[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]
A REVIEW OF VA'S LOAN GUARANTY AND SPECIALLY ADAPTIVE HOUSING GRANT
PROGRAMS (SAH)
=======================================================================
HEARING
before the
SUBCOMMITTEE ON ECONOMIC OPPORTUNITY
of the
COMMITTEE ON VETERANS' AFFAIRS
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED FOURTEENTH CONGRESS
SECOND SESSION
__________
WEDNESDAY, FEBRUARY 10, 2016
__________
Serial No. 114-54
__________
Printed for the use of the Committee on Veterans' Affairs
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Available via the World Wide Web: http://www.fdsys.gov
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COMMITTEE ON VETERANS' AFFAIRS
JEFF MILLER, Florida, Chairman
DOUG LAMBORN, Colorado CORRINE BROWN, Florida, Ranking
GUS M. BILIRAKIS, Florida, Vice- Minority Member
Chairman MARK TAKANO, California
DAVID P. ROE, Tennessee JULIA BROWNLEY, California
DAN BENISHEK, Michigan DINA TITUS, Nevada
TIM HUELSKAMP, Kansas RAUL RUIZ, California
MIKE COFFMAN, Colorado ANN M. KUSTER, New Hampshire
BRAD R. WENSTRUP, Ohio BETO O'ROURKE, Texas
JACKIE WALORSKI, Indiana KATHLEEN RICE, New York
RALPH ABRAHAM, Louisiana TIMOTHY J. WALZ, Minnesota
LEE ZELDIN, New York JERRY McNERNEY, California
RYAN COSTELLO, Pennsylvania
AMATA RADEWAGEN, American Samoa
MIKE BOST, Illinois
Jon Towers, Staff Director
Don Phillips, Democratic Staff Director
SUBCOMMITTEE ON ECONOMIC OPPORTUNITY
BRAD WENSTRUP, Ohio, Chairman
LEE ZELDIN, New York MARK TAKANO, California, Ranking
AMATA RADEWAGEN, American Samoa Member
RYAN COSTELLO, Pennsylvania DINA TITUS, Nevada
MIKE BOST, Illinois KATHLEEN RICE, New York
JERRY McNERNEY, California
Pursuant to clause 2(e)(4) of rule XI of the Rules of the House, public
hearing records of the Committee on Veterans' Affairs are also
published in electronic form. The printed hearing record remains the
official version. Because electronic submissions are used to prepare
both printed and electronic versions of the hearing record, the process
of converting between various electronic formats may introduce
unintentional errors or omissions. Such occurrences are inherent in the
current publication process and should diminish as the process is
further refined.
C O N T E N T S
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Wednesday, February 10, 2016
Page
A Review of VA's Loan Guaranty and Specially Adaptive Housing
Grant Programs (SAH)........................................... 1
OPENING STATEMENTS
Honorable Ryan Costello, Acting Chairman......................... 1
Honorable Mark Takano, Ranking Member............................ 2
Honorable Amata Radewagen, Member................................ 12
WITNESSES
Ms. Heather Ansley, Associate General Counsel for Corporate and
Government Relations, Paralyzed Veterans of America............ 2
Prepared Statement........................................... 20
Mr. Ross A. Meglathery, MPA, Director, VetsFirst................. 4
Prepared Statement........................................... 23
Mr. James H. Danis II, CMB, AMP, President, Residential Mortgage
Corporation, On behalf of the Mortgage Bankers Association..... 6
Prepared Statement........................................... 26
Ms. Sherri Meadows, 2016 Vice President, National Association of
Realtors....................................................... 7
Prepared Statement........................................... 31
Mr. Mike Frueh, Director, Loan Guaranty Service, Veterans
Benefits Administration, U.S. Department of Veterans Affairs... 9
Prepared Statement........................................... 34
A REVIEW OF VA'S LOAN GUARANTY AND SPECIALLY ADAPTIVE HOUSING GRANT
PROGRAMS (SAH)
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Wednesday, February 10, 2016
Committee on Veterans' Affairs,
U. S. House of Representatives,
Washington, D.C.
The Subcommittee met, pursuant to notice, at 2:07 p.m., in
Room 334, Cannon House Office Building, Hon. Ryan Costello
presiding.
Present: Representatives Costello, Radewagen, Takano, and
Rice.
OPENING STATEMENT OF RYAN COSTELLO, ACTING CHAIRMAN
Mr. Costello. Good afternoon, everyone, and the
Subcommittee will come to order. Chairman Wenstrup has a
scheduling conflict and apologizes for not being able to join
us today. I am pleased that we were still able to reschedule
this important hearing following the snowstorm that caused us
to postpone it last month.
The subject of today's hearing is the Loan Guaranty Service
of the Department of Veterans Affairs. The major mission of
this service is the administration of the VA Home Loan Program.
This benefit was originally authorized by the Servicemembers'
Readjustment Act of 1944 and has provided over 22 million loans
to veterans since its inception. While the home loan program is
a wonderful benefit that helps veterans achieve their piece of
the American dream, it is also a win-win for taxpayers. Unlike
most other VA benefits programs, the home loan program operates
as a partnership between the VA and the private mortgage
industry. It is because of this partnership and the VA's high
underwriting standards that VA-backed loans consistently have
one of the lowest foreclosure and delinquency rates in the
country.
While the benefit provides a great service to veterans,
there is always room for improvement. I am concerned there are
veterans who are unaware of this benefit and I look forward to
hearing from the VA about their outreach efforts. I am also
concerned that the current cap on loan guaranty amounts
excludes as many as 12,000 veterans who live in high cost areas
from using this benefit. Yesterday, the House passed a version
of Mr. Zeldin's legislation that removed this cap. I am hopeful
that our colleagues in the Senate will consider this proposal
quickly and send it to the President's desk.
The other issue we will examine this afternoon is the
administration of VA's Specially Adaptive Housing Program that
provides grant funding for severely injured veterans to adapt
their homes to make them more accessible for their needs. Some
of our witnesses have raised concerns about the amount of
paperwork and processing delays associated with this benefit.
While I understand there is a need to examine each veteran's
circumstances to appropriately fund the adaptation that fits
their needs, we must strive to improve timeliness of service
for all veterans.
Finally, I would like to commend Mr. Frueh and the staff of
VA's Home Loan Guaranty Service for their dedication and their
willingness to work with the Members and staff of this
Subcommittee. They truly represent the model for positive
interactions with Congress, and I wish other parts of the
department would take a page out of their play book.
With that, it gives me great pleasure to recognize Mr.
Takano for any opening remarks he may have.
OPENING STATEMENT OF MARK TAKANO
Mr. Takano. Thank you, Mr. Chairman. The VA's Home Loan
Guaranty Program leverages the non-government world of
realtors, lenders, builders, and servicers with the veterans
who want to buy a home. Because the government protects lenders
from loss on these loans, and because of the safeguards built
into the law barring lenders from entering into loans that are
risky, more VA loans go to closing than any other product in
the industry. Veterans are able to find the homes they want and
get into them with a minimum of time and hassle, clearly a win-
win for all involved.
Today's hearing is a check-in on this popular program as
well as on the Specially Adaptive Housing Program, which helps
service-connected disabled veterans build or adapt homes so
they can live with greater ease after being catastrophically
injured. The Specially Adaptive Housing Program has seen an
increase of 65 percent since fiscal year 2013. Today we will
hear how VA's improvements in outreach have contributed to this
increase, and what is needed in terms of funding and staffing
to meet the challenges ahead if growth continues at that pace.
Both programs embody successful public-private
partnerships, and I think that makes all of us happy here. I
want to thank the witnesses for being here today and I look
forward to their testimony. Thank you, Mr. Chairman, I yield
back.
Mr. Costello. Thank you, Mr. Takano. On our first and only
panel we have Ms. Heather Ansley with Paralyzed Veterans of
America; Mr. Ross Meglathery, with VetsFirst; Mr. James Danis
testifying on behalf of the Mortgage Bankers Association; Ms.
Sherri Meadows testifying on behalf of the National Association
of Realtors; and finally, Mr. Mike Frueh, who is the Director
of VA's Loan Guaranty Service. Thank you all for being here.
Each of you will be recognized for five minutes for your oral
statement. Ms. Ansley, let's start with you.
STATEMENT OF HEATHER ANSLEY
Ms. Ansley. Thank you, Representative Costello, Ranking
Member Takano, and Members of the Subcommittee. Paralyzed
Veterans of America would like to thank you for the opportunity
to testify this afternoon regarding the Department of Veterans
Affairs Loan Guaranty and Specially Adaptive Housing Grant
Programs. Our testimony this afternoon will focus on VA's
Adaptive Housing Grant Programs.
PVA's members are veterans who are catastrophically
disabled by a spinal cord injury or disease. Many of them have
benefitted from VA's Specially Adaptive Housing or SAH Grant
Program. Providing a catastrophically disabled veteran with an
accessible home is an investment that pays dividends in lower
health and long term care costs. We hope that every effort will
be made to strengthen VA's Adaptive Housing Program and
increase the benefits available for these veterans by making
investments in staffing, streamlining and expediting grant
processing for veterans with terminal illnesses, and improving
outreach.
Investments in staffing are needed to increase the number
of SAH agents serving veterans. In many parts of the country,
inadequate staffing contributes to delays in processing grants
and results in poor customer service for veterans. According to
PVA's service officers, many veterans have a difficult time
contacting their SAH agents as phone calls and emails are not
returned in a timely manner. PVA believes that veterans'
inability to connect with their SAH agents is not only unfair
to them, but also to these agents who are sincerely trying to
serve veterans despite too many tasks and too few resources.
Insufficient staffing also leads to retention problems as
agents leave their positions due to excessive workload and
extensive travel requirements. PVA's service officers report
frequent turnover, which overburdens agents who must carry
increased workloads when other agents leave. In addition, some
agents cover large geographic areas and travel hundreds of
miles one way to meet the eligible veterans, which also leads
to delays in responding to veterans and processing grants.
One of the biggest challenges PVA encounters in the SAH
Grant Program is the length of time it takes for grants to be
processed and approved. This is especially true for veterans
living with amyotrophic lateral sclerosis, or ALS. Veterans
with ALS are critical users of the SAH Grant Program and the
housing adaptation assistance it provides. VA's SAH grant
process, however, is not well suited to veterans with rapidly
changing diseases like ALS. As a result, it may be difficult
for a veteran with ALS to get the adaptations he or she needs
when he or she needs them.
In its recommendations to the 114th Congress, the coauthors
of the independent budget, which include PVA, Disabled American
Veterans, and the Veterans of Foreign Wars, recommended that VA
expedite these grants for veterans who are terminally ill,
including those who have ALS. This includes encouraging the use
of waivers to prevent adaptations that are unneeded due to the
veteran's level of disability.
Ultimately, the SAH Grant Program must be flexible enough
to assist veterans who have relatively static disabilities such
as spinal cord injuries, and those who have rapidly changing
diseases such as ALS.
Delays in processing grants for veterans with diseases such
as ALS can also prevent these veterans' families from accessing
the mortgage protection that is available through the VA's
Veterans Mortgage Life Insurance, or VMLI program. The VMLI
program is designed to provide a mortgage insurance option for
veterans who otherwise would not be able to seek such coverage.
Coverage begins when an eligible veteran receives final
approval of the grant. VMLI must be available to these veterans
earlier in the grant process. One incremental change would be
to approve VMLI at the same time as the final grant instead of
waiting until funding is in escrow. Another option would be to
approve those that are eligible for VMLI coverage as soon as VA
determines that they meet all applicable requirements with the
exception of the final approval of the adaptive housing grant.
PVA strongly supports VA's adaptive housing programs
because the benefits available through this program are not
only life-changing, but also life-saving.
When a veteran is determined by VA to be eligible for
ancillary benefits including adaptive housing, VA provides the
veteran with a decision that includes information about these
benefits, and such a notice typically includes the requisite
forms to apply. We have noticed, however, that the required
forms are not always provided with the notice of eligibility
and for veterans who are not represented by a veterans service
organization like PVA, it may be difficult for them to navigate
the sea of benefits for which they are eligible.
PVA provides significant outreach related to the benefits
of adaptive housing. Our service officers communicate with our
veterans to ensure they understand the benefit and the
importance of the program. We also seek to increase awareness
by providing information on our Web site, and in our meetings,
and in our membership magazine. We also work to provide
information about how to design a wheelchair accessible for
home and we support efforts to increase affordable accessible
housing for all people with disabilities.
We appreciate the Subcommittee's focus on VA's adaptive
housing program. We hope additional resources will be
available, and we thank you for the opportunity to share our
thoughts today.
[The prepared statement of Heather Ansley appears in the
Appendix]
Mr. Costello. Thank you. Mr. Meglathery?
STATEMENT OF ROSS MEGLATHERY
Mr. Meglathery. Representative Costello, Ranking Member
Takano, and other distinguished Members of the Subcommittee,
thank you for giving VetsFirst the opportunity to testify
regarding VA's Loan Guaranty and Specially Adaptive Housing SAH
Grant Programs.
VetsFirst has represented our disabled veterans, their
families, and their caretakers since 1946 when paralyzed World
War II veterans came together to claim their rights. We
advocate for the programs, services, and disability rights that
help all generations of veterans with disabilities remain
independent and fulfill their desire to reintegrate into
society. Today through our parent organization, United Spinal
Association, we are not only a VA-recognized national veterans
service organization, we are a leader in advocacy for all
people with disabilities. We are honored to have the
opportunity to testify about the VA's Loan Guaranty and SAH
Grant Programs and offer some suggestions for improvement.
The VA's Loan Guaranty Program is a critical benefit to
veterans across the Nation and it is an example of what the VA
is doing right by veterans. More than 80 percent of veterans
utilize this program as a result of its affordability and ease
of use. VA's delinquency rate is quite low as a result of the
holistic approach to ascertain the veteran's income based on
monthly expenses. On a personal note, I have taken advantage of
this benefit, and it allowed me to purchase a home in an area
with an extremely high cost of living.
From the perspective of the VSO, this benefit is one of
ease. We just determine the eligibility of the veteran, and the
lender does the remainder of the work. It is an example of a
program that supports VetsFirst's core principle one of
independence, and core principle two of timely access to VA
benefits.
VetsFirst supports all programs that are designed to
enhance the independence of veterans with disabilities. For
this reason, community integration and independence is our
first core principle. The ability to own a home that is adapted
to the unique needs of each individual is critical for both the
emotional and physical well-being of the veteran. VetsFirst
wholeheartedly backs SAH. We would like to highlight areas
where we see that improvements are warranted and would make
this program even more successful.
