Oversight: Kitchen Table Issues: Lowering Costs for Veteran Families Through the VA Home Loan

Want today's discussion to be meaningful, uh respectful obviously, and with the end state of keeping housing affordable for our veterans, service members and their families. And with that I'd like to yield to my very good friend, Ranking Member Pappas.

Thank you, Mister Chairman, for holding this session, and I agree with you that the VA home loan guarantee program is one of the most important commitments that we can make to veterans so essential uh especially at this moment where we're dealing with the housing crunch all across our country. We know that housing prices, along with pretty much every other expense a family faces, like energy and groceries, continue to rise. As veterans spend more money at the pump and at the grocery store, they have less to spend on rent, their mortgage, or to save for a down payment. From what I hear constantly from my constituents, and I'm sure this applies to all of my colleagues too, affordability concerns aren't a hoax. They're a huge concern of Americans, and I'm thankful that we're holding this hearing in recognition of that. When we're talking about how to make a VA home loan m- program more affordable, We can't forget that veterans are facing some the same housing and affordability crisis that impacts all Americans a situation we can't address through minor fixes to the home loan program itself for example when most Americans talk about barriers to buying a home they're talking about the down payment we know for veterans one of the greatest advantages of the home loan guarantee program is that no money that no money down option so down payments aren't an issue for a lot of veterans when it comes to closing fees VA already limits what lenders can charge veterans Of course, we should be open to a discussion about how limiting fees, uh, even more, uh, can save, uh, uh, in terms of veterans' costs. However, it's important to make clear that up to two-thirds of the closing fees a veteran pays are to register the deed, homeowners insurance, escrowing taxes, none of which this committee can influence. My point here is that focusing on issues like fees shouldn't divert our attention away from the crux of the problem. That's why we need a whole-of-government approach to tackle the housing crisis, lower costs for veterans and all Americans, and put home o- ownership back within reach for everyone. We should explore comprehensive policies that would provide real savings, tangible affordability, and accessibility to home loans for veterans. We need to focus on legislative packages like the updated Senate-passed Twenty-first Century Road to Housing Act, which House leadership has yet to put, uh, to the floor for a vote. This bipartisan bill includes bills I helped introduce that would cut red tape to build more housing, strengthen assistance to middle class homeowners for improvements and repairs, and expand access to the VA home loan program by ensuring veterans are made aware of the benefit during the loan application stage. The housing crisis requires an all hands on deck approach, and we should be using every tool at our disposal to create the conditions to tear down red tape build more housing and lower prices. In my state of New Hampshire, we're moving in that direction. We have a first in the nation veterans campus in Franklin, which is a partnership between the private sector, government, and the non-profit community, funded with federal dollars in providing critical housing for our veterans. We're empowering our non-profit and VSO partners, including HarborCare, that have stepped up to fill the need for emergency transitional permanent housing for veterans. Based on the testimony we received and will hear momentarily, perhaps there are ways to uh there are ways to align VA along with other other federal agencies to put veterans on an equal footing with non-veteran home buyers. However, the benefits must outweigh the cost, especially if proposals will ultimately expose veterans to excessive risks. So rather than discussing slight changes to improve accessibility, let's also focus on what this hearing should be about, affordability, and that big picture conversation about how to bring down costs uh and make life better for veterans and all Americans. So I look forward to the testimony today and I yield back.

The gentleman yields. Uh before I introduce the witness panel, I'd like to recognize one of my constituents who is sitting in the audience. Jane, how are you? Thanks for coming very much. She works for Portage County and she does a fantastic job. Thank you so much for joining us today. I'll now introduce the witness panel. Our first witness is Mister Patrick Zondervan, Executive Director of Loan Guarantee Service at the Department of Veterans Affairs. Accompanying Mister Zondervan is Mister Terry Rausch. Assistant Director for Loan Policy and Evaluation, Loan Guarantee Service at the Department of Veterans Affairs. I ask you two gentlemen to stand and raise your right hand. Do you solemnly swear that the testimony you're about to approve or to provide is the truth the whole truth and nothing but the truth? Alright. You may be seated. Let the record reflect that the witnesses have answered in the affirmative. Mister S- Sondervan, you're now recognized for five minutes to deliver your testimony on behalf of the

Good afternoon, Chairman Ordon Van Ordon, ranking members Pappas, and members of the subcommittee. Thank you for the opportunity to present information on several topics regarding the Department of Veterans Affairs home loan guarantee program.

Mister Von I- i- Von Ervin, is is your microphone on? Okay.

