68 billion in value. Since VA loans are increasingly being seen in a positive light, more loans are expected to be made this year.
Most servicemembers, veterans, National Guard members and reservists and some surviving spouses are eligible for the VA Home Loan Program, which gives them the opportunity to buy a home with no down payment. Banks and other mortgage lenders are glad to offer VA home loans because they’re guaranteed by VA and a portion of the loans are also paid by VA if the borrower fails to pay the loan.
Recently, the VA Home Loan Program received recognition in the media for its much lower foreclosure and delinquency rates compared to that of other types of home loans. According to the National Delinquency Survey of the Mortgage Bankers Association, the seasonally adjusted delinquency rate for VA home loans in the second quarter this year was only 7.79 percent, much lower than the delinquency rate for prime ARM loans, which was 13.75 percent; for subprime fixed loans, which was 25.19 percent; and for subprime ARM loans, which was 29.5 percent.
The VA loan delinquency rate was also much lower than that of FHA loans, which was 13.29 percent. The rate for prime fixed loans – 5.98 percent – was the only rate lower than that of VA loans. The good news is that the overall rate for delinquency decreased in the second quarter, largely because of the decreases in delinquencies in VA and fixed rate loans.
VA mortgage borrowers also performed better in avoiding foreclosures despite economic pressures. The foreclosure rate for VA loans was only 2.5 percent, much lower than that of prime loans, which was 3.49 percent; FHA loans, which was 3.62 percent; and subprime loans, which was 14.4 percent.
One big factor for the low foreclosure and delinquency rates among VA mortgage borrowers is the commitment of VA to help its members keep their homes in the midst of financial difficulties. VA loan counselors have helped over 150,000 servicemembers and veterans save their homes from foreclosure. Several options are offered to borrowers so they can get out of their mortgage payment problems, including repayment schemes, forbearance plans and loan modifications.
The relatively good performance of VA home loans should be studied by federal officials looking at ways to sustain home ownership in the country. The fact that the VA Home Loan Program has among the lowest delinquency and foreclosure rates despite its no-down payment scheme is a good reason for housing officials to look into the VA underwriting and oversight processes for lessons to learn.