Currently, both SAH and Vocational Rehabilitation and
Employment Program are in the business of housing modifications
for veterans. VetsFirst believes this is a less efficient way
to utilize limited resources. SAH staff are experts in the
arena of home modification. While VR&E staff are hardworking
and diligent, they are not solely focused on this benefit.
Additionally, as you know from a prior hearing, VR&E staff are
currently overworked with large caseloads supporting vocational
rehabilitation. By taking home modification off their
portfolio, VR&E would be able to focus on their area of
expertise.
In the last few years, SAH has seen an increase in approved
grants. The addition of VR&E's caseload would add to that
growing number. For this reason, VetsFirst would like to
emphasize its desire to see that SAH is fully funded and
staffed to support this upward trend, and would like to see
that commensurate with any addition of the VR&E caseload.
VetsFirst does not advocate removing VR&E from the process
altogether. If a veteran is getting vocational rehabilitation
in conjunction with home modifications, VetsFirst recommends a
three-way dialogue amongst the veterans, SAH, and VR&E
personnel.
Currently, SAH gives the veterans the chance to choose
which contractor to use for home modification. VR&E does not.
We recommend shifting VR&E's home modification to SAH. Giving
the veteran the choice of contractor is important on several
levels. It allows the veteran to have the independence they
would seek and it allows them to quickly address any problems
or complaints with the intent of not having to bring in a third
party to settle the dispute.
With regard to grant money that is funded, VetsFirst is
concerned that the benefit is not a large enough amount. SAH
has been indexed based on inflation. However, we are concerned
that the baseline was too low. Currently, the maximum amount of
a grant is just under $74,000. Often, with that money, the
veteran is forced to make choices as to what to modify and what
not, or pay the remainder out of pocket. Another point of
concern is the amount of the grant is not based on the cost-of-
living, but rather standard across the board. Anyone who has
lived in the Washington, D.C. metro area is aware that the cost
of living here, for instance, is a lot higher than in Boise,
Idaho, for example.
The last point I have to make about SAH based on feedback
from my VSOs and our online help desk, Ask VetsFirst, is that
the SAH process takes longer than desired. This should not be
seen as a criticism of the individual SAH staff members as they
work in the local community. It is a way to identify an
opportunity to find a solution for rapid response.
VetsFirst would like to express its thanks for the
opportunity to testify today on the Loan Guaranty and SAH
Programs. We appreciate your leadership on behalf of this
Nation's veterans. I would be happy to answer questions.
[The prepared statement of Ross Meglathery appears in the
Appendix]
Mr. Costello. Thank you. We will recess and reconvene very
shortly.
[Recess.]
Mr. Costello. I call the hearing back to order and
recognize Mr. Danis on behalf of the Mortgage Bankers
Association.
STATEMENT OF JAMES H. DANIS
Mr. Danis. Chairman Costello and Members of the
Subcommittee, thank you for the opportunity to testify this
afternoon on VA's Home Loan Guaranty Program.
I have been in the mortgage business for 23 years and have
worked with the VA Home Loan Guaranty Program the entire time.
My company, Residential Mortgage Corporation, is an independent
mortgage lender located in Fayetteville, North Carolina.
Approximately 70 percent of the loans we issue are VA loans. In
North Carolina with our large military population centered
around Fort Bragg, loans guaranteed by VA are an important part
of our market. In fact, their use is steadily increasing. In
the latest fiscal year alone, more than 14,000 VA purchase
loans were originated in our state, up 13 percent from 2014.
For many reasons I am a staunch advocate of the VA Home
Loan Guaranty Program. You see, the homes my parents purchased
and where my siblings and I were raised were bought with VA
loans. In keeping with our family tradition of military
service, I served my country, and my first home was financed
with a VA loan.
Much like our company, MBA has been a consistent supporter
of the VA Home Loan Guaranty Program. Our industry is united in
the belief that the VA remains an important and viable program
for veterans and active duty military personnel. Providing 100
percent LTV loans is a tremendous benefit to our veterans who
have dedicated their lives to serving our country and is
crucial in military communities. But as credit markets have
tightened and loan underwriting has become stricter, finding
low downpayment mortgages has become increasingly difficult.
Despite most VA borrowers not having skin in the game, VA
loans have continued to outperform their counterparts. In fact,
the VA portfolio has been able to sustain production, and
weather the turbulent market largely due to its historically
conservative underwriting standards which includes a residual
income test. VA mortgages have always been fully documented,
and fully underwritten loans and owner occupied properties.
That is why they continue to perform so well today.
Additionally, the borrowers who use the VA program are as
diverse as the entire U.S. population. According to VA's 2015
Annual Benefits Report, African Americans comprise 10.6 percent
of VA loans; American Indian and Alaskan Natives 8.3; Hispanics
7.8; and Asian and Pacific Islanders 2.6 percent.
In our written testimony, MBA offers a number of policy
recommendations for improving VA programs. Chief, among them,
we urge the VA to issue a final qualified mortgage rule that
establishes clear bright lines for VA lending, and once the
rule is issued, we hope that they will permit an appropriate
implementation period so that smaller lenders like our company
have the time we need to test our systems and ensure we are in
full compliance.
MBA also calls on Congress to reauthorize the extended
foreclosure protections afforded to active duty military by the
Servicemembers' Civil Relief Act, or SCRA. During the financial
crisis, SCRA's foreclosure moratorium for active duty military
members was extended from three years to a year. Unfortunately,
that important consumer protection lapsed at the end of last
year. In our view, it should be extended immediately and
ultimately made permanent.
I want to conclude my testimony by commending VA and its
excellent staff for the collaborative approach they take to
policy making, as well as their overall emphasis on maintaining
open lines of communication with our industry. We are grateful
for our strong partnership, and look forward to continuing to
work together on the issues I have outlined here today.
Once again, I want to thank you for holding this hearing
and shining a spotlight on the importance of this vital path to
home ownership. We look forward to working with you to help our
members of our military, past and present, achieve the American
dream.
[The prepared statement of James H. Danis appears in the
Appendix]
Mr. Costello. Thank you, Mr. Danis. Ms. Meadows testifying
on behalf of the National Association of Realtors, welcome.
STATEMENT OF SHERRI MEADOWS
Ms. Meadows. Good afternoon. I have been a realtor in North
Central Florida for 33 years. I serve in a volunteer position
as the 2016 Vice President of the National Association of
Realtors, and represent its more than one million members
working in all aspects of real estate.
The National Association of Realtors is a strong supporter
of housing opportunities for veterans. According to the U.S.
Census, there were 19.3 million veterans in the United States
in 2014 and 2015, and one in five home buyers was a veteran or
active duty servicemember according to our NAR survey.
In 2015, the homeownership rate was 76 percent for
veterans, more than 12 points above the national average. The
Department of Veterans Affairs Home Loan Guaranty Program
serves a large population and has been doing it well for over
70 years, including in the aftermath of the recent recession.
VA's strong, yet flexible underwriting allows veterans the
ability to purchase a home of their own without depleting their
savings. More than 82 percent of veterans utilize the zero
downpayment option provided by the VA.
Despite this VA delinquency, rates are very low, comparable
even to today's tight conventional lending. Despite all the
talk about the skin in the game, loans with appropriate
underwriting, especially VA's use of the residual income test,
and zero downpayment can successfully balance risk, and provide
sustainable homeownership.
A realtor in Atlanta once told me the story of a veteran
who lost his job, and as a result his home, during the Great
Recession. When he found a new job, he moved with his family to
Atlanta. He worked to rebuild his credit and was able to use
his VA guaranty to buy a home for his family just two years
after being out of work and down on his luck. This would have
been impossible without the VA.
VA also protects their borrowers. Extensive counseling, and
active negotiating helps veterans who run into financial
difficulty. Since 2009, the VA has prevented more than half a
million veterans and their survivors from losing their homes,
while saving our taxpayers more than $16 billion in claims
payments.
NAR also supports grant programs that allow disabled
veterans to own a home that accommodates their needs. VA
provides two types of grants to servicemembers and veterans
with service-connected disabilities to help purchase or
construct an adapted home or modify an existing home to
accommodate a disability. These grants provide a significant
benefit that allows our disabled veterans to retain their
independence.
We support the comments by the two veterans service
organizations urging that staffing and financial levels are
sufficient to operate the program efficiently.
In recent years, this Committee has made tweaks to the home
loan program to make it even more useful for veterans. The
National Association of Realtors is here today to offer several
other changes that could further enhance the program. Number
one, consider higher cost loan limits. The VA Home Loan
Guaranty Program is unique. It is not simply a Federal loan
program, it is an entitlement promised to our military members
in return for their service to our Nation. Veterans should be
able to purchase a home wherever they choose to live and should
not be prevented from using their entitlement due to the low
loan limits. We urge this Committee to increase the VA loan
limits and not penalize veterans for geographic differences in
the housing market.
Number two, VA fee requirements. NAR believes that VA
borrowers should be allowed to negotiate fees with sellers,
just as non-VA buyers do, as part of the home purchase
transaction. A realtor in Ohio recalled a client who wanted to
use his VA benefit to purchase his first home. His lender tried
to discourage him from using the VA, saying it was too time
consuming and complicated. Moreover, he lost offers on the
first several homes he bid on because the seller did not want
to deal with the VA requirements. While the veteran was able to
buy the home, he ended up using FHA and paying 3.5 percent
downpayment to get the home he wanted. We urge VA to create a
level playing field and provide veterans with the flexibility
to negotiate all fees so they are not disadvantaged when trying
to buy a home.
Number three, incentivize a program for renovation and
rehabilitation. NAR urges the U.S. Department of Veterans
Affairs to incentivize lenders to use existing authority to
offer a veterans renovation pilot program, similar to the FHA's
203(k) Program. The 203(k) Program provides a loan for post-
renovation appraised value. It is a safe and viable way for
veterans to purchase a home that is in need of renovation while
still using their guaranty.
The National Association of Realtors strongly supports the
VA Home Loan Guaranty Program and the Specially Adaptive
Housing Grants. It is our hope that the Subcommittee will
support our recommendations for enhancing and improving the VA
Home Loan Guaranty Program, so it may be a real benefit to
those who bravely served our country.
I would also like to thank the Members of this
Subcommittee. Each of you have served your communities and our
Nation's veterans very well in areas such as protecting private
property rights, advocates for affordable housing, the
disabled, domestic violence victims, and those that are less
fortunate than us. It has been an honor and I thank you for the
opportunity just to be here today.
[The prepared statement of Sherri Meadows appears in the
Appendix]
Mr. Costello. Thank you, Ms. Meadows. Mr. Frueh, who is the
Director of the VA's Loan Guaranty Service, welcome.
STATEMENT OF MIKE FRUEH
Mr. Frueh. Thank you, Mr. Chairman, Ranking Member Takano,
and Members of the Subcommittee. Thank you for this opportunity
to appear before you today and discuss the status and
accomplishments of the Loan Guaranty Program and the Specially
Adaptive Housing Program.
Our program's mission is a very simple one. We work to
maximize veterans' and servicemembers' opportunity to obtain,
retain, and adapt homes. However, our program does not
generally make loans, build or sell homes, service loans, nor
do we build adapted homes. Instead, we rely on lenders. We rely
on realtors, appraisers, servicers, builders, and many others
in the mortgage industry to help us deliver these benefits that
our veterans have earned, many at great sacrifice.
We have worked relentlessly to increase our program's
efficiency and effectiveness by delegating functions to our
mortgage industry stakeholders. And I would like to take this
opportunity to thank my colleagues at the Mortgage Bankers
Association, the National Association of Realtors, and others
like the National Association of Home Builders and the
Appraisal Institute that have worked with us over the years to
help make our program work better for our Nation's veterans.
To ensure this relationship is effective, we maintain a
robust oversight and risk management program to secure a world
class veteran experience, ensuring these private sector
stakeholders adhere to our program goals, values, statutes, and
regulations. Our work centers on creating success on all sides
of the program. We work constantly to remove barriers veterans
may face when using their benefits and ensure that veterans
experience high quality consistent services no matter where
they live. This work ranges from in home grant consultations
with SAH eligible veterans and their families, to creating
informational YouTube videos and the Google Hangout feeds, to
making prudent policy changes that facilitate timely appraisal
and loan closings, more efficient SAH grant processing, or
innovative loss mitigation efforts.
We also work to ensure our program is easy to understand
and at the forefront of industry processes and technology so
that our private sector stakeholders succeed in their missions
to make and service loans, construct or renovate homes, and
manage and sell properties. On this front, we facilitate daily
electronic transmission of loan and property data, we
established permanent liaisons to all of the lenders and
servicers across the Nation, and we hold regular forums,
trainings, and calls, so stakeholders have open access to our
leadership to ask questions, and obtain realtime answers and
timely explanations of program or industry changes. We built
systems that streamlined the flow of information between the
industry and VA and provide analytical tools that decrease the
time from application to closing so veterans benefit directly.
Through these strong partnerships, our focus on veterans,
and our continuous drive to innovate and enhance operations and
performance, we have built a high performing program that works
for veterans, our stakeholders, and the American taxpayer. We
have seen tremendous results from our efforts in removing
barriers and enabling access. For the past few years, VA loans
have equaled or exceeded industry benchmarks for time to close,
percent of applications that actually do close, serious
delinquency rate, and foreclosure inventory rate. We know our
approach works because by creating ways to help our industry
partners more effectively deliver these benefits, they have
responded by offering veterans an interest rate lower than that
for any other type of loan.
Veterans prove our approach works as well. At the same
time, we guaranteed our largest number of loans last year,
while preventing the largest number of foreclosures, the VA
loan program maintained the second highest satisfaction rating
in J.D. Power's Primary Mortgage Origination Satisfaction
Study, significantly higher than the industry average.
The VA loan is not a good loan, it is a great loan. VA
loans are viewed by lenders as safe and viable and viewed by
veterans as an important financial benefit that helps them
obtain a home for their families. Additionally, the work we
have done to streamline policies and procedures in the SAH
Program have enabled us to process a record number of grants
for veterans who want to live independently in their own homes.
We have done some amazing things over the past few years.
But could we do better? Of course we could. We can always do
better. And no matter how successful we have been, we are
always looking forward to see how we can make the program
successful for veterans a decade from now. To that end, we are
focusing on a number of initiatives that will empower veterans
with information and access to innovative, effective, high
quality products and services.
We have made incredible progress in our ability to manage,
market, and sell foreclosed properties, and we have been able
to increase our return on sale to almost 90 percent while
decreasing our time in inventory to under 120 days.