Yes. I'll try to speak a little louder. How's that? Okay. Good afternoon, Chairman Van Ordon, ranking member Pappas, and other members of the subcommittee. Thank you for the opportunity to present information on several topics regarding the Department of Veterans Affairs Home Loan Guarantee program. Joining me is Terry Rauch, Assistant Director for the VA Loan Policy Evaluation. My remarks will focus on a set of key issues that are both timely and significant to veteran home lending. These are also detailed in my written testimony for your reference. As the new Executive Director of VA Loan Guarantee Service, I have the distinct honor to lead the VA's home loan program. The VA home loan program is an earned benefit for veterans and service members to obtain, retain, and adapt a home which truly recognizes their service to the nation. As a veteran myself, I have personally leveraged the VA home loan program more than once to secure stable housing for my family. Since nineteen forty-four, VA has been helping veterans achieve the American dream of home ownership. To date, VA has guaranteed more than twenty-nine million home loans totaling over four trillion dollars, and there are more than three point nine million active VA guaranteed loans. VA guaranteed home loans can be considered as one of the most useful VA benefits available to veterans and service members and is a premier choice in opening the door to home ownership. VA home loans provide a great opportunity for the first time veteran home buyers to purchase a home because of the following unique features on the VA home loan program one hundred percent financing with no down payment required exemptions from paying the VA funding fee for service connected disabled veterans in receipt of disability compensation limits on certain costs lenders may charge a veteran for origination and administrative fees to one percent, lower interest rates, no monthly private insurance premiums, and allowing seller concessions of up to four percent of the reasonable value of the home for items like prepaid escrow and paying off consumer debts. These cost-saving measures ensure that VA - that the VA home loan is an affordable option for veterans. Even in tight housing markets, VA continues to see strong demand for the program. In fiscal year twenty-five, VA guaranteed more than five hundred thousand home loans with more than sixty percent of those being new and first-time homeowner b- purchases. While the demand for the VA home loan program is strong, housing affordability remains a valid concern for veterans as it does for buyers in the conventional market. With mortgage rates around six percent on average, housing prices remain elevated in many areas where property taxes, homeowners association fees, home insurance costs, and other unexpected VA continues to make s- to make efforts to modernize its origination system and increase automation to allow lenders to submit proposed loan information prior to closing and identify potential errors that may lead to costly corrective measures after the loan is closed. Earlier this month, VA launched an enhancement to the VA mobile app that now allows eligible veterans to view their certificates of eligibility from their mobile phones. Within the first week, more than thirty-five thousand An often misunderstood component of the VA program is the VA appraisal process, which is designed to ensure the home meets safety, soundness and livability standards for veterans. These minimum property requirements have frustrated many buyers, sellers and real estate agents alike. Today I'd like to set the record straight and dispel a few myths about the VA appraisals for the committee. The first myth is that the VA appraisals take too long. As of February twenty twenty six, VA appraisals are taken on average seven business days to complete, which is equal to other conventional and federal government programs. The second myth is that the VA appraisal of the VA appraisals are a home inspection. VA appraisals are not a home inspection. The VA home loan appraisal is an opinion of fair market value. VA is developing several actions to reduce and simplify the minimum property requirements for appraisals outlined in VA regulation, handbook policies, and procedures. This month, VA updated the VA Lenders Handbook Chapter Twelve with the removal of several minimum property requirements to streamline the appraisal process. In conclusion, VA will continue to support the path to homeownership through the VA Home Loan program, strive to modernize our systems, streamline processes, and expand communication and education efforts to improve the VA Home Loan program for future veterans and their families. Mister Chairman, thank you for the continuous support of the VA Home Loan program, and for this opportunity to speak today. This concludes my testimony and I welcome any questions that you or other members of the subcommittee may have.

Thank you, Mister Zynervan, the written statement of Mister Zynervan will be entered into the hearing record. We're now gonna proceed to questioning and uh please stick to the five minute rule. Uh I now recognize Ranking Member Pappas for five minutes to question the witnesses.

Well thank you very much for that testimony, I appreciate the steps that you're already taking uh to make things more efficient, and to streamline processes, I think that's incredibly important and we always need to be thinking about how we can do things a little bit better. Um, we hear a lot of uh comments from industry that the processes and standards for the VA home loan program are different from other government lending programs, especially when it comes to the appraisal process and minimum uh property requirements. So I understand the desire for these programs to be matched up across the board, uh as it would be easier for industry and it would reduce misconnections among sellers and real estate agents that VA backed loans are harder uh to complete or take long longer to get done uh as you've addressed. I have to question the logic though that we should lower VA standards to meet everyone else instead of perhaps raising all standards for FHA and USDA to match VA so I'm wondering um does the VA home loan program perform better than similar programs at other agencies and is that partially credited to the kinds of protections that are in place for veterans that are purchasing a home?

Thank you for that question, sir. Um the protections are very important because the veteran is our first priority. Um however there are parts of our minimum uh property requirements that we can remove. And so right now what we're doing is evaluating our policies and identifying any, you know, um proper minimum property requirements that we can remove without compromising the uh the additional features that we have to ensure that the safety, the soundness, and the well um the sanitary conditions of the home remain in place.

Could you give folks some examples of ways that you feel like you could modify the property requirements in a way that wouldn't hurt veterans or put them at risk.

Certainly. Actually, I'm going to defer to my colleague, Mr. Terry.

Sure.

Great. Thank you for that question. Uh, a lot of these are cosmetic in nature, so we're looking at some of the things that have been problematic over the years, such as uh chipped paint or peeling paint. Uh, uh, so those are are are one of the ones that are that are out there. Um, hand railings uh burglar bars those type of things have have been problematic that while there are NPRs and other programs as well uh VA has made those subject to uh in the in the past and so those are the ones that we wanna tackle

but you agree that there are certain minimum property requirements that you feel should stay in place as a means to protect veterans

they're they're they the whole purpose of minimum property requirements are uh safety soundness and sanitation and those were the ones that will be

wanting to keep.

I appreciate that. Um, last year the administration put an end to the VASP program, which we know offered veterans uh a low interest rate and refinances to avoid foreclosure. I'm just wondering if you can say whether VASP uh prevented folks from getting foreclosed on and if that lowered the foreclosure rate for veterans.

Thank you for that question. Um, so the VASP program did end. Uh, the secretary decided to end it in May of last year. Um, and our focus right now remains on implementing the partial claims program, which will now provide the additional um option for veterans to, you know, um

Yep. And while it was in place, can you speak to, I mean, the fact that there were thousands of veterans that were assisted. I assume for those veterans, um, that that helped them prevent foreclosure, uh, and that kept the foreclosure rate lower across the board. Would you agree with that?

