Written by Isaac F Davis

In a press release dated November 1, 2010, the U.S. Department of Veterans Affairs announced that the VA Home Loan Guaranty Program hit the 19 million mark.  The record-breaking number of VA loans shows that the VA home loan program is resilient despite depressed housing and economic conditions as a result of the recession that hit in fall 2008.

The success of the VA-guaranteed mortgage program can be measured in growth and foreclosure rates. During the period from 2006 to 2010 the numbered of VA-backed home loans for veterans rose by 63 percent from previous years. And, from summer of 2008 to fall of 2010 the VA’s foreclosure rate, as well as the serious delinquency rate for the latter six quarters of this period, were one of the lowest in the lending industry.  Even when compared to prime loans, the VA mortgage program performed with the lowest foreclosure and delinquency rates according to the Mortgage Bankers Association’s National Delinquency Survey.

When lenders tightened their belts as a result of the 2008 mortgage crisis, the VA mortgage program managed to thrive. Factors that may have contributed to the program’s success could be the attractive features of VA loans like zero money down and no private mortgage insurance, low interest rates, as well as the character profiles of the typical VA borrower.

The number one reason VA-eligible borrowers cite for using the VA home loan program is the zero down feature associated with veterans’ loans.  Zero down means VA borrowers have savings intact for financial security.

Mortgage borrowers across the country, including VA borrowers, have been enjoying historically low interest rates in 2009 and 2010.  Low interest can attribute to low monthly mortgage payments.  Interest rates can go up and down based on risk and inflation.  But, VA-approved lenders typically offer interest competitive with the national rate.

Perhaps a main attributing factor to the success of VA loans may be the borrower demographic associated with the program.  VA-backed mortgages are not available to civilians; in other words they are only offered to the military affiliated.  The VA’s Secretary Shinseki stated that the nation’s military members have an “unshakeable sense of responsibility”, and that this is a possible key reason for the low foreclosure rate of VA loans.

For VA-eligible borrowers only, the Department of Veterans Affairs guarantees approximately 25 percent of each VA mortgage.  The added security of federal backing can reduce risk for VA-approved lenders.

A low foreclosure rate and fewer delinquencies than other loan programs may be due to the care and keeping of military borrowers.  Included in the U.S. Department of Veterans Affairs’ home loan program is a unique service for borrowers in financial distress. The VA employs qualified mortgage counselors in 11 Regional Loan Offices throughout the country.  These certified financial counselors provide advice for VA borrowers to get their defaulted mortgages back on track and keep their homes that are threatened by foreclosure.

VA Secretary Shinseki said that the “professionalism and savvy” of Department’s mortgage counselors may be one key to maintaining a low foreclosure rate for VA-backed home loans.

Since 1944, the VA Home Loan Guaranty Program has provided more than $1 trillion in VA loans.  For additional information about the successful and recession-proof VA Home Loan, contact a seasoned VA loan professional.