Since June 1944, following enactment of the Servicemen’s Readjustment Act – more commonly known as the GI Bill of Rights - America’s Veterans have played a unique role in establishment of our Nation’s middle class and more specifically in the development of the Nation’s modern housing economy. But for the GI Bill, which among other things provided guarantees for home loans for WWII Veterans, the dream of homeownership would have continued to elude most average Americans. The GI Bill changed that and between 1944 and the early 1950s, more that two million Veterans took advantage of the Bill’s benefits and bought homes.

Today, with America’s economy severely stressed due in large measure to continuing declines in housing prices as a result of excess inventory and record numbers of foreclosures, the opportunity exists to turn to America’s Veterans to help rebuild America’s housing economy through implementation of what will be know as the “Veterans’ Secure Housing Program”.

An important first step in arresting the downward spiral in housing prices involves reducing the current inventory of unsold homes. Much of the inventory of foreclosed homes (or what are generally referred to as REO) are currently owned either directly by the U.S. government by the Department of Housing and Urban Development (HUD) or indirectly through the government’s interest in Fannie Mae and Freddie Mac. Even more foreclosed homes are owned by the numerous depository institutions that have recently received substantial government assistance.

The record level REO inventory of these institutions is generally secured and maintained by the institutions that own them at significant expense and the REO properties are then disposed of at auctions at severely depressed prices. Sales of this REO inventory at depressed prices are a significant contributing factor to the continuing overall decline in U.S. housing prices, which has broader implications for the general economy.

The larger process of recovering from the excesses of the past decade and correcting the enormous economic imbalances leading to the current crisis will take years, but a first step targeting the current housing inventory imbalance through implementation of the Veterans’ Secure Housing Program might work like this:

1. Modify the current Veterans’ benefits to permit today’s returning veterans as they either transition to civilian life or elect to continue to loyally serve our nation as active-duty personnel, to occupy one of the government-owned (or controlled) REO properties rent free for some period of time – say up to 5 years. And for the families of Veterans who have been killed, extend this benefit to their families as well. During that period, require that the occupants only be responsible for minor maintenance. Major repairs would remain the responsibility of the REO owner - as it is today.
2. At the conclusion of the rent-free period, offer the Veteran (or their family) the option to either purchase the property using a VA loan on favorable terms or to remain in the property as a rental at a market or near-market rate for an extended period.

3. As a condition of eligibility, it would also be wise to require the Veteran or their family to complete a Homeownership/Financial Planning Education seminar, which program could be centrally developed and administered by the VA as a normal part of the GI Benefits administration process. As the experience of the past several years teaches, society benefits most when the experience of home ownership is a positive and successful one.

Implementation of this Program would benefit all parties in the following ways: 1) the market would benefit in that the REO would be removed from inventory for some period of time thus reducing downward pressure on housing prices; 2) the REO owners would benefit in that properties that were vacant would now be occupied and maintained by invested tenants. This would also aid in the process of stabilizing the neighborhoods and communities in which these REO properties are located, and; 3) America’s servicemen and women would benefit from the opportunity to live in a home rent free – a reasonable tribute for those (and their families) who have worn the uniform and have sacrificed in the service of their nation.

The implementation of the Veterans’ Securing Housing Program could be accomplished very quickly, especially with the coordinated support of HUD and the VA and the backing of the current administration.