I would say that the VASP program at the time did have options. to help veterans who are facing foreclosure, yes.

Okay, well it's certainly borne out in the numbers that I've seen. Um, and so talking about partial claims, I mean, we're - we're approaching a year since this was, you know, designed and passed by Congress. We're really eager to see this implemented. And with VASP gone, uh, I'm wondering what happens to veterans who are still waiting for this to be stood up?

Uh, thank you for that question. So, uh, there are other options before the p- the partial claims rolls out. So there are uh forbearance uh special forbearance um modifications of the loans, those options have always been available absent of the VAS program, so we work closely with our servicers and the industry partners to ensure that when veterans reach a point of default that they are offered all of the remaining options that are available until the partial claims program comes out.

We're seeing the foreclosure rate increase, and so I think time is of the essence here. I know you've been briefing uh staff I'm wondering if you can give us a clearer picture on the timetable for the rollout.

Absolutely. Thank you for that question. Uh, our goal is to have it available to the public in June of this year.

Okay. And you've been through the comment period. I assume you've received significant comments from folks on the outside, uh, that would be, you know, working with veterans on loans. Can you, uh, characterize any of those comments and how long it's gonna take to work through that? You'll still be able to hit that June time frame?

Certainly. Thank you. Um, so we actually did something new with the VA. We used what's called a drafting table. It's different from comments through the regulatory process. And we received well over eight hundred individual unique feedback items.

Gentleman's time is expired.

Yield back.

The gentleman yields back. The chair now recognizes Representative Amadei from Arizona.

Thank you, Mr. Chairman. Mr. Zondervan, thank you for being here. As a veteran myself and I represent Arizona's eighth district, which is home to one of the fastest growing veteran populations in the country. The median home prices in our communities are now topping four hundred and fifty thousand dollars. Young veterans, fresh off active duty, they're trying to start families and put down roots in the state they defended are being locked out. Not because they lack discipline or drive, but because the VA home loan program has failed to keep up with Arizona's skyrocketing cost of living and housing market. My first question is, Mister Zondervan, my constituents in Arizona are getting slammed with what I call fee stacking. You know, lenders are charging a full one percent origination fee on VA loans, then piling on extra itemized charges for processing, underwriting, and others. That one percent is supposed to be all in, inclu inclusive. It's meant to cover the lender's labor and overhead. You know, these sneaky add-on mis-rated fees are nothing but a cash grab and they need to be banned. Now, what is the VA doing right now to ensure our veterans are not paying twice for the same paperwork at closing?

Thank you for that question. Um, so We we look at data, our systems uh evaluate data, and uh if there is any evidence of misuse uh or inappropriate fees being charged, uh we do work with the lenders to recoup those fees back. And if we receive complaints from veterans, we do a full file loan review, and if we do find that there are overchance overchance and charges those are actually paid back by the lender.

They get paid back to the veteran?

To the VA, cuz

Now right now the VA caps seller concessions at just four percent, as you know. Now while FHA and USDA allow six percent. In a red heart hot market like Phoenix, that two percent difference can sometimes be the difference maker between winning and losing a home. Now sellers see a VA offer and realize they're getting less help with closing costs and immediately choose the FHA buyer instead. Now our veterans are getting squeezed out of the market they fought to protect. Now does the VA support raising the seller concessions cap to six percent to align with the other federal uh agencies?

Thank you for that question. Um so seller's concessions um it's kind of you know the higher you go on the seller's concessions it can create some issues with cost um because it's what what we have seen is that the um the lenders will or or the the the person selling the home when you have higher concessions that sometimes causes them to raise the the price on the home and so it it doesn't necessarily help with affordability um so that is one of the things that we're looking at we'll be glad to work with the committee to continue to look at that um we currently are at four percent but we we do wanna make sure that whatever decision we make it will continue to protect the veteran and not cost them more down the road

Yeah, of course, but I'm about common sense. Right now, FHA, USDA are six percent. It seems to make sense to me to align the VA with FHA and USDA. My family's in real estate. I am very familiar with uh housing and uh I know the unintended consequences of that what you're talking about, but that's not what we are seeing. So I would encourage you to go back to the VA and try to align that up with the FHA, okay?

I will be glad to take that into consideration.

No, the VA has identified four hundred and thirty-six counties thirty-one states that don't have enough certified appraisers to meet demand. Now the VA demands three to five years of experience for certification, while the FHA only requires twelve to eighteen months. Now that gap is forcing our veterans into longer wait times and much higher fees, sometimes six hundred dollars to thirteen hundred dollars per appraisal, versus just four hundred to seven hundred dollars on the FHA side. Is the VA willing to reduce its experience requirements to align with FHA standards

Thank you for that. Um, we are absolutely willing to consider looking at our requirements and reducing those to help.

And how are you doing that?

So, um, I'm working with my staff right now to determine the balance between what's required versus ensuring that the product that's delivered is still a quality product. I'm looking forward to our modernization efforts which will help us with the quality control of appraisals. which will then also help us reduce the requirements before a VA uh before an appraiser can become part of the the panel.

Yeah, but it goes back to my previous question. We just gotta align up with what FHA is doing. It seems like it's common sense to me. And I know it is common sense for the for our veterans as well. Thank you.

The gentleman in yellow is the channel recognizer's representative of King Heins from the Northern Mariana Islands.

Thank you very much for your time today. So Earlier there was a lot of focus on on how do we make things better uh for for our vets, and I kind of want to just start off and get your thoughts on what has the VA done to modernize the home loan program in recent years.

