Information for VA Homeowners Affected by Hurricane Sandy

By Daniel Duffield

VA mortgage homeowners with properties affected by the superstorm Hurricane Sandy should take several steps to move toward rehabilitation of the home or reconstruction for homes with excessive damage.

1.       Contact FEMA.

Firstly, borrowers should get into contact with the Federal Emergency Management Agency (FEMA) in order to begin the disaster application process by calling 800-621-3362 or by going to the FEMA website. Homeowners can potentially obtain housing assistance or other forms of federal aid from organizations which have supported the recovery effort after the devastating effects of Hurricane Sandy. In order to receive any federal aid, borrowers must fill out this application.

2.       Contact the Mortgage Servicer.

After applying for federal aid through FEMA, borrowers should contact their mortgage servicer, or the person who collects the monthly mortgage payments, rather than the company which financed the loan. Regardless of the condition of the home, whether habitable or not, borrowers will still be held responsible for making monthly mortgage payments. Since natural disasters can significantly affect a borrower’s employment and income, it is imperative that borrowers speak with the mortgage servicer as soon as possible, especially if paying mortgage payments will be difficult or impossible as a result of the circumstances.

3.       Contact the Home Insurer.

Next, borrowers should call the homeowner’s insurance company to file a claim. Although generating an insurance claim soon will be crucial, borrowers should not act rashly or accept a hasty settlement. Rather, if your home has been damaged, hire a contractor to get a repair estimate; however, be sure to choose a reliable contractor with an official license, as many swindlers will attempt to take advantage of homeowners after natural disasters.

4.       Consult local veteran organizations.

For additional assistance, consider contacting local veteran groups which may provide assistance to veterans, especially following such a disaster. These groups may include a local Veterans of Foreign Wars, American Legion, or other organization associated with the military.

5.       Contact the VA.

Finally, the Department of Veteran Affairs may be able to assist veterans who have been affected by natural disasters such as Hurricane Sandy, typically through loan modification, supplemental loans, or even prolonging foreclosure proceedings in affected areas.

For more information on VA loans, VA eligibility, VA refinancing, or other mortgage related topics, visit Lender411.com, your key to a smart mortgage loan.

 

VA Mortgage Loan Popularity Skyrockets

By Daniel Duffield

The VA Home Loan Program offers significant benefits for U.S. veterans and as a result has seen a rapid rise in popularity in the past several years. With unique terms not available to civilian borrowers, these home loans have seen a meteoric rise in demand and have become much more prevalent within a relatively small timeframe.

Over the past five years, VA home loan demand has skyrocketed, rising 71% in terms of VA home purchases from 2007 statistics and seeing a 20-fold increase for mortgage refinances. During the 2012 fiscal year, the VA guaranteed a total of 540,000 mortgages, constituting nearly a third of the currently outstanding 1.7 million VA mortgage loans.

This phenomenon can be attributed to several key factors. For instance, with the disappearance of the subprime mortgage market, VA loans comprise one of the very few remaining loan programs which offer the advantage of no required down payment, thus attracting many young veterans and active-duty servicepersons with rigid budgets. Currently, 90% of VA mortgages do not include any down payment.

Credit Score Leniency and Streamline Refinances

The VA credit qualifications are much less strict than the majority of conventional loans. Last year, the FICO credit score for VA mortgage borrowers averaged approximately 708, while credit scores for conventional loan borrowers averaged within the 750-770 range due to the conforming guidelines set in place by Fannie Mae and Freddie Mac. In contrast, the VA does not enforce a minimum credit score requirement.

In terms of refinancing, VA loan refinances have surged as a result of ease in which these transactions may be performed. Basically, the VA offers a streamline refinance; as with the FHA, this specialized refinance, known as the Interest Rate Reduction Refinance Loan (IRRRL), allows borrowers to refinance with minimal verification, in terms of credit score, income, and employment. The process works so smoothly that it is almost automatic, although only borrowers who have kept current on their monthly mortgage payments will be eligible for this refinance program.

Furthermore, VA-eligible borrowers can secure a streamline refinance even when underwater on their mortgage, which has impeded a large number of borrowers in recent years and which has necessitated the creation of the Home Affordable Refinance Program (HARP).

Eligibility Extended

In addition to the ease of refinancing and the exclusive zero-down payment benefit, VA loans have also seen a rise in popularity as a result of the extended eligibility standards which have been put into place. Last August, the Obama administration expanded VA eligibility to include the surviving spouses of veterans whose deaths were not judged as “service-related.” In addition, this bill also expedited the application and approval process for veterans applying for a disability waiver.

Created in 1944 as a portion of the GI Bill of Rights for veterans returning from WWII, the VA Home Loan Program recently announced its reaching 20 million home loans guaranteed under the program, marking a new milestone for military home loan benefits. The 20 millionth guaranteed mortgage was secured in Virginia by the surviving spouse of an Iraq War veteran who passed away in 2010, according to the Department of Veteran Affairs.

Veteran Borrower’s American Dream Impeded by Cautious Lenders

By Daniel Duffield

As with many other Americans who have been capitalizing on the historically low mortgage rates, military veteran Sam Johnson wants to purchase a home; however, this has proven to be more challenging than he had anticipated.

A veteran of the Desert Storm conflict, Johnson served in the United States military for four years. This Veteran’s Day, he expressed his patriotic desire to capture his idea of the American dream: owning a home in Manteca, California.

Conveying his feelings of homeownership, Johnson describes his American Dream as, “just to be able to have pride and own the things that I own, own a home.”