We created a Federal Housing Agency Task Force, where FHA,
USDA, VA, and others meet regularly to talk about best
practices in the mortgage industry. And we are happy to report
that USDA thought our processes were so good that they asked us
to start managing and marketing their REO properties. And in
the past three months, we have already made inroads in selling
their properties, and they look to save about $10 million a
year by using our processes.
Finally, Mr. Chairman, I would like to leave you with three
thoughts about the impact our program has on veterans, on the
taxpayers, and on the U.S. housing market. The record 631,000
borrowers obtaining a VA guaranteed home loan last year enjoyed
an interest rate that was on average more than a quarter point
below the rate for conventional loans. In addition to the
longstanding no downpayment feature of VA loans, because they
require no mortgage insurance premiums, those 631,000 borrowers
saved over $40 billion in their mortgage payments for the life
of their loans. Even here in D.C. that is serious money. The
savings in downpayment and mortgage insurance are a strong
benefit to veterans who may need those funds in the future to
overcome unforeseen financial obstacles.
Since 2009, we have worked with private sector loan
servicers to help over half a million veterans and their
families retain their homes or avoid foreclosure, helping a
record 90,000 last year alone.
And finally, in the past three years, we have helped over
4,000 severely disabled veterans build or adapt homes to help
them live independently in the house of their choosing. And the
1,800 we helped last year represents almost a 50 percent
increase from the record setting year before.
Obtain, retain, and adapt. It is that simple. Mr. Chairman,
I appreciate the opportunity to speak today. I would like to
thank the Subcommittee for your support of our veterans and for
the productive working relationship that we have had with your
Committee Members and your staff. I will continue to identify
opportunities to enhance our program and stand ready to provide
any information or technical assistance that the Subcommittee
requires on ideas the members believe would help deliver our
benefits to our veterans. This concludes my testimony.
[The prepared statement of Mike Frueh appears in the
Appendix]
Mrs. Radewagen. [Presiding] I thank the panel for their
testimony and I now recognize myself for five minutes of
questions.
Ms. Meadows, can you please expand on your suggestion for
VA to enter into a pilot program that would authorize a veteran
to borrow money to rehabilitate and renovate their homes?
Ms. Meadows. Thank you, Acting Chairman. The FHA 203(k)
program, we want VA to be a very similar program to that. The
203(k) program is a rehabilitation and renovation loan. An FHA
buyer can purchase a home that they plan to renovate. The costs
of that renovation are included in the loan amount. Working
with a specially designed plan and a trained appraiser, the
value of the completed renovations is included in the loan and
put in escrow. The work is done by an approved contractor and
the renovation part of the loan is paid out as the work is
completed. VA has the authority for a similar program, but has
not promoted it with lenders. We believe some kind of incentive
program for lenders, whereby they get an enhanced fee due to
the extra work required, would make this type of program
available to veterans.
Mrs. Radewagen. I have got a follow-up question. Should the
program be approved, what could be done to ensure that our
veterans who live in remote areas such as the U.S. Territories
would be made aware of and included in the program? By the way,
I think it is a good idea.
Ms. Meadows. We have, as I said in my opening statement,
thank you for the opportunity to answer this question. We have
1.1 million realtors across the United States and Territories.
The realtors have worked very hard to promote VA loans. I have
with me a VA Toolkit, Home Loan Guaranty Services, that each of
our realtors has the opportunity to obtain. So I believe by us
continuing to educate our members and realtors working within
the community and with the lenders in those areas, that we
would be able to promote this product. Thank you.
Mrs. Radewagen. Mr. Frueh, in her written statement, Ms.
Ansley raises concerns about inadequate staffing levels and
high turnover rates for SAH agents. What can be done to reduce
caseloads and improve services in this area?
Mr. Frueh. Well as part of our evolution in the loan
guaranty process to enable veterans to use their benefits, we
look at efficiency and effectiveness across the Board. And SAH
agents, by their very nature, need to be located, dispersed
throughout the country, so that they can actually get to and
meet with veterans in their homes. In fact, we have a
requirement within 30 days of being deemed eligible for the
grant, we want to be in your house, speaking with your family,
and looking at your living conditions, and talking about what
you want and what ideas we might have for your future needs. So
we do need to keep those staff dispersed, but we have taken a
lot of time the last several years to move the rest of the work
that we can across the Nation. So that just because there is a
spike in originations in a state such as California, it does
not mean that our office that serves California is the only
office that is affected. We spread that work nationwide.
We have seen a lot of efficiencies in that the last couple
years and we are making a couple changes as we proceed through
that process of allocating those efficiencies. And one of those
changes is focusing on SAH and saying where are the most
disabled veterans living, where we need this help? We had a 50
percent increase in SAH grants authorized last year, which
means 1,800 over 1,200 from the year before. That is a
significant increase in work for approximately the same number
of SAH agents. So we are working to free up the other staff
that we do have in our budget across the Nation so that more
agents can be put out to work on what we think is a very
essential, very in person, very unique benefit that requires
one on one development.
Mrs. Radewagen. Mr. Frueh, yesterday the House passed H.R.
3016 as amended, which included legislation from our colleague
Mr. Zeldin that would eliminate the home loan guaranty cap. Can
you please share with us how the current cap is affecting
veterans in high cost areas of the country? Additionally, how
many veterans does the current cap affect?
Mr. Frueh. First let me say thank you for passing that
particular piece of legislation. H.R. 3016 eliminates the cap,
which to explain is actually a little bit convoluted because it
relies on several different organizations to set a cap in
virtually every single MSA around the country. So it depends on
where you live. If a veteran decides to move to a particular
area or finds a house that they like in a particular area, what
they might find by looking up our caps in the particular area
is that the house they want to buy is greater than the amount
that we are willing to guarantee or we are able to guarantee.
I think a misnomer is that it is a lending cap. VA does not
set a limit on how much a veteran can purchase, we set a limit
on how much we will guarantee. Which basically means that a
lender can offer a loan to that veteran with no downpayment up
to what that cap is, which is predominantly $417,000 around the
country.
We did some analysis last year and found that there were
about 15,000 veterans who wanted to buy a home in an area that
was, where the price of the home was greater than the amount
that is allowed. And we do not know how many veterans did not
pursue purchasing a home with their VA benefit in an area where
the cap was less than the amount of the home that they want
because they never started the process. What we do know is that
from the inception of the program, almost 90 percent of our
loans have been made with zero downpayment. It is a cornerstone
of the program for 72 years. Our average loan to value, our
percentage of money that people put in on loans that they do
put money in, it's 98 percent. So people put two percent down.
The only other national housing program with a small
downpayment is FHA, which is a 3.5 percent downpayment program.
So I think that our records for the last almost 22 million
loans indicate that no downpayment is important. And setting an
artificial cap on the amount that we can guarantee is going to
limit people that want to buy a home above that cap because
that no downpayment is a very important part of the benefit.
Mrs. Radewagen. I now recognize Mr. Takano for five minutes
for any questions he may have.
Mr. Takano. Thank you, Madam Chair. Ms. Meadows, we
recently had a field hearing on veterans homelessness in my
district and one of the witnesses was someone who worked on the
VA Loan Guaranty, or the advising and educating veterans about
the benefit. And I think they also work with realtors. But he
said something that I vaguely recall, and I may not have it
correctly, but I recall him saying that often realtors may
have, not a vindictive or a malicious bias against directing
veterans toward the benefit, but that there may be easier ways
to get the veteran into a home. And so often they may not
mention the benefit to them, even though that benefit may be
advantageous. And that similarly the sellers, you know, may not
wish to go, I want to kind of understand what that's about, if
you know what I'm talking about.
Ms. Meadows. So there is a misconception among lenders as
well as realtors and they discourage veterans from using the VA
benefit because of that. You mentioned homelessness, and when I
was the 2014 President of Florida Realtors, we as a leadership
team traveled around the state to our 140,000 members to raise
awareness on homelessness, to bring a face to the invisible
homeless, and I believe we helped eliminate homelessness in
many communities. Of the 500,000 homeless in the United States,
eight percent of them are veterans. We have 40,000 homeless
veterans. So that is an issue that NAR is looking at. It is one
of our objectives this year, to try to decrease homelessness,
and especially among our vets.
I was just speaking with a few of my colleagues earlier,
and in my office what I have learned in working with the VA
loans is that it's just a misperception. And I taught 20 of my
agents yesterday that the first question that we should ask as
a realtor when we have a buyer approach us is number one, have
you served? Have you served in the military? Because if they
have, we want to thank them for their service, but number two,
we need to tell them about the VA Guaranty Funding Program. The
toolkit explains a lot of things. And I believe that realtors,
we just need to educate them and we can overcome this
misconception of the VA process being difficult.
As well as I believe if we, you know, are able to negotiate
the closing fees in the transaction and we raise those limits,
because those individuals want to live in areas where their
family is from. And I wrote some numbers down earlier. You were
asking earlier the prices around the United States. And the
average price around the United States is $222,700. But when
you move into areas like San Jose, California, it's $940,000.
Areas like San Francisco, it's $781,600. So the higher loan
limits, or removing the cap are absolutely necessary. Thank you
for your question.
Mr. Takano. Yes, just if I could follow-up. So you did hear
about the legislation by Mr. Zeldin that did pass, and I am
happy that we have addressed the loan limit issue and I am
hopeful that the Senate will pass similar language, so we can
make it law and actually make this happen. But help me
understand, what is the misconception? If you could just----
Ms. Meadows. That the VA process is clunky. That appraisers
come in with low appraisals. That there are repairs that need
to be made to the property in protecting the vet. And when you
have an investor come in with cash, and you have somebody with
a VA loan, the seller tends to believe in the misconceptions of
this being a clunky process, and they are going to take the
cash deal over somebody having to go get VA financing because
those fees that the seller has to pay in the closing, play a
part in what their net proceeds will be in the transaction.
Mr. Takano. So is that beyond a misconception? I mean it
sounds like, you know, the idea that cash is king, I mean, is
very real. So I mean, it is not that maybe the realtors are
under a misconception, it is maybe that they are looking for a
quicker transaction, right? And so if the veteran has some
other way, so I did recall that I had a conversation with a
realtor about the appraiser coming in, the cost of that
appraiser. So are there elements of the process which sort of
burden the veteran who wants to go through the VA program? And
I want to know how we can fix it because I want to make sure
that veterans are able to use it. If there's advantages, I want
the veterans to have that advantage.
Ms. Meadows. I think being able to negotiate those fees,
you have the termite inspection fee, the escrow closing fee,
the tax service fee, the document recording fee, attorneys
fees, brokerage fees, postage and delivery charges, these are
fees that a veteran cannot pay. So if they were able to
negotiate that into the contract, I believe that you would see
a more level playing field for the veteran.
Mr. Takano. Well so it is not just a misconception. There
are some real things that we need to address, and realtors are
not behaving, you know, in a rational manner. I thank you for
the spirit and attitude that you brought to Florida. But you
know, that caught my attention and I want to work with the
industry and the VA in looking at how we can incentivize
realtors to use the program. Thank you.
Ms. Meadows. Thank you.
Mrs. Radewagen. Mr. Frueh, would you like to comment on the
fees?
Mr. Frueh. Yes, actually on several things that you brought
up. One is an overall misperception that I call my father's VA.
You know, the way the VA operated before is really what is
living in a lot of realtors' minds and others in the industry,
bankers, and others, that say it takes a long time. And that is
what we have been working to address very very directly the
last several years, is to survey the landscape and say, what is
taking the most time that we control at VA? And moving it out
of the way. And closing time is very important. So for the last
several years, we look every month at industry benchmarks to
say how long does it take to close a VA loan compared to a
conventional loan? Which is someone that puts 20 percent down,
or pays mortgage insurance, someone that has got pristine
credit versus our borrowers who may or may not have pristine
credit. We don't have a credit requirement. They may or may not
put something down. We do not have a downpayment requirement.
We try to compare ourselves to the best of the best. And we
have been at industry standard closing times around 47 days, 49
days for most of the year. As of December, the last time I saw,
we were about two days slower than the average conventional
loan in the industry. Which to me is two days of opportunity
that we can get back. But for the last several years, we have
been dead even.
So we look at things like appraisal turn times, how quickly
can we work our appraisal process from order to receipt. And we
track that very diligently. And we know that at eight and a
half days on average for each of our 600,000 appraisals last
year, we are pretty much on par with industry. However, there
is another five days of notice of value issuance, which is five
days that we can control. And we have provided tools that this
year we anticipate will drive down that five days to one day or
less. And then, we will be at a four-day better than what we
were today in the process. So we are continually looking at
what we can do to take little steps out of the way that VA
controls to make the process more efficient.
I did note that 74 percent of loans started as a VA loan
actually closed last year, which is the highest rate in the
industry. Conventional loans was only 72 percent. So our loans,
if a veteran wants to use their benefit, they have a greater
likelihood of actually getting the home that they want and
completing that transaction than if they use any other type of
mortgage, more than anyone else that tries to use the mortgage.
As for closing costs we do agree, and we take what Sherri
said seriously. We are looking at the ability for veterans to
negotiate what fees they pay. We are kind of balancing, we have
been for 72 years, protecting veterans from getting into a
situation they don't like versus protecting them from buying a
house that they want. And that balance in some periods has
shown to be more protective than less. And I think this is a
regulatory option that we have for some of these fees and
charges that are allowable, and we are certainly willing to
work with our partners in the industry to find a balance that
works better.
Mrs. Radewagen. I now recognize Ms. Rice for five minutes
for any questions she may have. Thank you.
Miss Rice. So I just want to add, New York has got to be up
there in terms of housing prices, right? I mean, I do not know
how they compare to California, but I cannot believe that they
are not as high because this is a perennial complaint that I
hear about from our veteran community.
I have one question and it really is a question that every
meeting we have with the VA, every hearing we have, the
question is, and we just did a round table out in my district
last week. How is it--so there's 40,000 homeless veterans. You
mentioned some of the ways that you try to reach out to make
them aware, whether it is upon separation or when they are
still active duty. We have got to be able to do this better. I
mean, one of the great failures, I think, of our government is
we let too many veterans fall through the cracks, whether it is
for mental health care, physical health care, these benefits,
G.I. benefits. So is there a plan that you have, more than
just--well we are going to do these pamphlets, that--where are
they going to get them, how are they going to, do you
understand what I am saying? How do we reach more veterans?
Mr. Frueh. Well that is a very very important question to
ask. And I can address some of it. And we actually have a
department at VA called the Ending Veteran Homelessness which
is focused 100 percent on combining all of VA's resources that
can help in the homeless arena and reach out with the private
sector and other public sector entities to address the needs
and various entities. Because, you know, as real estate is all
about location, location, location, homeless veterans are in
pockets in different areas. And we have to reach them where we
are.