Uh thank you for that question. So part of our modernization efforts is uh what we call guaranteed remittance, uh and it it prof- it has four different parts where we use APIs um to gather data, and to be able to evaluate So we've im- implemented our first part of that modernization, uh a hundred percent back in November of twenty, twenty twenty four. Uh we are about eighty p- three percent with the second API and about thirty four percent with the third. So, although our priority is partial claims right now, uh once we have partial claims implemented, we will continue to focus on getting guaranteed remittance uh to full

Okay.

production as that is one of the things that our stakeholders have asked for, and it is one of my priorities.

That's good to hear. Are you familiar with the Commonwealth of the Northern Mariana Islands?

Somewhat.

Somewhat. So, you know, one of the challenges that - that we - that we have out there, y- uh, and I was reading uh the - the written submitted testimony of the second panel, the - the folks that are coming right behind you and they were talking about um shortage of uh housing available in general, right? Um. And that's a challenge out here. Um, that's not the challenge out in the Northern Mariana Islands, but I think more outreach with regards to the programs that you provide needs to be done so that you know the vets out there uh know right, that they that they have this opportunity and and the and the ability to avail of this program. Uh, I think Abe has mentioned that Arizona rep- he has a lot of veterans who are living in Arizona. Well, we have the second highest enlistment rate per capita across any state or territory. And, you know, folks are coming back home, and - and this program is incredibly useful. And so that's why I wanna thank the chairman for, uh, taking the lead with me to sponsor the Home Act, which, um, addresses or attempts to close in some of the gaps by, um, explicitly requiring that the VA does an outreach. two places like like the CNMI. Um Ranking Member Pappas mentioned that uh you know every the priority right now should be how do we make housing more affordable. So and I think it's uh the President's priority as well to make home ownership more of a uh affordable. What are you doing uh towards that effort?

Thank you for that question. So the VA home loan program is already a fantastic program. It's the best option for veterans out there. Uh, I am willing to work with the committee if you have any legislative proposals that you uh would like for us to view or provide technical assistance, uh we do want to help make it more affordable, so any opportunities that there are, we will be glad to work with your committee and our stakeholders as well.

But if you were to give a suggestion in terms of what policies are standing in the way to be able to open up that path, what would it be?

Uh thank you for that question. I don't have a specific suggestion at this time. Um you know our our program as I stated has a lot of benefits already, um but if you have ideas on how we could make it better we would welcome that and we'll work with you.

Alright. I yield back, Mister Chairman.

The gentle lady yields back, and I recognize myself for five minutes. Um Who writes the requirements for the, so I I just wanna I wanna talk a little bit about some of the stuff that that Reckonmer Pappas was saying and then also my Republican colleagues, so um about this this appraisal thing, it's fascinating to me, how long is the residency for a family practice physician? It's three years. So if you can do a residency to become a family practice physician in three years, why would you take five years to be an appraiser, and I'm not trying to degrade appraisers, it's, you know, it's a great vocation. But I just don't see, you know, five years is a very long time. And it's not just the fact, and I understand the times for getting an appraisal, you're right, you know, they're, they're generally on par. I've never had a problem with it. But when you're talking about five years, that's five years of a bunch of different people doing essentially repetitive tasks. And to me, that looks like another VA jobs program. And you're paying for these other people to train them as an apprentice, to look at paint chips and stuff like that. It just seems like a waste of time and money, and we can't waste time and money anymore. So who writes these requirements? I mean, who d- is a bunch of people like, " Hey, let's pile on all these requirements to make it take a half a decade to become an appraiser who who writes those

thank you for that question I I fully agree with you um I'm new to this program uh however

yeah yeah I know

there is a lot of opportunity for us to reduce that five year significantly so I'll be working on that with my staff it is within my control to change that

okay it is I'm gonna I'm gonna admit it I knew the answer to that question before I asked it one of the greatest slogans ever for advertising was Nike when they said just do it. The Trump administration has taken that and they say just do things. This is something that you can do. You are empowered by your position to do this, and it could, it could really be significant. Very happy about that. Now, where I can remember Pappas, he, I want you to understand that this is a bipartisan thing. You had three people talking about this. I'm not happy at all with the fact that it's gonna be June before partial claims is done. That time line is too long. And, you know, what Chris's concerns are absolutely valid. We don't want veterans getting booted out of their homes, right? So I want you, you can't, I don't know if you can say yes right now, but I wanna talk to you later about this. I wanna guarantee that you're not gonna foreclose on any single veteran's, you have the ability to do so until this partial claims gets done. Okay? So if that is in your power, I need to know that, and then I want your word, if you can do that. Um. That's really all right. Chris, do you wanna do a second round? Do you have more questions?

Uh, I think I'm good.

You guys good? Okay. Well, very well. Um, with that I'm gonna yield back, cuz my buddy's got all the questions. Uh, thank you very much. for coming. Gentlemen, you are excused, and I hope you stick around and listen to the second panel. Uh, please be seated. We'll have you stand up in a sec. Our second panel, we're gonna hear from the following witnesses. Our first witness is Mister Owen Lee, twenty twenty six, Chair, Elect of the Mortgage Bankers Association. Our next witness is Mister Kurt Thompson, Executive Committee Member at the National Association of Realtors. And our final witness is Miss Ellis, is it Ellis? Ellis. Ellis, that's a very neat name. Uh, Cohen, Director of Federal Housing Advocacy at National Consumer uh Law Center. I'd like to welcome you very much uh to the table and I ask now that you would stand and raise your right hand. Sorry, you're very eager, that's great. Do you solemnly swear that the testimony you're about to provide is the truth the whole truth and nothing but the truth? Thank you very much. Let the record reflect that the witnesses have answered in the affirmative. Mister Lee, you are now recognized for five minutes to deliver your testimony.