Despite his efforts, Johnson has faced overwhelming obstacles to acquiring a home due to being unable to receive financing from banks and lenders who refuse to issue VA mortgage loans. Although Sam stated that he browsed over 100 potential properties and considered bidding on 20 of these, he stated that the banks persistently refused his offers due to attempting to secure a mortgage loan guaranteed by Veteran Affairs.

Johnson relays that, “it’s just frustrating while you look at a home and then you want to make an offer and they tell you, ‘We don’t even want to see your offer… because you’re going to use a VA loan.’ To not even have a chance, you know?”

As with mortgages insured by the Federal Housing Administration (FHA), VA loans provide incredible benefits to military veterans and require minimal down payments, in some cases not requiring a down payment at all. Furthermore, VA loans do not include any mandatory mortgage insurance, which adds a considerable expense to FHA loans. Despite these advantages, some borrowers have been unable to attain these mortgages due to banks rejecting them due to not being conventional mortgages.

For many veterans, including Sam Johnson, purchasing a home without VA benefits is unfeasible. According to Sam, “without the VA loan, I don’t think I could afford a home.”

For now, he is currently residing with his sister and her family in the hopes that he can soon fulfill his own personal American dream.

“You want to be able to stand on your own and it just gets frustrating and you’ve for benefits,” he stated.

VA Loan Recap

VA Loans provide tremendous advantages for eligible military borrowers. Borrowers can purchase a home with no down payment and no costly mortgage insurance, making VA mortgage loans one of the best loan programs available to those who qualify.

In general, VA loans best suit military borrowers who would like to purchase a primary residence with a low down payment. With low mortgage rates and closing costs, these mortgages are some of the cheapest to acquire and are guaranteed by the Department of Veteran Affairs in the event of a default.

Furthermore, the VA offers Streamline Refinances for homeowners with preexisting VA mortgages. Similar to the FHA streamline refinance, the Interest Rate Reduction Refinancing Loan (IRRRL) allows VA homeowners to secure a refinance with much less hassle and expense than standard refinances.

While VA mortgages do include a mandatory funding fee, charged at 2.15% for first-time borrowers with no down payment, these mortgage loans are recommended for almost all borrowers who are eligible to secure them.

Housing Market Uncertainty Lingers in Obama’s Reelection

By Daniel Duffield

In the face of Obama’s reelection, the housing market remains unpredictable as recovery has been fairly sluggish. Over the past three months, home values have risen in a large majority of metropolitan markets; statistics from a survey conducted by the National Association of Realtors (NAR) showed this increase of home values in 120 of 149 cities.

This demonstrates an overwhelming increase from last year’s figures of 39 rising metros. In terms of pricing, median home values have risen 7.6% from last year, illustrating the most significant annual increase since the initial quarter of 2006.

Many attribute this shift to the trend of lessening distressed property sales, with an increasing amount of lenders modifying loans or writing down mortgage principal to avoid borrower default.

Despite this positive movement, tight credit has presented a challenging obstacle for a more healthy housing recovery.  While mortgage rates hover near historic lows and present a tremendous opportunity to qualified buyers, many potential homebuyers cannot secure these rates due to prior credit history and damage done by the mortgage crisis, making home purchase extraordinarily difficult.

Mortgage-dependent buyers have only been “bit-part players” in the scope of the housing recovery movement, wrote Ed Stansfield of Capital Economics.

With these factors in mind, one must consider how Obama’s second term could affect this fragile market.

According to Jaret Seiberg, Senior Policy Analyst for Guggenheim Partners, the president’s reelection will reflect positively for mortgage insurers, while banks and homebuilders may perceive this negatively.

Household construction has made a resurgence, which has been welcomed by the nation’s homebuilders; although the challenge lies with those who must attempt to obtain financing necessary for homebuilding and those potential buyers who may not be able to secure finance loans. This presents the challenge of the “fiscal cliff” and has expressed fears of an echoing recession.

NAHB chairman Barry Rutenberg wrote in a press release on Wednesday that the NAR has urged President Obama and congressional leaders to cooperate and collaborate on resolving the problems presented by the “fiscal cliff” by providing an extension of the 2001 and 2003 tax cuts while keeping a cautious approach to the effects which tax reforms will have on the burgeoning housing recovery.

According to Seiberg, Fannie Mae and Freddie Mac will go largely unaltered over the course of Obama’s second term, as the issue did not carry much weight during the campaign and President Obama never made any promises about actions regarding the future of the mortgage industry.

Rather, a more important concern should be the regulation of the mortgage market under the Dodd-Frank legislation and the potential of the economy falling over the edge of the fiscal cliff. Lenders now face new regulations regarding mortgage underwriting and how much mortgage risk they must maintain. Although the Romney administration could have impeded thise legislation, Obama’s reelection has cemented these new guidelines, and the mortgage industry has responded with caution.

President and CEO of the Mortgage Bankers Association David Stevens stated that the organization will request greater attention to these issues to ensure that these regulations are carefully considered to assess the effects. In addition, the MBA has repeated its appeal to the President to select a federal housing policy coordinator who could enforce a coordinated housing policy in which federal and supervisory organizations are keeping open communication during the drafting of these policies.

For those millions of homeowners who are underwater on their home mortgages, the Obama administration has persistently stated its intention to provide greater accessibility to mortgage refinancing in the hopes of allowing borrowers to capitalize on today’s historically low rates. Since the Democrats represent a majority of the Senate, the likelihood of new legislation on mortgage refinancing seems high, though analysts have endorse the removal of the Fannie Mae and Freddie Mac regulator Edward DeMarco, who has stubbornly impeded the progress of lowering mortgage principal.