You know one thing that we did as an organization last
month, VA had their point in time count. And in about 40
communities around the Nation, VA employees and local
representatives from all the different constituencies went out
to count the homeless and to meet with the homeless and to talk
to them about services that they could avail them right then,
they could find out whether these are homeless veterans or non-
veterans, what we can do to help them. And those are things
that we do repeatedly to find out how big is the problem.
Because 40,000 veterans is a number that is out, but there is
different numbers on different days in different communities.
So we are trying to continually address it.
In the Loan Guaranty Program, we deal with a single
benefit, the home loan benefit. And one thing that we focused
on a lot in the last nine years is how do we stop a veteran who
is already in financial distress from progressing down towards
foreclosure? And what we have seen in the last nine years is--
we have put together a formula, working with servicers around
the country, working with the Mortgage Bankers Association and
others, we have found a way to avoid foreclosure more than any
other major loan product out there. And what we have started
thinking about it more as we are not just avoiding foreclosure,
we are helping prevent homelessness by keeping a family in a
home, by not allowing one more family or one more veteran or
one more member of a community to not have a roof over their
head. So to that end, we work with our Ending Veteran
Homelessness group. And when we have a veteran that is in
default and a foreclosure date is set, we communicate that with
them to say here is a potential for homeless. We need to
conduct outreach to this family now and see do they have
opportunities for housing afterwards. Not every deed in lieu of
foreclosure or every short sale or every foreclosure leads to
homelessness, but we do take it very seriously and we call this
at risk for homelessness. And we identify a veteran family is
at risk and we communicate with that process. But for
everything else that VA is doing, I would have to put you in
touch with our EVH group, the Ending Veteran Homelessness
group.
Miss Rice. I think it is one of our great moral failures as
a country that we have even one homeless or jobless veteran. I
applaud all of you for doing your part to reduce that number of
homeless veterans. Thank you. I yield back my time.
Mrs. Radewagen. Thank you all for your testimony and
questions, and I thank the witnesses for taking time out of
their busy schedules to be here. Finally, I ask unanimous
consent that all Members----
Mr. Takano. Madam Chair, I just wanted to ask one more. Mr.
Danis, is it?
Mr. Danis. Yes, sir.
Mr. Takano. You looked like you wanted to say something
earlier and I just wanted to give you a chance to say it.
Mr. Danis. I did, and thank you. As far as the
misconception with the question that you asked earlier, I have
to agree with most of what Ms. Meadows says. Most of my
business is done in North Carolina, which is veteran heavy of
course. But I also work in other states that do not have a
military presence, and I have come up against the same issues
that Ms. Meadows has talked about where as realtors or
homeowners in that area are being discouraged from using their
VA benefits. And I think it is more of a lack of education with
the lenders, the veterans, and the realtors in that area
because they do not understand the program. They think it is a
difficult and cumbersome program to work through when in
reality VA is a very easy loan program to do. With Mr. Frueh,
when he talks about his closing times, you know, being in 40-
day range, there have been times where I have originated a loan
on a Monday and closed it that next Monday. So it can be a very
streamlined process. There is no reason why veterans should be
discouraged from using their benefits as far as a lender is
concerned. The fees can be an issue, but that can always be
worked around. Where you talked about where a veteran was
discouraged from using his VA benefits, that should not come
about. The program is a very easy, a very workable loan program
to do.
Mr. Takano. Well I am very happy to hear this. And you
know, I want to find out ways in which we can make sure the
industry, you know, overcomes this misconception.
Mr. Danis. I think it is just education. It is educating
lenders and realtors about the program. And then a little bit
of experience. We have that experience, but it is not something
that is difficult to gain at all.
Mr. Takano. Well thank you. And I appreciate the
chairwoman's indulgence.
Mrs. Radewagen. Finally, I ask unanimous consent that all
Members have five legislative days in which to revise and
extend their remarks and include any extraneous material on
today's hearing. Hearing no objection, so ordered.
This hearing is now adjourned.
[Whereupon, at 3:29 p.m., the Subcommittee was adjourned.]
A P P E N D I X
----------
Prepared Statement of Heather Ansley
Chairman Wenstrup, Ranking Member Takano, and members of the
Subcommittee, Paralyzed Veterans of America (PVA), thanks you for the
opportunity to testify for this oversight hearing regarding the
Department of Veterans Affairs' (VA) Loan Guaranty and Specially
Adaptive Housing Grant programs. Our testimony will be directed to the
adaptive housing grant programs which are vital to veterans who have
acquired a disability as a result of their service to our nation.
PVA is an organization of veterans who are catastrophically
disabled by a spinal cord injury or disease. Access to housing,
employment, and transportation are critical to ensuring that these
veterans are able to fully return to their communities. Many of our
members have benefited from VA's Specially Adapted Housing (SAH) grant
program as they worked to rebuild their lives after acquiring a life-
altering disability. Veterans who are unable to obtain accessible
housing are in danger of being forced to live in more restrictive
settings, away from their friends and family members.
Authorized under Chapter 21 of Title 38 of the United States Code,
VA's SAH program provides assistance to veterans and servicemembers who
need to remodel an existing home or build or purchase a home that will
accommodate their disability-related needs. Accommodations may include
wider doorways, ramps, roll-in showers, and other modifications that
allow individuals with significant disabilities greater independence.
VA's SAH program is an ancillary benefit available to veterans who
are permanently and totally disabled as a result of their military
service. Some of those veterans who are eligible for SAH include those
who have lost or lost the use of both legs or both arms, those who have
lost or lost the use of one leg together with the residuals of organic
disease or injury, or those who have lost or lost the use of a leg
together with the loss or loss of use of one arm. Veterans are eligible
to use the grant a maximum of three times up to the current grant
maximum. The benefit is indexed for the cost of construction. For
fiscal year 2016, the grant is $73,768. In fiscal year 2014, VA
approved 1,154 SAH grants for a total amount of $61,353,253. \1\
---------------------------------------------------------------------------
\1\ Department of Veterans Affairs, Veterans Benefits
Administration, FY 2014 Annual Benefits Report-Home Loan Guaranty
Section, available at: http://benefits.va.gov/REPORTS/abr/ABR-
LoanGuaranty-FY14-10202015.pdf.
---------------------------------------------------------------------------
The VA's Special Housing Adaptation (SHA) grant is available for
veterans who have blindness in both eyes with 20/200 visual acuity or
less, those who have lost or lost the use of both hands, those who have
severe burn injuries, and those with certain severe respiratory
injuries. Like the SAH grant, SHA eligible veterans may use the grant
three times up to the current grant maximum. For fiscal year 2016, the
amount available is $14,754, as indexed for the cost of construction.
In fiscal year 2014, VA awarded 99 grants for a total amount of
$960,930. \2\
---------------------------------------------------------------------------
\2\ Id.
---------------------------------------------------------------------------
Providing a catastrophically disabled veteran with an accessible
home is an investment that pays dividends in lower health and long-term
care costs. Veterans with catastrophic disabilities who are able to
live safely in their homes with their families also reap benefits
beyond those that are easily quantifiable. Consequently, we hope that
every effort will be made to strengthen VA's adaptive housing grant
programs and increase the benefits available for these veterans. This
includes investments in staffing, streamlined and expedited grant
processing for veterans with terminal diseases, increased benefits, and
improved outreach.
STAFFING CONCERNS AND RESPONSIVENESS
In many parts of the country, it appears that there are too few SAH
agents charged with too many responsibilities. PVA's service officers
overwhelming report that insufficient numbers of SAH agents is a
problem for their veterans. Inadequate staffing contributes to delays
in processing and results in poor customer service for veterans. Agents
are not able to handle the large workload, including the influx of
veterans living with amyotrophic lateral sclerosis (ALS).
According to our service officers, many veterans have a difficult
time contacting their SAH agents. Phone calls and emails to agents are
often not returned in a timely manner. PVA believes that veterans'
inability to connect with their SAH agents is not only unfair to them
but also to the agents who are trying to serve veterans despite too
many tasks and too few resources.
In general, we believe that most agents genuinely try to fulfill
their duties to the veterans in their caseloads. Many are simply
stretched too thin due to the demands on their schedules. For example,
SAH agents are required to review VA appraisals, which is unrelated to
their role in helping veterans with housing adaptations. We understand
that VA is hoping to eliminate this process through the use of
electronic reports. In light of the chronic staffing needs of this
program, which serves veterans with the most significant service-
connected disabilities, we hope that VA will reassign these and other
similar duties so that agents will be able to fully focus on their SAH-
related duties.
Insufficient staffing also leads to retention problems as agents
leave their positions due to the excessive workload and extensive
travel requirements. PVA's service officers reported frequent turnover
which overburdens agents who must carry increased workloads when other
agents leave. In addition, we understand that some agents cover large
geographic areas and must travel hundreds of miles one way to meet with
eligible veterans, which also leads to delays in responding to veterans
and processing grants.
Limited numbers of SAH agents mean that every agent must do his or
her part to fulfill their obligations to the veterans in their
caseloads. Increased accountability measures are needed to ensure that
all agents are performing at peak capacity. Underperforming agents are
a burden to other agents struggling to keep up with the demands of
their positions.
VETERANS LIVING WITH ALS
Grant Processing and Approval
One of the biggest challenges PVA encounters in the SAH grant
program is the length of time it takes for grants to be processed and
approved. This is especially true for veterans living with ALS. ALS is
presumptively related to a veteran's military service and is rated at
100 percent regardless of how advanced the veteran's disease is at the
time of rating. ALS veterans are also presumed medically eligible for
SAH even if the disease has not yet resulted in loss of use of limbs or
other significant impairments.
Veterans with ALS are critical users of the SAH grant program and
the housing adaptation assistance it provides. VA's SAH grant process,
however, is not well suited to veterans with rapidly changing diseases
like ALS. As a result, it may be difficult for veterans with ALS to
receive the types of accommodations they need when they need them.
In its recommendations to the 114th Congress, the co-authors of The
Independent Budget (IB), Disabled American Veterans, PVA, and the
Veterans of Foreign Wars, recommended requiring VA to expedite SAH
grants for veterans who are terminally ill, including those with ALS.
This includes encouraging the use of waivers where appropriate to
prevent adaptations unneeded due to a veteran's level of disability.
Projects that take a long time to complete are not able to meet the
needs of a rapidly progressive disease like ALS.
Ultimately, the SAH program must be flexible enough to assist
veterans who have relatively static disabilities, such as spinal cord
injuries, and those who have rapidly changing diseases such as ALS. For
example, SAH agents should be given permission to approve all paperwork
needed in order to get these projects underway instead of following
standard procedures which require the agent to gather the paperwork and
submit it for approval to the regional loan center (RLC). We believe
that this will eliminate months of waiting and delays, which will allow
veterans with ALS to have faster access to bathrooms and other crucial
areas of their homes.
Implementation of expedited procedures for veterans living with ALS
may also help VA continue to streamline the grant process for all
eligible veterans. Although VA recently revised its internal processing
procedures, some veterans continue to encounter bureaucratic processes.
The need for waivers of project requirements and delays in receiving
final grant approval once agents have submitted all paperwork to the
RLCs continues to cause concern for many veterans.
Veterans' Mortgage Life Insurance
VA's Veterans' Mortgage Life Insurance (VMLI) program provides
veterans who are eligible for an adaptive housing grant with insurance
benefits that pay down or off their home's mortgage in case of their
death. The VMLI program is designed to provide a mortgage insurance
option for veterans who would otherwise not be eligible for such
coverage due to their catastrophic disabilities. Coverage begins when
an eligible veteran receives final approval of his or her adaptive
housing grant. Unfortunately, delays in processing grants for veterans
with diseases such as ALS can delay final approval and prevent
veterans' families from accessing the mortgage protection available
through VMLI.
To ensure that veterans with ALS and other similar diseases are
able to receive mortgage protections available through VMLI for their
families, VMLI must be available to these veterans earlier in the grant
process. One incremental change would be to approve VMLI at the same
time as the final grant instead of waiting until the funding is in
escrow. Another option would be to approve eligibility for VMLI
coverage for these veterans as soon as VA determines that they meet all
applicable requirements, with the exception of final approval of the
adaptive housing grant. If the veteran's adaptive housing grant does
not receive final approval, then VMLI coverage could be terminated.
CONTRACTORS
Another difficulty many veterans face is locating a contractor who
will agree to work through VA's adaptive housing grant process. Due to
the length of the process, many contractors are no longer willing to
work with VA. In addition, VA provides veterans with little guidance
about how to locate contractors who are willing to work through the
process. We understand that VA is working to improve its relationship
with contractors and educate veterans. We applaud these efforts.
VA should work more closely with contractors to ensure that they
are aware of VA requirements up front. Providing contractors with this
information might prevent all the haggling over materials and equipment
in the early stages of the contract. Additional thought should also be
given to the level of detail involved in providing information about
the project.
For example, floors tiles must have the slippage coefficient and
color identified and approved prior to final grant approval. While the
slippage coefficient is understandable, requiring identification of the
color in most cases is not. There are many examples of too much
information being required from contractors that is not critical to
ensuring completion of a quality, safe project.
SUPPLEMENTAL GRANT FOR ADAPTATION OF A NEW HOME
Although veterans with catastrophic disabilities are able to access
VA's adaptive housing grant programs three times, up to the statutory
funding limit, this benefit may be insufficient to assist a veteran who
must move due to employment, health, family, or other needs. For
veterans who have used up their remaining eligibility for these
programs, they may have fewer options to acquire a new accessible home.
Many homes are not built with universal design or other features that
would allow these veterans the opportunity to live independently and
remain healthy.
The IB for the 114th Congress recommends establishing a
supplementary housing grant to cover the costs of housing adaptions for
veterans who have already exhausted their eligibility. This grant would
be available to allow veterans with catastrophic disabilities to build
or adapt another home to ensure safety and independence. Without proper
living accommodations, veterans who could otherwise live in their homes
may be forced to reside in expensive, restrictive settings.
Providing a supplemental grant is an investment in veterans who
have acquired catastrophic disabilities as the result of their military
service. It ensures that veterans will not be forced to choose between
the need to relocate and having a home that accommodates their needs.
Until the nation's housing stock provides a greater supply of homes
universally designed to accommodate individuals with varying abilities,
the lack of affordable, accessible housing will remain an issue.
Alternatively, Congress could choose to increase the amount of
funding available through the current adaptive housing grant programs
to provide veterans with more funding throughout their lifetimes.