And members of this subcommittee, thank you for the opportunity to testify today on behalf of the Mortgage Bankers Association. My name is Owen Lee. I serve as the MBA's twenty twenty-six chair elect, and I am also Chief Executive Officer of Success Mortgage Partners. I have more than thirty years of experience in residential real estate finance as an independent mortgage banker. I founded Success Mortgage Partners, headquartered in Plymouth, Michigan in two thousand and two. Our firm originates mortgages in forty-three states and the District of Columbia, closing billions of dollars of loans every year. Today, SMP is a top one hundred VA lender, since twenty twenty we have closed between a hundred and two hundred and twenty million dollars of VA loans each year. I am proud that over the last six years, SMP has helped more than thirty-one hundred veteran families secure the dream of homeownership. Many of those VA loan closings have been memorable, especially one very close to me. It involved my cousin, retired Sergeant First Class Damien Seawick. Sergeant Seawick is a twenty-two year army veteran and recipient of the rarely received Soldier's Medal, one of the highest honors a soldier can receive, for an act of valor in a non-combat situation. During his army service, he completed multiple tours of duty on the DMZ in Korea, and then Honduras, Egypt, Iraq, and Afghanistan. He retired from the army nearly ten years ago. As a soldier, my cousin never lived in a singular posting for more than three years. He made the achievement, this made the achievement of homeownership quite difficult. Sergeant Seewick all was also judged seventy percent disabled upon his discharge due to circumstances directly related to his service. So it was with the men's pride that on January seventeenth of twenty twenty five, I helped my cousin become a homeowner for the first time at age fifty eight. The MBA is honored to have productive work working relationships with the Full House Veterans Affairs Committee and this subcommittee, including your highly professional staff. I want to highlight a few of MBA's recommendations to strengthen and improve the VA home loan program. More details can be found in my written testimony. I appreciate the full committee passing H. R. eighteen fifteen, the VA home loan program reform act, which last year created a practical and permanent partial claim program, aligning with existing programs across other federal housing agencies. This law ensures veterans are not left behind during moments of financial stress. MBA commends the VA for their transparent and open drafting table process to implement the new partial claim authority but would encourage the agency to improve their draft waterfall proposal in the following ways. A borrower should not have to agree to a monthly payment increase before receiving other home retention options that do not result in a payment increase. It is also important for the policy to explicitly allow servicers the option to offer regular forbearance so a veteran home owner does not have to commit to a repayment option before their hardship has ended. Beyond the partial claims implementation, MBA would also encourage the VA to make certain other programmatic changes. among a list included in my written statement. To align minimum property requirements with Fannie Mae and Freddie Mac. To reform the EARL program to improve its effectiveness and assure ensure it reflects today's mortgage market. To modernize the allowable fee schedule structure that VA mortgage servicers can charge to process an assumable loan and to align the agency's fee documentation requirements with how third-party services are actually billed and documented. I would be remiss if I did not mention that MBA stands by its traditional position that the use of any revenue generated by VA home loan funding fees should only be used for the benefit of the VA's home loan program itself. In closing, I want to thank the committee for its time and attention on ways to reduce costs and improve efficiencies with this vital program, ensuring it better serves veteran families as they pursue their slice of the American dream. And I look forward to answering any questions you may have.

Thank you, Mister Lee, the written statement of Mister Lee will be entered into the hearing record. Mister Thompson, you are now recognized for five minutes to deliver your testimony.

Thank you, Chairman, then Ordon, Ranking Member Pappas, and distinguished members of the subcommittee. My name is Kurt Thompson and I am the Broker-Owner of Remax Liberty in Westminster, Massachusetts, where I've been helping buyers and sellers for over twenty-nine years. I am testifying today on behalf of the more than one point four million members of the National Association of Realtors. And I'm also a veteran. I served for eight years with the Army Reserve in one of the one fifty-seventh era fueling ring and New Hampshire's Air National Guard. The VA home loan program helped me to achieve home ownership, which is why as a standard practice I ask every buyer whether they have VA eligibility. I know from my own experience that the no down payment feature can be the difference between owning a home or continuing to rent. Before I turn to where I think the program can be strengthened, I want to thank this subcommittee for its leadership in passing H. R. eighteen fifteen. This legislation will help insure our nation's veterans utilizing the VA benefit have access to professional representation when making one of the most important decisions of their lives. That said, even the strongest loan benefit can only do so much when the availability of homes is in such short supply. NAR research estimates that Americans face a shortage of almost five million homes. In my market in Massachusetts, most entry-level buyers are looking in the three hundred thousand to five hundred thousand range, and there simply are not enough homes at that price point. The ability for veterans to purchase with no down payment is VA loan program's greatest strength, and it is most meaningful when affordable homes are within reach. Strengthening the benefit and increasing supply are complementary goals and both are essential. This is why NAR strongly urges Congress to pass the twenty-first century Road to Housing Act HR sixty-six, forty-four and the More Homes on the Market Act H R thirteen forty, which will unlock existing inventory by modernizing the capital gain exemption. Turning to the program itself, I want to spend most of my time on appraisals because that's where I see the issues most clearly in my day-to-day work. The biggest competitive challenge I see with VA buyers is closing costs leading to appraisal risk. Many of my veteran buyers have limited cash on hand, and closing costs largely cannot be rolled into the VA loan. This means that I often need to negotiate seller concessions. In a hot market like mine, sellers have a certain expectation of the amount of proceeds they will receive, and from the sale of their property. So to get the seller the number they need and secure the concession, my clients need, the offer has to go above the asking price. As a result, the appraiser appraisal has to come in at that higher number. If it does not, the seller has to either take less or walk away. And when they have another offer on the table without that that is where veterans lose homes. Another issue I see is that property conditions are generally acceptable for conventional loans are required to be flagged by VA appraisers. These additional requirements can add time and cost or even kill purchases, giving sellers yet another reason to favor conventional or cash offers. NAR recommends Congress direct VA to align its minimum property requirements with GSC standards. Modernizing appraisal timelines and expand the appraisal pool. Beyond appraisals, there's another issue that represents real untapped potential, which is loan assumptions. VA loans are assumable, which in today's high interest rate environment sounds like an incredible feature. A buyer can take on a seller's two point five or three percent mortgage instead of borrowing at today's rate which would have significant impact on the monthly payment however I cannot think of a single transaction in my career where an assumption is actually closed. The process can take up to ninety days or more, and most buyers cannot bridge the equity gap in cash. The assumption uh the assumption benefit exists on paper, but in practice it rarely pencils out. NAR recommends VA reevaluate the cap on lender compensation, and that Congress explore financing solutions to close the equity gap. Congress should also address veterans losing their entitlement when a non-veteran assumes their loan. The VA home loan guarantee program has been one of the most

