THE VIRGINIAN-PILOT
Copyright (c) 1994, Landmark Communications, Inc.
DATE: Saturday, July 30, 1994 TAG: 9407290452
SECTION: REAL ESTATE WEEKLY PAGE: 22 EDITION: FINAL
COLUMN: Mortgage Matters
SOURCE: David Gilbert and Helen E. Dragas
LENGTH: Medium: 58 lines
A bill to enhance the VA Home Loan Guaranty Program, introduced by Rep. George Sangmeister, D-Ill., has won overwhelming support from mortgage lenders, builders and real estate firms.
The legislation contains many changes that would expand the Department of Veterans Affairs Program and would make its benefits more widely and easily available, industry observers say.
Under the bill, a new VA loan product, similar to the conventional two-step mortgage, would be introduced. The current two-step loans have easier qualifying standards than traditional fixed-rate loans, along with fewer rate adjustments than one-year adjustable loans.
The two-step loans, also known as 7/23 or 5/25 balloons, are prohibitive for many veterans because they usually require a down payment of 10 to 20 percent. By contrast, VA borrowers with full entitlements can buy a home without a down payment.
The new bill also extends loan-guarantee eligibility to reservists discharged because of a service-connected disability, as well as to spouses of reservists who die while on active duty.
As a result of defense cutbacks, the bill would also reduce the minimum active-duty service requirement for loan eligibility. This would allow terminated military personnel to be eligible for VA loan benefits even though they may not meet current service requirements.
The bill's passage might also streamline property appraisals by allowing lenders to choose their own appraisers for VA cases. The VA must now approve each appraiser and assign them on a rotating basis as it receives requests from lenders.
Because federal law requires appraisers to be state-licensed. Eliminating this step may speed the processing of VA applications without sacrificing quality.
Also, the bill calls for changes in the VA interest-rate reduction refinance program. It would expand the opportunities for a veteran to use this streamlined, no-qualifying process to refinance an adjustable-rate mortgage to a fixed-rate loan.
The bill also would allow the cost of energy-efficient home improvements to be financed under the program. Reportedly, the Department of Veterans Affairs favors all the bill's provisions except this one. The reason, apparently, is that such improvements would boost mortgage balances over the appraised value of the homes. MEMO: David H. Gilbert is president and Helen E. Dragas is immediate past
president of the Tidewater Mortgage Bankers Association. Send comments
and questions to Real Estate Weekly, Mortgage Matters, 150 W. Brambleton
Ave., Norfolk, Va. 23510.
To submit questions by phone, call 446-2060; by fax: 446-2531.
by CNB