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Mortgage News Daily combines the expertise of some of the housing industry's leading minds with the power of social media to offer an always lively, constantly evolving web community. MND communicates breaking news, streams video, and provides expert opinion and commentary to a community of interested market professionals and curious consumers.MBA: Risk Retention Reform Should Not Include Guaranteed Loan Programs
A spokesperson for the Mortgage Bankers Association (MBA) told a House
subcommittee on Thursday that Veterans Administration (VA) loans have performed
better during the financial crisis than almost any other type of loan and care
should be taken to avoid including the VA and other guaranteed loan programs in
proposed new lending measures "that might make the program less strong."
James H. Danis, President of a North Carolina mortgage company,
represented the MBA at a hearing on "The Status of the Loan Guarantee
Program" before the House Veterans Affairs Subcommittee on Economic
Opportunity. He told the members that VA
loans are providing a valuable service to veterans at a time when finding
affordable low-down payment mortgages is very difficult.
Through FY 2009, he said, VA guaranteed more than 18.7 million
mortgages worth $1 trillion for purchasing, constructing, or refinancing a
home. While VA loans are just a fraction
of the market - 4.2 percent of originations in 2008 - the number is growing
with the 325,673 loans made in 2009 nearly doubling the number a year earlier. "The
VA program has been a tremendous success," he said, "and the numbers
pretty much speak for themselves. The
homeownership rate among veterans is astounding - 82 percent compared to 67
percent for the general population."
Danis said that VA loans have outperformed their counterparts through
the recent housing crisis even though most of the borrowers have no "skin
in the game." According to MBA
data, he said, the serious delinquency rate for VA loans during the first
quarter of 2010 was 5.29 percent, well below the 7 percent delinquency rate for
prime loans.
He credited the ability of
the VA portfolio to weather the turbulent market because of its conservative
underwriting standards which have always allowed only fully documented and
underwritten loans on owner-occupied properties.
Danis said to keep the VA
program strong Congress "should avoid mandating costly new risk retention requirements
that could cripple the program and harm our economic recovery." Both the House and the Senate are considering
financial reform bills with provisions that would require lenders to retain a 5
percent ownership in any mortgage they originate, sell, or securitize. He said this provision will directly hurt both
the VA program and small independent lenders such as his company which serve
military communities. Not only should VA
loans be specifically exempted from this requirement, he said, so should other
loans or securities insured or guaranteed by the government including FHA and USDA
Rural Housing.
"Failure to exclude the VA and other safe and properly underwritten
loans," he said, "will negatively affect the housing recovery and
veterans' opportunities to secure affordable home mortgages."
Congress should also
continue the higher loan limits that have been available to VA borrowers for
the last two years. The higher limits,
he said, along with a second provision of the Veterans Benefits Improvement Act
of 2008 which allows borrowers to refinance 100 percent of their home, ensure
that veterans who reside in high-cost areas can enjoy their much deserved
housing benefits.
Another improvement
suggested by Danis and the MBA is to review and update the VA program and align
it with prudent industry standards that would give management the flexibility
to make changes to keep the program competitive and relevant in a rapidly
changing market. Among the specific
suggestions he made was that the VA should review its fees and charges and
align them with FHA and conventional products and simplify its policy to allow
borrowers to pay reasonable and customary fees to make the loans more
competitive. He also told that members
that the adoption of the Home Valuation Code of Conduct (HVCC) has essentially
made The Appraisal System (TAS) unnecessary as HVCC has "raised the
bar" for the entire appraisal industry.
Still a third area for improvement, according to Danis, would be to
update the VA's residual income tables to reflect new economic realities.
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MBA: Risk Retention Reform Should Not Include Guaranteed Loan Programs
A spokesperson for the Mortgage Bankers Association (MBA) told a House
subcommittee on Thursday that Veterans Administration (VA) loans have performed
better during the financial crisis than almost any other type of loan and care
should be taken to avoid including the VA and other guaranteed loan programs in
proposed new lending measures "that might make the program less strong."
James H. Danis, President of a North Carolina mortgage company,
represented the MBA at a hearing on "The Status of the Loan Guarantee
Program" before the House Veterans Affairs Subcommittee on Economic
Opportunity. He told the members that VA
loans are providing a valuable service to veterans at a time when finding
affordable low-down payment mortgages is very difficult.
Through FY 2009, he said, VA guaranteed more than 18.7 million
mortgages worth $1 trillion for purchasing, constructing, or refinancing a
home. While VA loans are just a fraction
of the market - 4.2 percent of originations in 2008 - the number is growing
with the 325,673 loans made in 2009 nearly doubling the number a year earlier. "The
VA program has been a tremendous success," he said, "and the numbers
pretty much speak for themselves. The
homeownership rate among veterans is astounding - 82 percent compared to 67
percent for the general population."
Danis said that VA loans have outperformed their counterparts through
the recent housing crisis even though most of the borrowers have no "skin
in the game." According to MBA
data, he said, the serious delinquency rate for VA loans during the first
quarter of 2010 was 5.29 percent, well below the 7 percent delinquency rate for
prime loans.
He credited the ability of
the VA portfolio to weather the turbulent market because of its conservative
underwriting standards which have always allowed only fully documented and
underwritten loans on owner-occupied properties.
Danis said to keep the VA
program strong Congress "should avoid mandating costly new risk retention requirements
that could cripple the program and harm our economic recovery." Both the House and the Senate are considering
financial reform bills with provisions that would require lenders to retain a 5
percent ownership in any mortgage they originate, sell, or securitize. He said this provision will directly hurt both
the VA program and small independent lenders such as his company which serve
military communities. Not only should VA
loans be specifically exempted from this requirement, he said, so should other
loans or securities insured or guaranteed by the government including FHA and USDA
Rural Housing.
"Failure to exclude the VA and other safe and properly underwritten
loans," he said, "will negatively affect the housing recovery and
veterans' opportunities to secure affordable home mortgages."
Congress should also
continue the higher loan limits that have been available to VA borrowers for
the last two years. The higher limits,
he said, along with a second provision of the Veterans Benefits Improvement Act
of 2008 which allows borrowers to refinance 100 percent of their home, ensure
that veterans who reside in high-cost areas can enjoy their much deserved
housing benefits.
Another improvement
suggested by Danis and the MBA is to review and update the VA program and align
it with prudent industry standards that would give management the flexibility
to make changes to keep the program competitive and relevant in a rapidly
changing market. Among the specific
suggestions he made was that the VA should review its fees and charges and
align them with FHA and conventional products and simplify its policy to allow
borrowers to pay reasonable and customary fees to make the loans more
competitive. He also told that members
that the adoption of the Home Valuation Code of Conduct (HVCC) has essentially
made The Appraisal System (TAS) unnecessary as HVCC has "raised the
bar" for the entire appraisal industry.
Still a third area for improvement, according to Danis, would be to
update the VA's residual income tables to reflect new economic realities.
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