Thank you, Mr. Thompson.

Thank you.

Uh, the written statement of Mr. Thompson will be entered into the

Thank you.

Miss Cohen, you are now recognized for five minutes to deliver your testimony.

Thank you, Chairman Van Orden, Ranking Member Pappas, and members of the subcommittee. Thank you for the opportunity to testify on behalf of the low income clients of the National Consumer Law Center regarding the VA home loan guarantee program. I am Elise Cohen, Director of Federal Housing Advocacy at NCLC and the daughter of a proud Air Force veteran. We support the goal of promoting affordability for veteran homeowners. and we recognize the key role of the VA home loan program. Today I will address the key tool VA has to make veteran homeownership more affordable, improving its hardship options. And I will discuss several issues relating to VA lending policies, all of which would have limited effect on today's affordability crisis, in great part because those challenges are market-wide. The most important step the VA can take to promote affordability for veterans is to help them retain their homes when feasible and avoid devastating home loss when they face financial hardships, including those related to their service. These home retention programs keep kids in school, stabilize neighborhoods, prevent home equity loss, and allow veterans to avoid an unforgiving rental market. However, the mortgage relief options available for veteran borrowers remain less favorable than the options available to other borrowers with federally backed mortgages. and a higher share of veteran borrowers are moving to active foreclosure. The situation for delinquent VA borrowers should improve due to passage of the VA home loan program reform act, and we thank members of this committee for your leadership on that legislation. However, the newly authorized partial claim program has not yet begun, and VA's draft handbook proposals do not fulfill the promise of the legislation, especially with respect to affordability. Primarily, because the agency's proposal requires a homeowner to accept up to a fifteen percent increase in their monthly payment before accessing the partial claim. Of the roughly ninety thousand VA borrowers who are seriously delinquent on their loan today we estimate that over thirty thousand will face a payment increase under this approach which on average would raise their monthly payment by one hundred fifty dollars per month. VA includes other options that create more affordable payments, but these are not offered until later in the draft waterfall. We sincerely appreciate the fact that VA placed its proposed waterfall on the drafting table for comment. We are hopeful that VA will make changes as a result of the consistent feedback it has received to change the order of its waterfall to prioritize affordability. The VA's proposal, while understandably seeking to be sensitive to the need, to limit term extensions and total amounts due, is out of step with Fannie Mae, Freddie Mac and FHA, which only consider payment increases as a last resort if at all. To promote affordability truly, VA should ensure that veteran borrowers have options that promote affordability first, which will save money for the VA fund, veteran borrowers and mortgage servicers. In addition, we urge the VA to adopt measures to hold off foreclosures until the partial claim program becomes widely available. We have suggested full pay forbearance, which would allow servicers to accept monthly payments again for veterans who can resume payments. This would meet the goal that the chairman just expressed about stopping foreclosures until the new program is up and running. Aside from adjustments to its home retention program, the other steps VA could take will only help affordability around the edges at best, or would seek to address issues not within VA's control. The problems of housing supply and overall market affordability are problems for all homebuyers and mortgage borrowers. The VA's appraisal and minimum property standards ensure the soundness of the home's veterans' purchase and catch faulty appraisals. Any change should be first examined for fair lending compliance, and any needed additional system accountability. Any steps the agency takes on underwriting should avoid changes that could undermine loan performance or unnecessarily narrow program access. VA's unique underwriting guidelines with a focus on the borrower's residual income have led to an impressive track record. Any reductions in closing costs will be limited if useful and cannot have a significant impact on market-wide affordability issues. VA should also explore a small dollar mortgage loan pilot, in coordination with FHA. Thank you for the opportunity to testify. We urge VA to stand up the partial claim on new waterfall in a way that protects the fund, limits servicer burden, and stabilizes homeownership.

The general lady's time has expired. The chair now recognizes Reikimair Papas for five minutes. Oh,

Thanks.

excuse me.

Go ahead, Mr. Chairman.

Uh, ma'am, your written statement will be entered into the record. The chair now really actually recognizes Reikimair Papas. Thanks.

Well, thanks very much, Mr. Chairman. I appreciate everyone's uh testimony here today. Uh, Mr. Lee, in your testimony uh that was submitted to us, you said veterans today, just as in the early nineteen eighties, face one of the most challenging housing affordability environments in decades, marked by elevated interest rates, limited inventory and rising home prices. I'm just wondering for all the witnesses here, you've you've touched on this, uh, but can you stress what the major headwinds are facing buyers uh right now? Mr. Lee, you can start.

