Tips & Special Topics
Nineteen Million VA Loans and Counting
Added January 10, 2011
The U.S. Department of Veterans Affairs announced in a press release dated November 1, 2010 that the VA Home Loan Guaranty Program hit the 19 million mark. This is a record-breaking number of VA loans despite the recession that began in Fall 2008 and the depressed housing market conditions associated with it.
Are VA loans recession-proof? Even in a very tight lending market, the VA mortgage program can thrive. Examining the attributing factors can help us understand why this program can endure recessions and continues to be successful.
Topping the list for most VA borrowers may be the zero down feature associated with VA loans. No money down leaves a lot of savings left over for financial security.
Additionally, historically low interest rates in 2009 and 2010 contributed to low monthly mortgage payments, with VA-approved lenders typically offering interest rates based on risk and inflation expectations. However, low rates may not be the sole reason for the program’s success.
Another attributing factor may be the borrower demographic associated with VA loans. The VA-backed mortgages are only offered to veterans, military personnel and surviving military spouses. The VA’s Secretary Shinseki cites the “unshakeable sense of responsibility” of our nation’s military members as a possible key reason for the low foreclosure rate of VA loans.
For eligible borrowers only, the Department of Veterans Affairs provides its guaranty (approximately 25 percent) for each VA mortgage. Perhaps it’s the added security of federal backing that helps make the program a success.
The success of the VA-guaranteed mortgage program can be measured in growth and foreclosure rates. During the period from 2006 to 2010 the numbered of VA-backed home purchase loans for veterans rose by 63 percent. And, from summer of 2008 to fall of 2010 the VA’s foreclosure rate, as well as the serious delinquency rate for the latter six quarters of that period, were one of the lowest in the lending industry. Even when compared to prime loans, the VA mortgage program performed with the lowest foreclosure and delinquency rates according to the Mortgage Bankers Association’s National Delinquency Survey.
Low foreclosure and delinquency rates may be due to the care and keeping of VA borrowers. An aspect unique to the VA home loan program is the U.S. Department of Veterans Affairs’ commitment to helping borrowers keep their homes if they run into financial perils. VA mortgage counselors working in the 13 Regional Loan Offices have provided mortgage counseling to more than 150,000 families in financial straits allowing them to hold onto their homes that are threatened by foreclosure.
The VA’s Secretary Shinseki stated that the “professionalism and savvy” of VA mortgage counselors is one key to maintaining a low foreclosure rate on VA-backed home loans.
The VA Home Loan Guaranty Program dates back to 1944, and has provided VA loans valued at more than 1 trillion dollars since its inception. For more information about the VA’s Home Loan benefits and its recession-proof success, contact a seasoned VA loan professional.