Public Law 110-289 increased the maximum allowable grant amounts
available through VA's adaptive housing grant programs and also
provided for indexing the grants based on the cost of construction. Due
to indexing, the SAH grant amount has risen from $60,000 to $73,768 as
of October 1, 2015.
Despite these increases, which have been crucial to the program,
the total amount of funding remains inadequate. It can be difficult for
veterans with catastrophic disabilities to have the kitchen or
additional bathrooms adapted. Consequently, additional funding for the
grant would not only allow veterans to better adapt their homes to
fully meet their needs but would also increase the probability that
veterans would have funds remaining to allow them to adapt another home
in the future. It would also make it easier for veterans to get the
help they need without being forced to cobble together assistance from
other programs such as the Home Improvements and Structural Alterations
grant program.
IMPROVED OUTREACH TO ELIGIBLE VETERANS
Access to housing adaptation assistance is fairly limited outside
of VA. Discovering the benefits available through VA for housing
adaption may not only be life changing, but also lifesaving. When a
veteran is determined by VA to be eligible for ancillary benefits, such
as the adaptive housing grant programs, VA provides the veteran with a
decision that includes information about those benefits. Such a notice
typically includes the requisite forms to apply for the benefits.
We have noticed, however, that the required forms are not always
provided with the notice of eligibility. For veterans who are not
represented by a veterans service organization, it may be difficult for
them to locate these forms and subsequently navigate the sea of
benefits for which they may be eligible. This may be especially true
for veterans and their families who are overwhelmed by their
circumstances and unable to fully appreciate the ancillary benefits
available to them, including how to obtain them.
Without additional staff support for the adaptive housing grant
programs, PVA is concerned that efforts to increase outreach would only
lead to increased wait times for veterans who are seeking to use them.
Aside from increased staffing to perform new outreach efforts, VA
should seek to implement partnerships with nonprofit organizations that
assist veterans with catastrophic disabilities. It is important to
ensure that partners are aware of VA's adaptive housing grant programs
and how to direct veterans to VA for assistance. Additional outreach
will also be critical to assisting veterans who have ALS to ensure that
they understand the importance of beginning the adaptation process
before it is needed so that they will be able to remain as independent
as possible, for as long as possible.
Everyone has a role to play in increasing awareness of VA's
adaptive housing grant programs. For its part, PVA's service officers
communicate with the veterans they assist to ensure that they
understand the benefit and its importance. Some service officers even
provide agents with veterans' contact information as soon as
eligibility is established to ensure that the agent is prepared to move
forward as soon as he or she is assigned the case.
In addition, PVA seeks to increase awareness by providing
information about adaptive housing benefits on our website and by
including articles on the grant program and housing adaptation in our
membership magazine. PVA also assists veterans with disabilities by
providing information about how to design a wheelchair accessible home.
Furthermore, PVA supports broader efforts to increase affordable,
accessible housing for all people with disabilities.
Recent efforts include supporting increased assistance for veterans
who need help with housing adaptations beyond that available through
VA. Specifically, we support the Veterans Homebuyer Accessibility Act
of 2015 (H.R. 3975). This legislation, sponsored by Representatives
James Langevin (D-RI), Paul Cook (R-CA), and Dina Titus (D-NV), would
provide a veteran first-time homeowner or a current veteran homeowner
with a refundable tax credit of up to $8,000 for adaptive housing
improvements. The credit may also be assigned to another individual
making the improvements. We support these and other efforts to expand
the help available to our members.
We appreciate the Subcommittee's focus on VA's adaptive housing
programs. Many of PVA's members have greatly benefited from the SAH
program. We hope that additional resources will be provided to this
program and that it will continue to serve as a cornerstone in the
efforts of veterans with catastrophic disabilities to remain
independent.
PVA thanks you for this opportunity to express our views. We would
be happy to answer any questions that you may have.
Information Required by Rule XI 2(g)(4) of the House of Representatives
Pursuant to Rule XI 2(g)(4) of the House of Representatives, the
following information is provided regarding federal grants and
contracts.
Fiscal Year 2016
Department of Veterans Affairs, Office of National Veterans Sports
Programs & Special Events - Grant to support rehabilitation sports
activities - $200,000.
Fiscal Year 2015
Department of Veterans Affairs, Office of National Veterans Sports
Programs & Special Events - Grant to support rehabilitation sports
activities - $425,000.
Fiscal Year 2014
No federal grants or contracts received.
Disclosure of Foreign Payments
Paralyzed Veterans of America is largely supported by donations
from the general public. However, in some very rare cases we receive
direct donations from foreign nationals. In addition, we receive
funding from corporations and foundations which in some cases are U.S.
subsidiaries of non-U.S. companies.
Heather L. Ansley, Esq., MSW
Heather L. Ansley is the Associate General Counsel for Corporate
and Government Relations at Paralyzed Veterans of America.
Ms. Ansley began her tenure with the organization in January 2015.
Her responsibilities include corporate legal matters, government
relations, and disability advocacy. She also works to promote
collaboration between disability organizations and veterans service
organizations by serving as a co-chair of the Consortium for Citizens
with Disabilities (CCD) Veterans and Military Families Task Force.
Additionally, she serves as an officer on CCD's Board of Directors.
Prior to her arrival at Paralyzed Veterans of America, she served
as Vice President of VetsFirst, a program of United Spinal Association.
She has also served as the Director of Policy and Advocacy for the
Lutheran Services in America Disability Network.
Before arriving in Washington, D.C., she served as a Research
Attorney for The Honorable Steve Leben with the Kansas Court of
Appeals. Prior to attending law school, she worked in the office of
former U.S. Representative Kenny Hulshof (R-MO) where she assisted
constituents with problems involving federal agencies. She also served
as the congressional and intergovernmental affairs specialist at the
Federal Emergency Management Agency's Region VII office in Kansas City,
Missouri.
Ms. Ansley is a Phi Beta Kappa graduate of the University of
Missouri-Columbia with a Bachelor of Arts in Political Science. Ms.
Ansley also holds a Master of Social Work from the University of
Missouri-Columbia and a Juris Doctorate from the Washburn University
School of Law in Kansas.
She is licensed to practice law in the State of Kansas and before
the United States District Court of Kansas.
Prepared Statement of Ross A. Meglathery, MPA
At VetsFirst, our priorities are based on three core principles for
improving the lives of veterans with disabilities.
Core Principle-1: Community Integration and Independence
VetsFirst supports policies that help veterans with disabilities
reintegrate into their communities and achieve independence. Disabled
veterans must have access to employment and educational opportunities
that allow them to live meaningful and productive lives.
Core Principle-2: Timely Access to Quality VA Health Care and
Benefits
Access to VA health care, compensation and pension benefits are the
lifeline for many veterans with significant disabilities. Veterans who
are unable to access these needed services and benefits due to delays
or shortages of personnel will lack the foundation that will allow them
to take advantage of opportunities in their communities.
Core Principle-3: Rights of Veterans with Disabilities
VetsFirst believes that discrimination against disabled veterans
that produces barriers to housing, employment, transportation, health
care, and other programs and services must be eliminated.
Introduction
Chairman Wenstrup, Ranking Member Takano, and other distinguished
members of the subcommittee, thank you for giving VetsFirst the
opportunity to testify regarding VA's Loan Guaranty and Specially
Adaptive Housing (SAH) Grant Programs.
VetsFirst has represented our disabled veterans, their families and
their caretakers since 1946 when paralyzed World War II veterans came
together to claim their rights. We advocate for the programs, services
and disability rights that help all generations of veterans with
disabilities remain independent and fulfill their desire to reintegrate
into society. Today, through our parent organization United Spinal
Association, we are not only a VA-recognized national veterans service
organization, but we are a leader in advocacy for all people with
disabilities.
VetsFirst is honored to have the opportunity to both underscore its
support of the VA's Loan Guaranty and Specially Adaptive Housing Grant
Programs while at the same time offer some suggestions for improvement.
Specially Adaptive Housing Grant Program
VetsFirst supports all programs that are designed to enhance the
independence of veterans with disabilities. For this reason Community
Integration and Independence is the first of VetsFirst's three Core
Principles. The ability to own a home that is adapted to the unique
needs of each individual is critical for both the emotional and
physical well-being of the veteran. With that said, VetsFirst
wholeheartedly backs the Specially Adaptive Housing Program. VetsFirst
would like to highlight areas where we see that improvements are
warranted and would succeed in making this program even more
successful.
Currently, both SAH and Vocational Rehabilitation & Employment
Program (VR&E) are in the business of housing modifications for
veterans. VetsFirst believes that this is a less efficient way to
utilize limited resources. Whereas the SAH staff are experts in the
arena of home modification, VR&E personnel are not. While VR&E staff
are hardworking and diligent, they are not solely focused on this one
benefit alone. Additionally as you know from a prior hearing, the VR&E
staff are currently overworked with large caseloads supporting
vocational rehabilitation. By taking home modification off their
portfolio, VR&E would be able to focus on their areas of expertise.
In the last few years SAH has seen an increase in approved grants.
The additions of VR&E's caseload would add to that growing number. For
this reason VetsFirst would like to emphasize its desire to see that
SAH is fully funded to support this upward trend and would like to see
that commensurate with any addition of the VR&E caseload. But, by
removing the stovepipe of two parallel programs, VetsFirst believes
that in the longer term the taxpayers will see cost savings.
That said, although VetsFirst does recommend shifting all home
modification to SAH, it does not advocate removing VR&E from the
process altogether. If a veteran is getting vocational rehabilitation
in conjunction with home modification, VetsFirst recommends three-way
dialogue amongst the veteran, SAH and VR&E.
Currently, SAH gives the veteran the chance to choose which
contractor to use for home modification. VR&E does not afford this
opportunity. While it is unclear whether or not this lack of choice is
based on statute or regulation, it serves as another reason why
VetsFirst recommends shifting VR&E's home modification to SAH. Giving
the veteran the choice of contractor is important on several levels.
First off, it allows the veteran to have the independence that they
would likely seek. Additionally, it allows them to quickly address any
problems or complaints with the intent of not having to bring in a
third party to address any disputes.
With regard to grant money funded, VetsFirst is concerned that the
benefit is not a large enough amount. SAH has been indexed based on
inflation, however, we are concerned that the baseline was too low.
Currently the maximum amount of a grant is $73,768. While in some
geographical areas that number is reflective of the costs, in areas
with a high cost of living that is not enough money and the veteran is
forced to make tough choices as to what and what not to modify; or pay
the remainder out of pocket. This brings up another point of concern
which is the amount of the grant is not based on the local cost of
living, but rather a standard, across the board amount. However, as
anyone in the National Capitol Region is aware, the cost of living in
Washington, D.C. for instance, is not the same as it is in Boise,
Idaho.
The last point I have to make about SAH based on feedback from my
lead veterans service officer and veterans using our online helpdesk,
Ask VetsFirst, is that the SAH grant process seems to take longer than
desired. This should not be seen as a criticism of the individual SAH
staff member as they work in and are from the local community in which
their services are used. Rather, it is stated as a way to identify an
opportunity to find a solution for more rapid response. VetsFirst
cannot state if the slowdown is a result of grant request action that
must first take place at Cleveland or if it occurs upon receipt by the
local staff appraiser who works with the veteran.
VA's Loan Guaranty Program
Following the return of 16 million veterans, the VA experienced
tremendous growth. Congress passed the GI Bill along with education and
housing benefits. The home loan guaranty program began with the
original Servicemen's Readjustment Act that was passed by the United
States Congress in order to extend a wide variety of benefits to
eligible veterans.
The main purpose of the VA home loan program is to help veterans
finance the purchase of homes with favorable loan terms and at a rate
of interest which is usually lower than the rate charged on other types
of mortgage loans.
The VA's Loan Guaranty program is a critical benefit to veterans
across the nation. During a period where VA has had much criticism
leveled at it as an organization, the Loan Guaranty program is an
example of the VA doing right by veterans.
More than 80% of veterans utilize this program as a result of its
affordability and ease of use. Although this nation has in recent years
seen a housing crash, VA's delinquency rate is quite low as a result of
its holistic approach to ascertaining the veteran's income based on
monthly expenses.
On a personal note, I have taken advantage of this benefit and it
allowed me to purchase a home in an area with an extremely high cost of
living.
From the perspective of a veteran service organization the process
by which we assist a veteran receive this benefit is one of ease. We
help the veteran identify the requirements of eligibility and if/once
eligibility is determined, they can contact a lender that will assist
them through the process.
The VA Loan Guaranty is another example of a program that supports
VetsFirst's Core Principle 1 of Independence. Based on its ease of use
and efficient processing, it further supports VetsFirst's Core
Principle 2 of Timely Access to VA Benefits.
VetsFirst would like to express its thanks for the opportunity to
testify concerning its views on VA's Loan Guaranty and Specially
Adaptive Housing Grant Programs. We appreciate your leadership on
behalf of our nation's veterans who are living with disabilities. I
will be happy to answer any questions.
Information Required by Clause 2(g) of Rule XI of the House of
Representatives
Written testimony submitted by Ross Meglathery, Director of
VetsFirst; VetsFirst, a program of United Spinal Association; 1660 L
Street, NW, Suite 504; Washington, D.C. 20036. (202) 556-2076, ext.
7103.
This testimony is being submitted on behalf of VetsFirst, a program
of United Spinal Association.
In fiscal year 2012, United Spinal Association served as a
subcontractor to Easter Seals for an amount not to exceed $5000 through
funding Easter Seals received from the U.S. Department of
Transportation. This is the only federal contract or grant, other than
the routine use of office space and associated resources in VA Regional
Offices for Veterans Service Officers that United Spinal Association
has received in the current or previous two fiscal years.
Biography of Ross Meglathery
Ross Meglathery is the Director of VetsFirst, a program of the
United Spinal Association. Ross has devoted his life to serving the
nation and its military/veteran community. Prior to his tenure at
VetsFirst, Ross spent over 15 years in the military, Homeland/National
Security and private sectors. As a high school student he interned for
Representative Ted Weiss in his New York City district office. As a
college student he attended Officer Candidates School where upon
graduation, he was commissioned a second lieutenant of Marines.
Highlights of his active duty career include a deployment to Western
Sahara, Africa as a United Nations Military Observer serving as one of
15 US military personnel in a multi-nation contingent. In 2004-05 Ross
deployed with the 24th Marine Expeditionary Unit (Special Operations
Capable) where he received the Combat Action Ribbon, and the Purple
Heart Medal for wounds received by mortar fire. He deployed once again
to Iraq as part of the 2007 Surge in Al Anbar where he performed the
duties of a Joint Terminal Attack Controller (JTAC) and led a
specialized team in support of US, and Iraqi Army units. For his
service, he was awarded the Navy and Marine Corps Commendation Medal
with Valor Device. In 2010, Ross was selected as a Congressional Marine
Fellow where he worked for Representative Mike Coffman. In this
capacity, he worked on Defense, Homeland Security, Veterans, Small
Business and Rare Earth Metals issues.