Yeah, I think that the um uh largest headwind facing buyers is supply it's the supply of inventory of homes for sale um so the supply of inventories of homes for sale is up um in relation to where it's been since covid but it has never recovered um in terms of there not being enough houses for sale obviously we have a supply problem the amount of homes that we used to build in this company our country uh up to the great recession has never recovered from after the great recession. So anything that can be done in order to bring a greater supply of homes onto the market, building new, uh and or anything that can be done to get people to put more homes on the market, uh like the piece of legislation to modernize and uh step up the capital gains, um uh tax deduction for the sale of your primary residence uh would help this situation quite a bit.

I see our realtors nodding. Anything else you wanna add in terms of headwinds?

Absolutely. It's definitely inventory supply in shortage. We estimate there's about five million home shortage, so that translates to roughly if we could increase production by four hundred thousand units it would take us easily twelve to thirteen years to catch up to demand um so that is a big deal and there are provisions around the table HR thirteen forty is one of those provi uh those bills that consist as is HR sixty six forty four.

Thank you. Miss Cohen?

Agree about supply, it's obviously a big issue. Prices are also quite high and having institutional investors involved in the market is also making um a home out of reach for a lot of people, but it would be a mistake to only look at home buyers and not look at staying in the home, so I would just add that once we get people into homes we need to make sure that they can afford to stay in their homes. Thank you.

Well, thanks, Ms. Cohen. I was gonna note in your written testimony you you referred to that, saying the most affordable home is the one where they currently reside. Uh, and, um, uh, actually, Mr. Lee, you said that, and - and,

Yes.

Ms. Cohen, you said, uh, the most important step that VA can take is to promote affordability for veterans, uh, and help them avoid unnecessary devastating home loss when they face financial hardships. Um, so I wanted to just ask about the end of the VAST program, and I appreciate the chairman's comments about how we can stave off, uh, foreclosure for veterans that are anticipating

We work with attorneys around the country who represent veterans and other

Mm-hmm.

borrowers with federally backed mortgages and after the VASP program was canceled, there were many homeowners who were facing hardship who needed a solution that was just out of reach because the new program wasn't yet online and so it has definitely pushed more people to the brink of foreclosure and home loss that we haven't had a program in this gap period.

Yeah. Mister Lee, any uh observations there?

No, we just wanted to uh reiterate our thanks to everybody on this committee on both sides of the aisle for the help in getting the partial claims act passed. We would commend the VA for their drafting table approach um because that would promote a better solution um faster even though we would like to see it as soon as possible and I can promise you that our members and our servicing members are readying themselves to implement it as fast and professionally as possible as soon as we get it.

Yeah. Mister Thompson, thanks so much for your service through the New Hampshire Air National Guard. I should have led with that at the top. We appreciate uh what the Guard does for for uh all granted staters. And um you talked about the the disparity that can exist with uh veteran buyers. um and uh some of the challenges that they have with seller concessions and you know having to um offer above asking price um how do we work to level that playing field.

Absolutely so one of the things that came up was increasing the concession from four to six percent that would make a huge difference in my opinion. One of the areas where we can streamline or make things more affordable for our veterans is when we're able to work with the seller to provide a concession towards those closing costs to minimize the amount of cash coming in. In terms of the minimum property requirements, that is a challenge as well. Many times veteran buyers take themselves out of contention even before they get to the point of offer knowing that the property may not be in a condition that's going to pass those requirements and as good stewards of our our veteran buyers, we don't wanna walk them into landmines when re resources may be limited. So it's very important that we streamline those issues as well.

Thank you. My time's up, so you're back.

The gentleman yields back. The chair now recognizes uh Representative Amade from the great state of Arizona.

Thank you, Chairman.

You're welcome.

Mister Lee, from the lender's side of the table, where is the single biggest source of delay or added cost in the VA loan process compared to conventional or FHA loans?

Well, uh, the MBA would like to see uh a modernization of the uh both the uh appraisal standards and how appraisers process the n b a does believe that um five years is too long uh we would love to see something much closer to the way the rest of the market operates a lot of states have adopted a two year um period that uh we think would be sufficient and that would speed along uh that process uh also um uh you know as we've talked about a modernization of the um minimum property standards uh to bring it closer to where Fanny Mae and Freddie Mac are with the GSCs, would definitely streamline the program.

You know, VA still relies on manual underwriting underwriting, while FHA has moved to a semi-automated systems that can approve a loan in two to seven days compared to VA's roughly ten. Now from an industry standpoint, what would automated ri- underwriting do for VA loan competitiveness and for the veterans waiting on approvals?

Um, automated underwriting does speed along the loan process, especially for the loans that are um you know fit more um uh right away into the box of underwriting where the underwriting's simple the income is simple um so that would be helpful um but uh it we don't think it's a the absolute major choke point of getting a VA loan uh approved as fast as possible.

Right, but if it could speed it up by maybe eight to three days compared to FHA, that would make a big difference.

I It it would make a difference and it would um it would reduce the stigma um that's sometimes on a VA loan uh for the fact that it might be harder or take longer, to get to the closing table.

Sure, I'm all about just making it simple. You know, if FHA is doing something, I don't see why VA is taking a a longer time. You know, they're both federal programs. Now, Mister Thompson, I hear from veterans in Phoenix, Peoria, Surprise, Glendale, that there is a real stigma against VA loans in competitive housing markets. Listing agents falsely claim that VA loans take longer to close or have a higher denial rate. When the data shows it's just the opposite. VA loans actually have the lowest denial rate of any loan type. Now from your experience in the field, how pervasive is this stigma and what can be done to educate the real estate community?

