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Washington, D.C. – The Economic Opportunity Subcommittee of the House Committee on Veterans’ Affairs today unanimously backed an effort by Congressman Jerry McNerney (CA-11) to aid veterans who face exploding monthly payments on adjustable rate mortgages or the prospect of foreclosure.
Rep. McNerney’s amendment increases the limit on VA-backed refinancing loans, the maximum value of which is currently $144,000, making them virtually useless in many parts of the country, especially Northern California.
The amendment was offered during consideration of the Helping Our Veterans to Keep Their Homes Act of 2008, H.R. 4884, which Rep. McNerney also supported. The underlying legislation revamps the VA Home Loan Guaranty Service, making the program more effective in its mission to provide housing opportunities to the men and women who put their lives on the line for our nation.
H.R. 4884, with Rep. McNerney’s amendment, also passed the subcommittee by a unanimous vote and will be taken up by the full House Committee on Veterans’ Affairs.
“Our veterans served our country with honor and dignity. When they return, it’s our duty to pay tribute to their service with the same level of commitment,” said Rep. McNerney. “Unfortunately, multiple deployments can put tremendous financial strain on veterans on their families. This makes them particularly susceptible to the promise of no money down, sub-prime loans.”
There is significant evidence that veterans, as a group, are more susceptible to sub-prime loans than the general population.
In testimony before the Veterans Economic Opportunity Subcommittee in February, Anthony Agurs from the National Association of Realtors offered this, “Veterans are more likely to have lower credit scores due to their service to our country. Sporadic civilian work due to calls to service and low military pay lead some military families into financial difficulties.”
And a 2003 study from the National Consumer Law Center had a similar finding.
“Military personnel are ripe targets for consumer predators because many are low-income (always the most targeted group) but have a far longer list of economically-attractive qualities than most low-income people. Periods of deployment like those for the recent war in Iraq are especially vulnerable times. And military conduct codes that stress the need for orderly personal lives, including orderly finances, may inadvertently be driving service people toward the quick fixes [offered by sub-prime loan products].”
Being more prone to sub-prime products such as adjustable rate mortgages with low introductory rates, many veterans now face skyrocketing payments with which they cannot keep up.
“I was pleased to help ensure an increase in the conforming loan limit was included in the Economic Stimulus Package. Similarly, I am proud to support this effort to up the amount of VA-backed mortgages to enable more veterans to take advantage,” continued Rep. McNerney. “And in particular, my amendment will aid veterans who took out sub-prime loans and now find their monthly payments skyrocketing to refinance into a stable VA-backed refinance loan.”
H.R. 4884, the Helping Our Veterans to Keep Their Homes Act of 2008, will increase the maximum home loan guarantee, enabling veterans to seek loans up to $729,750. Rep. McNerney’s amendment ensures that veterans who qualify for a VA-backed home loan, may now use that loan to refinance their existing sub-prime loan, up to the same dollar amount.
House Committee on Veterans’ Affairs Chairman Bob Filner, complimented Rep. McNerney’s efforts. “I applaud the effort of Jerry McNerney to address the negative impact the recent subprime foreclosures has had on our veterans and service members. As Jerry is a representative of San Joaquin County, I know that he is intimately aware of the impact of this crisis and I appreciate his leadership on this issue.”
Dave Siebold, a service representative with San Joaquin County’s Veterans Service Office also applauded the subcommittee passage of today’s legislation, particularly Rep. McNerney’s amendment, noting how important such efforts would be for veterans, including himself.
Siebold, a former Marine, used an adjustable rate mortgage to purchase his Stockton home because the maximum value of a loan available under the VA’s Veterans Home Loan Guaranty Service was insufficient given the property’s value. Later he refinanced the home, but the maximum value of the VA-backed refinance loan was woefully inadequate, leading Siebold to refinance into another adjustable rate mortgage.
“I applaud Rep. McNerney because this will assist veterans. Every day we get phone calls from veterans in the county about using home loan guarantees,” Siebold said. “Many veterans have a limited income, but it is a guaranteed, regular income.”
According to information from the Mortgage Bankers Association, extending a loan to a veteran is a good risk. During the third quarter of 2007, the 30-day delinquency rate on VA-backed loans was 6.58 percent, compared with 12.92 percent for the FHA and 16.3 percent for private subprime loans. The foreclosure rate for VA loans during the same period was 1.03 percent, vs. 2.2 percent for FHA and 6.89 percent for subprime.
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