As a reservist, Ross has commanded an artillery battery and
currently serves as a lieutenant colonel at MAGTF Staff Training
Program Division, Marine Corps Base Quantico.
As a civilian, Ross has worked as a Program Analyst at the Office
of Special Programs at the Department of Homeland Security for
Intelligence, Surveillance and Reconnaissance matters. Additionally, he
has experience with unmanned aerial system policy, test & evaluation,
modeling & simulation, intelligence production as a subject matter
expert in both the public and private sectors.
Ross is a graduate of Harvard University where he earned a Master
in Public Administration. In addition, he holds a Master of Science in
the Management of Information Technology degree from the University of
Virginia and a Bachelor of Arts in History from Trinity College,
Hartford.
In his spare time, Ross is the president of the board of directors
for Deeper Missions a 501 C 3 organization devoted to clean energy and
safe water in Africa.
As Director of VetsFirst, Ross's efforts support legislation that
is designed to address the issues where veterans and disability
community issues intersect. Ross seeks to bring attention to veteran
issues such as PTS, TBI, MST, suicide, unemployment, VA accountability,
dependent concerns and find ways to mitigate these problems.
Additionally, he serves the Resource Center through VetsFirst's
programs to answer veterans' question regarding educational, health,
and disability benefits that they deserve based on their service.
Prepared Statement of James H. Danis II, CMB, AMP
Chairman Wenstrup, Ranking Member Takano, thank you for the
opportunity to testify on behalf of the Mortgage Bankers Association
(MBA) \1\ on the status of the U.S. Department of Veterans Affairs (VA)
Loan Guaranty Program and Specially Adaptive Housing Grant Programs. I
am James H. Danis II, and President of Residential Mortgage in
Fayetteville, North Carolina, a Certified Mortgage Banker, and MBA
member.
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\1\ The Mortgage Bankers Association (MBA) is the national
association representing the real estate finance industry, an industry
that employs more than 280,000 people in virtually every community in
the country. Headquartered in Washington, D.C., the association works
to ensure the continued strength of the nation's residential and
commercial real estate markets; to expand homeownership and extend
access to affordable housing to all Americans. MBA promotes fair and
ethical lending practices and fosters professional excellence among
real estate finance employees through a wide range of educational
programs and a variety of publications. Its membership of over 2,200
companies includes all elements of real estate finance: mortgage
companies, mortgage brokers, commercial banks, thrifts, REITs, Wall
Street conduits, life insurance companies and others in the mortgage
lending field. For additional information, visit MBA's Web site:
www.mba.org.
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I have been in the mortgage business for 23 years and have worked
with the VA Home Loan Guaranty Program since 1993. Approximately 70
percent of the loans my company makes are VA loans. In North Carolina,
loans guaranteed by VA are an important part of our market and their
use is increasing. During fiscal year (FY) 2015, 14,353 VA purchase
loans were originated in our state, up 12.9 percent from FY 2014. On a
personal note, I am a beneficiary of the VA Home Loan Guaranty Program.
The homes my parents purchased to raise me and my siblings were bought
with VA loans. In keeping with our family tradition, I served my
country and my first home was financed with a VA loan. For many
reasons, I am a strong advocate of this guaranty program.
In 1944, Congress established the VA Home Loan Guaranty Program,
under which an eligible veteran could obtain a low-interest, up to 100
percent loan-to-value (LTV) mortgage loan to buy a house. The program
was one of the major innovations and an important part of the original
Servicemen's Readjustment Act of 1944, commonly known as the ``GI
Bill.'' Since its inception, the objective of the program has been to
assist eligible veterans and active duty service members in becoming
homeowners. The VA program is designed to benefit men and women because
of their service to the United States, and is not intended to fulfill
general economic or social objectives.
MBA has always been a staunch supporter of the VA Loan Guaranty
Program and we believe it remains an important and viable program for
veterans and active duty military personnel. As credit markets have
tightened and loan underwriting has become stricter, finding zero-
downpayment mortgages has become increasingly difficult. Providing 100
percent LTV loans is a tremendous benefit to our veterans who have
dedicated their lives to serving our country and is crucial in military
communities.
I. Background
Based on VA and MBA data, VA guaranteed 629,087 loans totaling
$154.1 billion in calendar year (CY) 2015, to purchase or construct a
home, or refinance an existing home loan. This number is up from CY
2014, when VA guaranteed 483,229 mortgages totaling $111.7 billion.
Though VA lending is still a relatively small percentage of the overall
housing market, constituting 10 percent of the overall originations for
CY 2015, VA home loans have gained market share, increasing from 9
percent in CY 2014 and 7 percent in CY 2013. More remarkably, according
to 2014 Census and the National Association of Realtors (NAR) data, as
of January 7, 2016, homeownership among the veteran population is 76
percent, compared to 62.5 percent for the general population. The
borrowers who use the VA program for their homeownership financing are
as varied as the U.S. population. According to VA's 2015 Annual
Benefits report, African Americans comprised 10.6 percent of VA loans,
American Indian and Alaskan Natives comprised 8.3 percent, Hispanics
comprised 7.8 percent, and Asian and Pacific Islanders comprised 2.6
percent.
VA guaranteed loans are underwritten by private lenders to eligible
veterans for the purchase of owner-occupied homes. These loans are
comprised of both fixed- and adjustable-rate mortgages and can be used
for purchase or refinance. Lenders will generally loan up to four times
a veteran's available entitlement without a downpayment provided the
veteran is income and credit qualified and the property appraises for
the asking price. If the loan is approved, and the veteran is eligible,
VA will guaranty a portion of the loan to the lender. Although the VA
does not have a maximum loan amount, there are effective ``loan
limits'' for high-cost counties. The basic or primary VA guaranty is
$36,000, however, for loans that exceed $144,000, a guaranty of up to
25 percent of the loan amount is possible, and for loans that exceed
$417,000, a guaranty of the lesser of 25 percent of the VA county loan
limit or 25 percent of the loan amount is available. This guaranty
allows a veteran to obtain favorable financing terms while protecting
the lender against losses up to the amount guaranteed.
II. VA Loan Performance
Despite most of these borrowers not having ``skin in the game,'' VA
loans have continued to outperform their counterparts (see chart below,
based on MBA data). This demonstrates that the VA portfolio has been
able to sustain successful production and weather the turbulent market,
largely due to its historically conservative underwriting standards,
which include a residual income test. VA mortgages have always been
fully documented and fully underwritten loans on owner-occupied
properties.
----------------------------------------------------------------------------------------------------------------
Seriously Delinquent 3rd
Quarter 2015, % Foreclosure Starts, %
----------------------------------------------------------------------------------------------------------------
................................................ 3rd Quarter 2015
VA................................................ 2.85 0.38
FHA............................................... 5.39 0.61
Conventional...................................... 3.23 0.34
U.S. Total........................................ 3.57 0.38
----------------------------------------------------------------------------------------------------------------
Source: Mortgage Bankers Association
Although VA requires no downpayment and has no monthly mortgage
insurance, VA requires a mandatory funding fee that can be financed
into the loan. This fee must be paid at closing unless a borrower
receives service-connected disability payments each month that serve as
an exemption from the fee. The fee ranges from 2.15 to 3.3 percent of
the loan amount on purchases and 0.5 to 3.3 percent of the loan amount
on refinances. The fee varies depending on the type of loan, the
borrowers' type of military service (regular, Reserves, or National
Guard), whether the borrower is a first-time or subsequent loan user,
and whether the borrower makes a downpayment. First-time users' fees
are less than subsequent users. For borrowers refinancing to lower the
rate, the fee is 0.5 percent. This fee is a critical part of the VA
Loan Guaranty Program and allows the program to maintain funding for
future generations of military families.
III. Recommendations
MBA appreciates VA's continued support of veterans through its
policies and guidelines. MBA supports VA's primary objective of
increasing access to credit for deserving veterans and their families
through flexible underwriting criteria that gives lenders the ability
to qualify more veterans for homeownership. This objective is reflected
in VA's willingness to help veterans and lenders to achieve sustained
homeownership with the inclusion of a waiting period after a
foreclosure or bankruptcy, 100 percent financing options, and no
minimum credit score requirements. Additionally, it is critical to
acknowledge VA's responsiveness to lenders' concerns throughout the
loan process in efforts to avoid significant delays and ensure that
loans are processed in a timely manner. To this end, MBA recognizes
VA's efforts to work effectively with lenders on a one-on-one basis,
valuing the need to establish strong relationships with participating
lenders. These efforts help keep the program relevant and encourage
continued lender participation.
Although the VA program has had an excellent track record of
providing benefits to veterans and active duty military personnel, MBA
has recommendations to further improve this important program. To this
end, MBA supports the creation of a lender advisory panel to better
align VA's standard policies with other industry programs to ensure VA
programming remains current, competitive, and adaptive to the changing
needs of its borrowers.
1. Originating VA Loans
MBA offers the following origination recommendations to keep the
loan program effective and relevant in the marketplace today. Enhancing
this important program will encourage more lenders to participate in
the VA program and ensure direct benefits for military families.
a. VA Guidelines:
MBA recommends that VA issue a final QM rule that establishes
clear, bright lines in response to questions lenders have raised
following the release of the interim final rule on May 9, 2014. When
this final rule is issued, MBA urges VA to allow for an appropriate
implementation period so that lenders can change processes and
procedures and to obtain any necessary clarifications from the VA. When
guidance is promulgated and effective immediately, many lenders are not
afforded the sufficient time necessary to test their systems to ensure
that they are in compliance with VA guidelines.
MBA commends VA for making a number of clarifications in its
recently released Circular 26-16-03, specifically clarifying that the
``allowable fees'' included in the Interest Rate Reduction Refinance
Loan (IRRRL) recoupment calculation are not intended to include prepaid
items such as real estate taxes and homeowners insurance. In the
interim final rule, for an IRRRL to be accorded QM safe harbor status,
all allowable fees and charges financed as part of the loan or paid at
closing had to be recouped within 36 months through regular mortgage
payments, which caused certain IRRRL originations to fall outside of QM
safe harbor status in one month, and inside it in the next, based on
proximity to tax season.
This Circular, however, also changed VA policy by clarifying that
for an IRRRL to be QM safe harbor, the loan being refinanced must have
been originated at least six months before the new loan's closing and
at least six payments have been made on the original loan. In VA's
interim final rule, a lender needed to only wait six months from
closing. The inclusion of a six month payment requirement adds an
additional 45-60 day period after closing. This policy change will have
implications on the way in which lenders are processing IRRRLs and will
result in lender confusion without further clarification or a delayed
effective date for this policy change.
MBA urges VA to repeat these clarifications in its final QM rule.
Providing clarity to IRRRL guidelines through a source as authoritative
as a final rulemaking will create a sense of certainty for lenders and
a consistent application of the rules throughout the industry. Without
such authoritative guidance, some lenders may still be hesitant to take
on the risks associated with loans that are not formally deemed safe
harbor loans.
b. Certificate of Eligibility Process:
Once an active duty service member or veteran establishes their
eligibility for a VA guaranteed loan, eligibility to obtain VA home
loan benefits must be confirmed by obtaining a Certificate of
Eligibility (COE). A COE is an official document, issued upon proof of
military service, to verify to the lender a borrower is eligible for a
VA-backed loan. Without a COE, lenders are unable to complete the
processing of a VA guaranteed loan. The COE can be obtained by the
prospective VA borrower themselves, online, by mail, or by visiting a
nearby Regional Loan Center, or the document may be obtained by a VA
approved lender through VA's Automated Certificate of Eligibility (ACE)
system. The ACE system was designed to automatically generate a COE,
which is intended to make it easier for the veteran and lender to
obtain eligibility verification. Though ACE automatic certifications
have been significantly improved for veteran borrowers over the past
year, some lenders still struggle with the additional verification
needed for COEs generated and housed in the ACE system. In order to
protect lender guarantees, lenders must be able to verify the original
date a COE was issued due to individual lender requirements.
Additionally, there is no mechanism for lenders to verify whether a COE
has already been used by another lender. Though ACE has created a
centralized database to hold all veteran COEs, without the ability to
obtain additional verification information on these issuances, lenders
will still be unable to accept these certifications, which ultimately
will delay the VA loan process for a deserving veteran who is eligible
for a loan.
MBA appreciates the strides VA has made in significantly improving
the COE process for veterans. In order to make this system even more
user-friendly, MBA encourages VA to continue to improve the COE process
and create a business to government communication system that assigns a
case number to each COE request. By streamlining the processing system,
similar to other loan program systems, lenders will have easier access
to COE information.
c. Appraisals:
Accurate and timely appraisals are critical to a successful
origination process. MBA recommends VA work with the industry to refine
its appraisal process. Currently, VA operates a ``closed'' panel of
appraisers who must be approved by VA to be a part of the panel. VA
approved appraisers must be licensed, and have at least five years of
experience. To maintain the independence of the appraisal process, VA
completely controls the valuation process by setting fees, turn times,
and assigning appraisers to assignments on a rotating and randomized
basis. VA may also remove an appraiser from the panel based on failure
to follow VA guidelines.
Although this process works well for many, some have voiced
concerns regarding appraiser availability and the length of appraisal
processing times. Due to the limited number of VA-approved appraisers,
some lenders are concerned about sufficient appraiser availability to
cover the demand for VA appraisals. Additionally, some lenders have
reported the overall VA appraisal process can result in extended
processing times that have the potential to delay the VA loan process.
With these concerns in mind, MBA welcomes the opportunity to work
with VA on improving the appraisal process within the bounds of VA's
statutory framework. MBA encourages VA to re-evaluate its appraisal
process and we look forward to working with VA staff on developing
enhancements that will improve appraiser efficiency while maintaining
the independence and integrity of the current process.
d. Technology Support:
Given increasing developments in technological capabilities and a
fast-changing market, VA requires additional support for technology
developments in order to increase program competitiveness and support
increased efficiencies within its loan processes. MBA supports the
allocation of increased funding and resources for VA to work with its
participating lenders to improve its technology interface, including
its appraisal software and lender portal, to meet the needs of both
lenders and VA and increase technological integration with the
industry. This will also enable VA to improve current systems and
databases to make processes more user-friendly for both lenders and
veterans. Additionally, MBA requests resources to support VA efforts to
educate veterans on its homeownership program by better understanding
the decision-making process of veterans when financing a home and to
monitor and measure individual VA appraiser performance to help
streamline the appraisal process. These initiatives are critical to the
further improvement and expansion of the VA loan program.
