A new group of people will be eligible for mortgages guaranteed by the Department of Veteran Affairs thanks to one aspect of a wide-ranging omnibus bill that Congress passed Wednesday.
The Johnny Isakson and David P. Roe Veterans Health Case and Benefits Improvement Act includes a provision that extends VA loan eligibility to full-time National Guard and Reserve members deployed domestically.
The bill allows National Guard members who, as defined under federal Title 32 orders of the U.S. Code, have supported operations regarding COVID-19, natural disasters and social unrest in the U.S., to credit their service toward home loan eligibility requirements. Previously, eligibility for National Guard and Reserve members was only extended to those with 90 consecutive days of active service in overseas operations, under orders authorized by Title 10 of the U.S.C., or those who completed six years of honorable service.
More than 37,100 National Guard members were supporting domestic operations as of July, according to
“In the scope of both active and retired military, it’s a small number of people who have not had access to this benefit, but it’s certainly commendable,” said Jon Irvine, chief strategy officer at Sovereign Lending Group.
Mortgage lenders not only welcomed the broader borrower eligibility in the bill but were relieved that the many initiatives within it wouldn’t be funded by a guarantee fee increase the way past legislation has been.
“The Community Mortgage Lenders of America commends Congress on passing a major veterans benefits bill while accomplishing two key policies for homebuyers,” the group said in a statement released Wednesday.
“First, Congress did not raise guarantee fees on VA mortgages as it has in the past; this means our veterans and active duty servicemembers won’t pay higher costs for a benefit they have already earned.
“Second, Congress has newly authorized cohorts of full-time National Guard and Reserve servicemembers (deployed domestically to help with COVID and natural disasters) to have access to these VA mortgages for the first time.”
VA loans most recently experienced a g-fee increase as a result of
“In the past, the default pay-for for Veterans committees — it didn’t matter if it was healthcare, education or housing — they always went to the VA mortgage program,” said Robert Zimmer, director of external affairs for the CMLA and a principal at Washington, D.C.-based consultancy TVDC. “It may have been manageable at first, but it got crazy, and veterans already earn this benefit — why should they pay more for it? Only this year did I feel like that message was starting to get across.”
With the additional stress on the economy due to the pandemic, the fees that represent the Department of Veterans Affairs’ cost to guarantee mortgages could still go up if there is a significant deterioration in loan performance, but that remains to be seen.
“If you look historically, the default rates on VA loans tend to be lower than in other housing programs,” said Irvine. “So right now, not raising g-fees I think is a benefit to the country, and both of the things in this bill are good news.”
