Lawmakers worry VA home loans aren’t keeping up with hot housing market

A bipartisan group of House lawmakers is urging Veterans Affairs officials to consider quick fixes to the department’s home loan program in order to ensure users can compete in the still surging housing market.

“Historically, VA mortgage loans were appealing and competitive to sellers,” the group wrote in a letter to VA Secretary Denis McDonough on Thursday. “Unfortunately, the current housing market and the rise in cash and conventional loans with waived contingencies can leave veterans unable to compete with other buyers. … It is imperative that veterans receive a competitive loan that provides them the opportunity to purchase a home.”

According to statistics from the National Association of Realtors, the median sales price of a home in America as of February 2022 was up 15% from the year before.

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Lawmakers — led by Rep. Guy Reschenthaler, R-Pa., a Navy veteran — said they are concerned the VA home loan benefit has not kept up with the demands of home buyers and sellers and risks forcing eligible individuals into abandoning the benefit to secure a home purchase.

“VA borrowers are less successful than borrowers using conventional loan products, with 11% of VA borrowers changing loan products during their housing search, compared to only 1% of conventional borrowers who change financing methods,” the lawmakers wrote.

In fiscal 2021, department officials guaranteed more than 1.44 million loans valued at roughly $447 billion, a record high and up 15 percent from the previous year.

In a VA home loan, the federal government does not provide any money to the homebuyer but does agree to back the loan against the possibility of default. That allows veterans to put no money down on their home purchase and avoid some other associated home-buying fees.

But it does require special qualifying and appraisal rules, which can slow down completion of a home purchase.

In testimony before the House Veterans’ Affairs Committee in December, VA officials said the average wait time for a department appraisal is about 15 business days. For non-VA loans, that process is usually around two days.

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Witnesses said the department is looking for ways to streamline the process, but not at the risk of defaulting on more loans or putting veterans in substandard housing.

The lawmakers who wrote to McDonough this week are asking VA officials to look at improvements to lessen the burden on buyers and sellers involved in the program, and also for ways to “improve the public perception of the VA mortgage loan program.”

Outside groups said real estate agents looking for quick and easy sales may often ignore VA home loans because of the extra work involved in the process.

In March, the National Association of Realtors and VA released a video series for home buyers, sellers and real estate agents designed to dispel myths around the program and explain how the process differs from conventional loans.