2. Servicing VA Loans
MBA appreciates VA's continued support of veterans through its
servicing guidance and believes that VA's efforts towards efficient
communication benefits the program by providing transparency within key
processes. MBA recognizes many useful communication tools VA uses to
help lenders access contact information for specific groups such as
Regional Loan Centers and the Construction and Valuation Section (C&V)
to make the loan process more efficient. Additionally, the
functionality of the VALERI Helpdesk serves as a great resource for
loan-level answers. MBA also values VA's open guidelines that give
servicers the opportunity to do what is in the best interest of the
veteran borrower. Though guidelines state a required end result, no
specific actions are required to achieve it. This flexibility allows
servicers to work with a borrower to make decisions that best benefit
their particular circumstances. This program flexibility benefits
lenders, borrowers, and the VA in adjusting to a borrower's specific
needs.
Though there are many positive VA servicing guidelines, there are
some changes VA could make to allow its servicing partners to better
serve veteran borrowers and address the challenges unique to servicing
VA loans. MBA offers the following servicing recommendations to
simplify and create more cost-effective processes that will further
improve the program.
a. Reauthorization of the Extended Foreclosure Protections in the
Servicemember Civil Relief Act (SCRA).
MBA calls on Congress to reauthorize the extended foreclosure
protections afforded to active-duty military provided by the SCRA.
During the financial crisis, Congress extended the SCRA's foreclosure
moratorium for active-duty military from three months to one year. This
extension has been continuously renewed until Congress failed to extend
this provision at the end of 2015. MBA urges the House to reauthorize
SCRA as the Senate did late last year and to ultimately enact a
permanent extension of this important protection for active duty
military.
b. Assumptions:
With many in the industry anticipating a rise in interest rates
over the next few years, a growing opportunity for veterans seeking
homeownership will be the assumption of an existing VA loan that was
previously originated at lower than market rate. Today, many VA loans
are assumable at the discretion of the servicer of the original loan.
However, VA rules cap the maximum amount a lender is allowed to charge
to process an assumption at either $250 or $300, plus the credit
report, depending on whether the lender has automatic authority to
underwrite the file on behalf of VA. This fee cap was set many years
ago, and has not been increased or indexed for inflation. In practice,
the actual cost of processing a loan assumption for a new borrower is
several times this amount. Additionally, many servicing platforms are
not properly equipped to process the required elements of an
assumption, such as a creditworthiness review of the assuming party.
In order to make processing VA assumptions viable for servicers,
MBA encourages VA to ensure that those processing VA assumptions are
able to cover their processing expenses. This can be achieved by
increasing the maximum assumption fee servicers are allowed to charge.
MBA offers to assist VA with this initiative to offer veterans the
opportunity to utilize assumptions to further expand homeownership
opportunities at below market rates. The availability of assumptions
will also increase home values for veterans looking to sell their homes
by making below market rate loans available to any buyer, ultimately
expanding access to credit for all American consumers.
c. Improve the Issuance Process for Disability Benefits:
MBA commends VA on its ability to work with VA's loan technicians
to push for disability benefits to get veterans to workout options. In
fact, MBA urges VA to reduce turnaround times so servicers can help
more veteran borrowers. In some instances veteran borrowers are unable
to make their payments because their disability benefits have not been
processed. As a result, these veterans may be flagged as being in
danger of losing their home. The delay in processing disability
benefits not only hurts veterans by putting them in danger of losing
their homes, despite their ability to make their loan payments if
benefits were paid on time, delays also have the potential to raise VA
costs because in cases of defaulted loans, VA will have to pay the cost
of the guaranty.
MBA recommends that VA establish a formalized process to issue
disability benefits owed to deserving veterans. Through this process,
VA would be able to coordinate the payment of disability benefits in
tandem with housing loan payment due dates. A formalized process will
grant veterans the benefits they are owed, keep deserving veterans in
their homes, and decrease VA costs by improving VA program
coordination.
d. Train Regional Loan Center team members for specific states:
While centralizing the Regional Loan Center staff has
organizational and communication benefits, the process has resulted in
the loss of some expertise in state specific rules or requirements. MBA
encourages VA to retain the benefits of centralization by training some
Regional Loan Center staff to cover specific state laws and
requirements.
e. Expand Loss Mitigation Options:
There is a balance in loss mitigation between doing everything
possible to keep a borrower in their home while protecting the taxpayer
investment in the program. While VA loss mitigation options do afford
some flexibility to servicers, the available program options could and
should be expanded to allow servicers more leeway to meet the needs of
the borrower. To this end, MBA suggests working with Ginnie Mae to
develop programs that would facilitate pooling of longer term-extension
modifications and other similar programmatic solutions that may help
increase the tools a servicer can deploy in loss mitigation.
3. Specially Adaptive Housing Grant Programs
VA provides two types of grants to service members and veterans
with permanent and total service-connected disabilities to help
purchase or construct an adapted home or to modify an existing home to
accommodate a disability. These programs are the Specially Adapted
Housing (SAH) grant and the Special Housing Adaptation (SHA) grant.
Specifically, the SAH grant program helps veterans with certain
service-connected disabilities to live independently in a barrier-free
environment by providing funds to construct a specially adapted home on
land to be acquired, build a home on land already owned if it is
suitable for specially adapted housing, remodel an existing home if it
can be made suitable for specially adapted housing, or to apply against
the unpaid principal mortgage balance of an adapted home already
acquired without the assistance of a VA grant. These grants are
critical to allowing disabled veterans to live independently after they
return home from their dedicated service. According to VA data, in FY
2014, VA approved more than 1,154 SAH grants totaling over $61 million
in home modifications for disabled service members.
MBA urges Congress and the VA to ensure that this program is fully
funded and fully staffed to provide disabled veterans with access to
the valuable resources and benefits afforded by SAH grants. These
benefits can be used for, but are not limited to, the building of wider
doorways and hallways to accommodate wheelchairs, ramps or platform
lifts, and wheelchair accessible bathrooms. Adding these housing
features can be time consuming and expensive, but these grant programs
are designed to reduce burdens and costs for deserving veterans. The
robust continuation of this grant program is critical to the care and
rehabilitation of our wounded veterans and a necessary benefit that
will help our veterans regain their independence.
IV. Conclusion
MBA welcomes the opportunity to work with the VA and Congress to
enhance the already-existing benefits of the VA Loan Guaranty Program.
MBA and its members are willing and eager to work with this
subcommittee and the VA staff in an effort to develop and implement our
recommendations in order to increase the attractiveness of the VA
program and, ultimately, the number of available homeownership
opportunities for the many deserving eligible veterans and their
families.
We thank this subcommittee for giving MBA the opportunity to voice
our appreciation for and dedication to the VA Home Loan Guaranty
Program. This program is invaluable to the brave men and women who have
sacrificed for our country. MBA is confident the enhancements suggested
today will help make the program even more beneficial to veterans and
their families. We look forward to working with you and the
administration to help sustain the VA Home Loan Guaranty Program for
many generations of veterans to come.
Prepared Statement of Sherri Meadows
INTRODUCTION
Chairman Wenstrup, Ranking Member Takano, and members of the
Subcommittee, My name is Sherri Meadows. I have been a REALTOR for 33
years, and am the broker/owner of three Keller Williams offices in
Florida. In 2014 I was elected President of the Florida Association of
REALTORS, and today I serve as the 2016 Vice President of the NATIONAL
ASSOCIATION OF REALTORS. I am here representing more than one million
REALTORS working in all aspects of real estate.
The NATIONAL ASSOCIATION OF REALTORS is a strong supporter of
housing opportunities for veterans. REALTORS commend the Subcommittee
for its attention to issues impacting American veterans. According to
the US Census, there were 19.3 million military veterans in the United
States in 2014. The Department of Veterans Affairs (VA) Home Loan
Guaranty program serves a large population and is doing it well. The
homeownership rate for veterans was 76 percent in 2014 - well above the
national average of 64 percent.
The VA Home Loan Guaranty Program
In 2014, the GI bill turned 70 years old, and with it, the VA Home
Loan Guaranty program did as well. The very first loan was made that
same year right here in Washington, DC. This entitlement program
encourages private lenders to offer favorable home loan terms to
qualified veterans. Today, the VA has guaranteed nearly 22 million
loans to American veterans, with a total loan volume of over $1.7
trillion. The number of veterans eligible to buy a home is increasing.
Active military and veterans comprised 21 percent of all home buyers in
2015, according to NAR's 2015 Profile of Home Buyers and Sellers report
released in November 2015.
The VA home loan guaranty program is a vital homeownership tool
that provides veterans with a centralized, affordable, and accessible
method of purchasing homes as a benefit for their service to our
nation.
VA's strong yet flexible underwriting allows veterans the ability
to purchase a home of their own without depleting their savings. More
than 82 percent of veterans utilize the zero-downpayment option
provided by VA. Yet, despite this, VA's delinquency rate is very low.
In fact, VA's foreclosure inventory rate (the percentage of loans in
foreclosure) has bested that of even prime mortgage loans for 25 of the
last 30 quarters, according to the Mortgage Bankers Association's
National Delinquency Survey data. According to the 2015 3rd quarter MBA
data, VA's seriously delinquent rate was 1.46 percent, and the
foreclosure rate was even lower at 1.39 percent. That number is very
comparable to conventional lending products, which had a foreclosure
rate of 1.10 percent, and a delinquency rate of 0.97 percent. This is
the experience even when conventional lending rules are widely believed
to be very tight with high downpayment requirements. \1\
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\1\ National Delinquency Survey, Mortgage Bankers Association,
Q315.
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How does VA have such a successful program with zero down? VA
requires participating lenders to ensure that the loan payments are
appropriate for the veteran's present and anticipated income and
expenses and solidly underwrite the loans using debt-to-income ratios
and credit history. But, in contrast to conventional lending and even
FHA, VA also uses a residual income test. Residual income calculates
how much income a borrower will have left for other monthly expenses
after home payments. This calculation considers the borrower's complete
financial picture, and ensures money is available for emergencies or
other contingencies.
VA also requires the use of manual underwriting for those veterans
who marginally qualify. For these borrowers, lenders must look at non-
traditional factors and give veterans the benefit of the doubt when
making a decision.
This program shows that accurate and proper underwriting is the key
to successful low-downpayment lending programs. Despite all the talk
about ``skin in the game'', loans with appropriate underwriting and
zero down can successfully balance risk and provide for sustainable
homeownership.
In addition, the VA home loan program offers protections for
veteran borrowers when unexpected financial difficulties occur by
offering a variety of supplemental loan servicing programs to help
military families avoid foreclosure. VA offers financial counseling and
can serve as an intermediary between the veterans and the private
lender holding the loan. VA will try and negotiate repayment terms for
veteran borrowers in financial difficulty. Under some specific
conditions, VA may also purchase the loan and allow the borrower to
make payments directly to the VA at a reduced interest rate.
These interventions not only help the veteran retain their home,
but save the VA money by avoiding the payment of a guaranty claim.
Since 2009, more than half a million veterans, active-duty members, and
survivors kept their homes, at a savings to the Government of over
$16.3 billion.
Specially Adapted Housing Programs
In addition to our strong support for the underlying VA loan
program, NAR strongly supports grant programs that allow disabled
veterans to own a home that accommodates their needs. VA provides two
types of grants to service members and veterans with service-connected
disabilities to help purchase or construct an adapted home, or modify
an existing home to accommodate a disability. These grants are critical
to allowing disabled veterans to live independently, and a critical
part of our commitment to the benefits provided in return for their
service. In FY 15, VA approved more than 1,800 grants totaling $96M in
home modifications for seriously injured service members.
NAR urges Congress and the VA to ensure that this program is fully
funded and fully staffed, so that veterans with disabilities can access
this valuable resource. Making a home suitable for an individual's
disability is expensive and time consuming. The Specially Adapted
Housing programs are designed to reduce these costs for our veterans.
Our wounded warriors need assurances that their needs will be met
through this program, and that applications will be received, reviewed
and approved without unnecessary delay, so they can move forward with
their lives and regain their independence.
REALTOR Outreach to Veterans and Active Duty Service Members
Many REALTORS are veterans themselves, and NAR is proud to support
our military members and has created special pins that recognize the
service of REALTORS in each of the military branches. Our members wear
these proudly to display their veteran status.
The National Association of REALTORS has also created an
educational program for our members to learn how to best service our
military families. The Military Relocation Professional Certificate
program focuses on educating real estate professionals about working
with current and former military service members to find the housing
solutions that best suit their needs and take full advantage of
military benefits and support. To date 6,868 REALTORS have earned the
certification.
NAR also has an ongoing partnership with the Department of Veterans
Affairs. Each May, REALTORS from across the nation attend a briefing
at the Department regarding the home loan program and discuss ways to
make it work to the greatest benefit to veterans. NAR has produced a
short video, ``VA Home Loans - 70 Years and Counting \2\'' to educate
REALTORS on the program, and has worked to disseminate a video
produced by the VA entitled, ``VA Home Loan Program: Why Should
REALTORS Work with VA? \3\''
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\2\ http://www.realtor.org/videos/veterans-home-loans-70-years-and-
counting
\3\ https://www.youtube.com/watch?v=O90LCcea--
Uo&list=PLA93A5833057D78B7
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Changes to the VA Home Loan Guaranty Program
This Committee was successful in 2008 and 2012 in making a number
of changes to the VA home loan guaranty, making this program even more
useful for veterans. The National Association of REALTORS offers
several other changes that could further enhance the program.
Consider High Cost Loan Limits: The VA Home Loan guarantee program
is unique. It is not simply a federal loan program - it is an
entitlement promised to our military members in return for their
service to our nation.
A significant number of veterans live in urban areas. States with
the largest veteran population are California, Texas, and my home state
of Florida. These three states account for about 24 percent of the
total veteran population. Both California and Florida include areas
where the median prices of homes are well above the national average.
The current loan limits simply cannot provide all veterans with the
full range of access. Higher limits, which provided loans up to 125
percent of local area median price, expired in 2014. NAR urges the
Subcommittee to take action to give veterans the freedom to purchase a
home where they choose to live. Veterans in high costs areas should not
be penalized for geographic differences in the housing market.