I I think that's a timeline issue. So many times when you're looking at a transaction, the appraisal comes in at a certain point after home inspections, purchase and sales. So when that's coming in, there is a potential for a property to have a risk exposure on those elements within the um the minimum property requirements. So which require either a seller to take action and repair them, the consumer to take action and repair them, or the transaction could become terminal. So there is an added risk over say a conventional or a a cash purchase, and unfortunately in the market that can cause some challenges. Now I can tell you I had a client just a year and a half ago They accepted the VA loan over a higher cash offer, so there are still sellers out there that value the good work of our servicemen and women and will do the right thing but we can't rely on that, we need to try to streamline those programs to minimize friction for our veterans.

Yeah, that's great. There's so many brave patriotic Americans that are willing to support our service members as well.

Absolutely.

I wanna thank you all and I yield back, Mr. Chairman.

The gentleman yields and I recognize myself for five minutes. Mr. Lee, you said something really interesting that I thought was coming. So Right now, when we look at this waterfall,

Hmm?

the VA is intending on making service members who are having issues making their mortgage, the partial claim, mandatory out of the gate. Is that correct?

Um, I do not believe that's correct, but we would like to see some changes in the waterfall.

Yeah, we need we need to l- I mean we have the copy of it and all that But we need to, me and Chris gotta sit down and look at this collectively, and our staffs to make sure we agree with it, because with chevron deference,

Mm-hmm.

um that finding, if it does not comport to our intent, then that rule will not stand. So as opposed to having to undo something, um I would prefer to make sure that we nail it right. So let let's, if it's cool with you, let's talk about that later to get I mean to really get down to brass tacks on this so we don't

Yeah.

have to undo something that the administration does. Um, ma'am, Miss Cohen, I want you to know that we weren't like blowing you off, we're discussing the points that you were bringing up to make sure that we can have a really good discussion at the time, so I appreciate you doing that stuff. There are some things that we do need to address about VASP, and the reason that it went away is that the previous administration uh wrote what would have been a eighteen billion dollar check without congressional authorization. And my concern is, and I stated this earlier, the two best programs that the United States government has ever developed are the Veterans Home Loan Guarantee program and the GI Bill. And so for uh someone to administratively decide that they can magically create an eighteen billion dollar problem set without talking to us about it, directly contravened the will of Congress. And we don't wanna see any veteran uh removed from their home. ever. I don't wanna see that happen. We have to make sure that we in- we maintain the integrity of the program, so every single person in the future that wants to buy a home or is currently on active duty has the availability to use this program that is the intent that is why we did the partial claim thing, to align it with other federal lending programs. Um and I know that because we wrote it uh so there is one other thing

Mister Chairman, may I respond?

Yeah, sure, go ahead.

First of all,

Please.

my father went to college on the GI Bill and he bought the house I grew up

Right, along right,

with the VA benefits, so I agree with you about that.

see, you know what I'm talking about. Yeah.

Second, I think the question right now is what can we do now before the partial claim is stood up so that people don't lose their homes between now and then and you

Yeah.

raised that issue yourself we're suggesting something called full pay forbearance people who can resume their payments who will be able to qualify for the new system shouldn't be further behind because they didn't have their payments accepted. And so we're suggesting that as a stopgap measure, it will stop them from falling further behind and prevent avoidable foreclosure.

Can you explain, thank you for that, can you explain the having to accept a fifteen percent increase in their mortgage?

So the way the proposal works from VA, and it's my understanding that they've heard similar feedback and they're looking at it closely, is that the the top options before you get to the um payment that would stay the same, or the partial claim, is that if you can tolerate a thirty year mortgage with a fifteen up to fifteen percent payment increase, then you don't get to the next option, and then you stay at that higher payment. And I I believe the goal of that was to not extend people's terms or total amounts due, But what it gives people is an unaffordable payment that will lead to foreclosure.

OK. So that's - that's exactly why we need to really get - get into the weeds really, uh, like a hearing like this isn't really the setting for that. That's sitting down and looking at these things in detail and preempting any issues that we may have, uh, ahead of time. Well, with that, I don't have any more questions. I wanna thank you very much for coming. today, and I appreciate your work. I know that your your heart is exactly where ours is. That's making sure that every single man and woman that serves our nation in uniform has the ability to live the American dream and that is home ownership. Oh, I, you know what? My time has expired. Do you mind if I just ask one more thing?

Sure.

Hey, um uh how much money are you into building a home before you even break ground?

I'm not qualified to ask that, cuz it answers that, cuz it varies by location and the red tape of getting it through the local municipality.

Boop.

There's a lot of things we can work on that together to streamline,

Yep.

look forward to doing.

You nailed it, Mister Thompson. It's somewhere around a hundred thousand dollars.

Yeah, we've we have been in a lot of meetings uh where I've

You see?

heard between seventy and ninety-five thousand, uh or higher,

Okay.

depending

So you're you're buying a two hundred thousand dollar home for three hundred thousand dollars because there's a whole bunch of people that got six bosses

Yes.

and want you to fill out four hundred pieces of paperwork, right?

Yes, sir.

That's what we need to change. That's where your affordability comes in, getting rid of these damn bureaucrats and paperwork. And just do things. All right, so listen, God bless you guys. Thank you so much for coming. I appreciate it.

Thank you, Mr. Chairman.

Thank you.

You're welcome.

You guys did really well.

I ask you, Madam Secretary, that all members may have five legislative days to revise and extend their remarks, including extraneous material. Without objection.

Then you can come back.