Tips & Special Topics
Recent VA Loan Legislation Summary
Added February 15, 2010
In the years 2008 and 2009, new legislation was passed to improve the VA home loan program. Many find it difficult to keep track of all the changes. Here is a summary of some of the legislative and other changes regarding the program.
In October 2008, President Bush signed the Veterans Benefits Improvement Act. There are four major housing provisions in the bill regarding veterans and active duty personnel who are potential or existing homeowners. The major points of this legislation include:
• VA adjustable rate mortgage (ARM) and hybrid adjustable rate mortgage (HARM) programs are extended through September 30, 2012. The VA’s authority to guarantee these programs was previously set to terminate on September 30, 2008.
• The maximum guaranty loan to value (LTV) for cash out (regular) refinance increased from 90% to 100%. Borrowers may be able to receive cash out of equity for up to 100% of their home’s appraised value.
• The maximum guaranty for VA refinances was increased to equal the maximum guaranty for purchase loans. The amount depends on the loan limits for each county and varies across the country.
• The maximum amount the VA will guarantee, previously $417,000, has been extended for some counties until December 31, 2011. The guaranty amount varies depending on the county in which the financed property is located.
The provisions in the law primarily acknowledge the higher cost of living and also make it possible for VA borrowers to get out of subprime mortgage contracts and into the safer, more affordable terms of a VA guaranteed loan.
Not a part of any major legislation, but a noteworthy new policy, is the fact that Certificates of Eligibility required for obtaining a VA loan will no longer display a veteran’s birth date. The change came about as a result of an effort to limit the amount of personal information being displayed on the certificates. Although the date will no longer appear on the printed document, veterans will still need to provide their birth dates when submitting an application for determining eligibility.
Another, and separate, recent piece of legislation involving veterans with mortgages has to do with military reassignment. Part of the 2009 Stimulus Bill enables military members facing a loss as a result of relocation for certain military reasons to receive assistance from the VA. Issues faced by veterans in the current economy caught the attention of Congress, and language was included in the 2009 Economic Stimulus Package to describe compensation for service members, with or without VA Loans, who sell their homes and suffer a loss due to declines in fair market value, if the sale was made necessary by:
• Relocation after a military base closure
• Reassignment ordered between July 1, 2006 and September 30, 2012
• Combat wound requiring relocation for further medical assistance
Under the new provision, the federal government is prepared to cover part of a veteran’s loss if the veteran was effectively forced to sell as a result of any of the above. The government could buy the home and the price or payment would be determined by a formula. Generally, the government could cover the difference between 95% of the prior fair market value, and the fair market value at the time of the event that results in a loss.
The amount budgeted for this portion of stimulus is $555 million. It is under the Defense Department's Homeowners Assistance Program which was established specifically to help military and federal personnel who suffer financial loss due to base closures. This is not to be confused with benefits provided under the Department of Veterans Affairs Home Loan Guaranty Program which was established to help veterans purchase homes.
New legislation in 2008 and 2009 should provide some welcome relief for military members, and hopefully will protect against costly foreclosures and/or losses. The VA loan limits for 2010 have been published. For more information about recent legislation affecting the VA Home Loan Guaranty Program, contact a VA Loan Professional.