VA Fee Requirements: To ensure the veterans do not have to pay
excessive fees in the home purchase transaction, VA rules limit the
amount veterans can be charged for closing costs and even fees like
termite and other inspections. While NAR fully supports VA's efforts to
limit fees paid by veterans, our members report that veterans using the
VA Home Loan Guaranty program have found themselves at a disadvantage
when purchasing a home because of these rules. NAR believes that VA
borrowers should be allowed to negotiate fees with sellers, just as
non-VA borrows do, as a part of home purchase transactions.
In some purchase transactions, special certifications and
inspections stemming from VA policy guidance are required by lenders.
Today, these certifications and inspections involve fees that must be
paid by the seller, as VA limits the fees veterans can pay in a home
purchase transaction. If the seller refuses, the veteran is denied the
opportunity to purchase the home of his or her choice.
Some sellers have refused to even accept offers from VA borrowers,
due to the inability of VA buyers to pay certain customary buyer-paid
fees. This issue is exacerbated by the current low inventory of homes.
When there is a multiple bid situation on a home, veteran buyers are
often at a disadvantage, because buyers do not want to have to abide by
VA's rules. NAR believes that VA borrowers should be allowed to
negotiate fees with sellers as a normal part of home purchase
transactions.
On November 7, 2014, the Department of Veterans Affairs issued new
guidance that allows veterans to negotiate the payment of wood
destroying insect inspection fees in select southern and western
states. NAR and VA continue to work together to find ways to improve
the loan process for Veterans. NAR has urged VA to allow buyers to
negotiate the payment of certain fees, such as pest inspections. While
pest inspection fee payments will not be allowed in all states, this
policy change is a step in the right direction.
REALTORS urge VA to create a level playing field, and provide
veterans with the flexibility to negotiate all fees, so they aren't
disadvantaged when trying to buy a home.
Incentivize a Program for Renovation/Rehabilitation: NAR urges the
US Department of Veterans Affairs (VA) to incentivize lenders to use
existing authority to offer a Veterans Renovation Pilot Program similar
to the Federal Housing Administration's (FHA) 203(k) Program. The pilot
could be run through VA's Loan Guaranty Program, which allows a veteran
to purchase, repair, alter, renovate, and improve a home under USC
Title 38, section 3710. Like FHA's 203(k) Program, this pilot would
promote homeownership and be an important tool for community and
neighborhood revitalization and stabilization. The program would also
be effective in areas with a large stock of older homes in need of
renovation, just as the FHA program has been for years. Under the
Veterans Renovation Pilot Program, veterans would use their guaranty to
purchase single family homes in need of renovation and repair.
Condominium units would also be eligible. The borrower gets just one
mortgage loan, at a long-term fixed rate, to finance both the
acquisition and the rehabilitation of the property. To provide funds
for the rehabilitation, the mortgage amount is based on the projected
value of the property with the work completed, taking into account the
cost of the work. Renovations should be completed only by licensed and
bonded contractors. This program has been very successful for FHA
borrowers, and should be offered to veterans as well.
Conclusion
I thank the Subcommittee for this opportunity to share the views of
NAR regarding veterans housing. The NATIONAL ASSOCIATION OF REALTORS
strongly supports housing opportunities for our nation's veterans and
active duty military professionals. It is our hope that the
Subcommittee will support our recommendations for enhancing and
improving the VA home loan guaranty program, so it may be a real
benefit to those who have so bravely served our country.
Prepared Statement of Mike Frueh
Good afternoon Chairman Wenstrup, Ranking Member Takano, and other
Members of the Subcommittee. Thank you for the opportunity to appear
before you today to discuss the status and accomplishments of the
Department of Veterans Affairs (VA) Home Loan Guaranty Program, to
include the Specially Adapted Housing Program.
Overview
The mission of VA's Home Loan Program is to maximize opportunities
for Veterans and Servicemembers to obtain, retain, and adapt homes by
providing a viable and fiscally responsible benefit in recognition of
their service to the Nation. We empower Veterans with information and
access to innovative, quality products and services by engaging our
industry partners and helping them deliver high-quality benefits to
Veterans in an efficient and effective manner. Through these strong
partnerships, our focus on Veterans, and our continuous drive to
innovatively enhance operations and performance, we have built a high-
performing program that has provided nearly 22 million loans totaling
over $1.7 trillion over the last 70-plus years.
Program Data and Accomplishments
Recent efforts increasing Veteran access to and stakeholder
knowledge of the program have contributed to a number of beneficial
outcomes for Veterans. Interest rates for VA loans remain lower than
those of conventional and Federal Housing Administration (FHA) loans,
and VA captured approximately ten percent of the mortgage market in FY
2015, guaranteeing a record of more than 631,000 loans. VA has provided
more loan guaranties over the past six fiscal years (2.9 million) than
it did in the ten years prior (2.5 million).
Despite the worst housing-market crash since the Great Depression,
VA has worked with private-sector loan servicers to help over 500,000
Veterans and their families retain their homes or avoid foreclosure
since 2009. This equates to the United States taxpayer avoiding over
$16.3 billion in foreclosure claim payments. Last year alone, VA saved
a record 90,000 Veterans from foreclosure, which equates to a savings
of $2.8 billion in avoided claim payments. Further, VA's foreclosure
inventory rate (the percentage of loans in foreclosure) has been better
than conventional prime mortgage loans for 25 of the last 30 quarters
according to the Mortgage Bankers Association's National Delinquency
Survey data.
VA has seen significant increases in Veterans using the Specially
Adapted Housing (SAH) program in recent years as well. The SAH program
is designed to ensure eligible seriously disabled Veterans have the
ability to improve independent living through the purchase and/or
construction of an adapted home, or the modification of an existing
home to meet their needs. In FY 2015, we approved more than 1,800
grants, totaling $96 million, which represents an increase of
approximately 44 percent over FY 2014 and an increase of approximately
65 percent over FY 2013. Additionally, FY 2015's approvals include a
best-ever 13 grants for Veterans living outside of the U.S. Recent
statutory expansions in the SAH program, coupled with military
drawdowns and VA's success in reducing disability compensation claims
processing time, have contributed to the overall increase in SAH-
eligible Veterans. VA's success in helping these Veterans reach grant-
approval is largely due to the streamlined policies and procedures that
VA implemented in February 2014.
VA has also sought to increase awareness and usage of the Native
American Direct Loan (NADL) Program by reinvigorating outreach efforts
to Native American Veterans and Tribal governments. The NADL Program
allows VA to provide direct loan financing to Veterans seeking to live
on Federal Trust lands. In order for VA to provide financing, a
memorandum of understanding (MOU) must first be signed between the
Tribal government and VA. During FY 2015, VA held 44 outreach events
with over 80 tribes, and recorded nearly 1,100 individual phone or
email communications with various Tribal governments. This work
translated into eight new MOUs and 18 new loans in FY 2015, bringing
the program-to-date totals to 93 MOUs and 989 loans originated.
Process and Technological Enhancements
VA has worked to provide world-class customer service to a recent
influx of Veteran borrowers by enhancing and implementing new
technology and nationalizing or streamlining key work products and
processes. One such nationalized process is the Home Loan Program's
certificate of eligibility (COE) workload. The COE verifies to the
lender that a Veteran is eligible for a VA-guaranteed loan. While the
percent of COEs issued electronically and in a matter of seconds rose
to a record 67 percent in FY 2015, some COEs cannot be processed
automatically by the system and require manual intervention. In order
to increase VA's efficiency in processing those requests, VA began
distributing those COE requests across staff at VA's nine regional Home
Loan Program offices. In May 2015, VA's inventory of pending home loan
COEs was over 15,000, with an average processing time of 26 business
days. By August 2015, that inventory declined to fewer than 4,000, with
an average processing time of two business days. Currently, there are
approximately 2,000 pending COEs, with an average processing time of
two business days.
VA also recently implemented two initiatives that provide key
program and industry benchmarking data necessary for enhanced
monitoring of loan, lender, and appraiser performance. As part of the
first phase of an initiative to develop and implement a risk-based loan
review environment, VA's Full File Loan Review (FFLR) initiative is
enhancing our electronic collection of over 300 data points from loan
closing documents and our ability to standardize and analyze that data.
Additionally, in order to ensure quality and timeliness of
appraisals, VA implemented the Automated Valuation Model/Appraisal
Management System (AVM/AMS), which aggregates appraisal data on VA
loans as well as other loan types in the marketplace. The AVM/AMS tool
uses an automated, rules-based approach to identify areas of risk, and
provides VA with an appraisal risk score and comprehensive and detailed
data for each appraisal in one report. This tool provides VA and its
lending partners with significant time savings in appraisal reviews and
issuance of the notice of value, an important benefit given the
program's recent upward trend in loan volume.
Outreach and Program Education
In recent years, VA has focused outreach and education efforts on
homebuyer literacy, general program and benefit information, the NADL
Program, and foreclosure avoidance. In order to deliver information
directly and further the interests of Veteran beneficiaries, VA
participates in many interagency workgroups and private-sector
collaborations and attends numerous mortgage industry events each year.
VA also develops and delivers numerous informational products such as
brochures, posters, and personal online testimonial videos from
Veterans who have taken advantage of the assistance VA provides in
avoiding foreclosure and in adapting a home through the SAH grant
program. In response to a rapidly changing mortgage industry and the
need for lenders to obtain real-time answers to pressing questions
about program policy changes, VA has developed a number of live,
interactive training broadcasts that we later make available to those
unable to attend the live broadcasts.
VA takes a more individualized approach to outreach under the SAH
Program. Due to the complex and individual nature of each grant, it is
imperative for VA's SAH agents to consistently, frequently, and
personally communicate with Veterans throughout the entire process.
Each individual Veteran's disability and housing situation is unique,
and as such requires personalized case management from VA's SAH Agents.
While the standard outreach methods, such as letters, are used in
notifying the Veteran of his/her eligibility, the SAH staff adds
personalized outreach from that point forward. Initial program
interviews with Veterans are conducted in-person within 30 business
days of eligibility determination, and personal agent-to-Veteran
contact occurs at least every 30 business days throughout the SAH
process. A typical SAH case involves numerous communications and in-
person meetings to best understand and communicate the Veteran's unique
needs and to help the Veteran navigate the home adaptation process
through to completion. VA also conducts yearly outreach to all Veterans
who are known to be eligible for the SAH program.
Inter-Agency Collaboration
VA and the Department of Agriculture (USDA) have forged a new
partnership to create efficiency in managing foreclosed property
assets. Since 2003, and as a result of an OMB A-76 study, VA's business
model has been one in which a private-sector contractor is hired to
perform all functions required to manage, market, and sell the
properties VA acquires from lenders as a result of foreclosure. After
numerous discussions between USDA and VA, the two agencies found that
this privatized business model would dramatically increase the
efficiency with which USDA disposed of its acquired properties and
drastically lower costs incurred for each property sold.
In fall 2015, VA and USDA established a pilot program under which
VA leverages its private-sector contract to manage, market, and sell
USDA's foreclosed property inventory. Since sales under the program
have only recently begun, significant performance data is not yet
available; however, the joint value proposition analysis prepared in
advance of the inter-agency agreement projects that the program will
generate annual taxpayer savings of over $9 million. VA looks forward
to continuing work with USDA to realize this projected success.
Upcoming Activities and Enhancements
In the coming year, VA will be working hard to provide Veterans
with continued exceptional service. In 2016, VA will continue its focus
on nationalizing and standardizing processes to ensure the program is
operating in an efficient and effective manner. One such focus is an
initiative to reduce hold-times and increase first-call resolution
rates for calls coming in to the Home Loan Program. By moving to one
telephone number for all Home Loan Program offices, standardizing
automated call scripts, and nationalizing the incoming call queue, VA
expects Veteran and lender hold times will be reduced and callers will
be able to obtain the information or response desired on their first
call attempt.
Additionally, VA will enhance Veterans' experience with the SAH
grant process by producing a revised Handbook for Design, which
Veterans, contractors, and compliance inspectors will use as a helpful
resource throughout the grant and construction process. VA will release
a new online training module for SAH agents so that they can continue
to provide accurate program information and high levels of customer
service to SAH grantees. The program will also continue its focus on
identifying new ways to handle challenging and problematic SAH cases,
such as those involving severe structural defects resulting from poor
workmanship or contractor negligence.
VA will develop a risk-based review process for appraisals and
appraisers, and for its post-closing loan review program. Risk-based
reviews, facilitated by the AVM/AMS and FFLR technology, and developed
using statistical methods, will allow VA to identify risk indicators in
its loan and appraisal data and target high-risk cases for review. From
an oversight perspective, VA will enhance its ability to monitor key
program stakeholders and provide them with more detailed performance
feedback.
Further, VA's new SAH Assistive Technology (SAHAT) grant program
will be poised to award its first grants in April 2016, providing
funding to individuals and entities for the purpose of developing
assistive technologies related to housing. We look forward to receiving
a number of qualifying proposals/applications from interested parties
in early 2016, and we are eager to see how the new and innovative
technologies could enhance Veterans' abilities to live independently in
barrier-free environments.
Finally, VA will re-compete the private fee-for-service contract
that provides the VA Loan Electronic Reporting Interface (VALERI) in FY
2016. VALERI is a software-as-a-service solution, deployed in 2008,
that allows VA to monitor status on every VA-guaranteed loan, level and
distribute work overnight, service and process foreclosure claims
electronically, and monitor private-sector loan servicers' performance
and compliance with VA policy and regulations. Although this technology
has enabled VA to realize significant success in helping Veterans and
their families retain their homes or avoid foreclosure, it requires a
refresh. VA will be working diligently to identify different
contractual and technological solutions to ensure VA's loan servicing
technology is modernized and Veterans continue to receive the best
service possible.
Legislative Matters
VA looks forward to continued discussions with the Subcommittee on
how Veterans can be served by collaborative administration of VA's SAH
and Vocational Rehabilitation and Employment programs. As the
Subcommittee identified last year, legislation would be required to
effectuate the coordinated administration. VA testified to a specific
section of draft bill H.R. 2344 before this Subcommittee, which
proposed that housing modifications required under a vocational
rehabilitation program may be provided under the SAH Program. VA
supported the purpose of the bill, but outlined in written testimony
some concerns with the bill as drafted. VA appreciates the
Subcommittee's interest in helping identify ways in which we can work
together to serve Veterans through streamlined benefit programs, and we
stand ready to provide any additional technical assistance requested of
us in the coming year.
Conclusion
Mr. Chairman, the coming months at VA will be busy and challenging,
but I know we will continue to provide our Nation's Veterans with
efficient, effective, and meaningful programs centered on meeting their
homeownership, home retention, and home adaptation needs. Thank you for
your continued support of our programs and for this opportunity to
speak today. This concludes my testimony, and I welcome any questions
that you or other Members of the Subcommittee may have.
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