Letter to Denis McDonough, Secretary of Veterans Affairs - Improving VA Mortgage Loan Process


Dear Secretary McDonough:

Thank you for your work to ensure the men and women who served our country receive the benefits they have rightfully earned. It is with those efforts in mind that we write to ask that your department work to make homeownership more attainable for our nation's veterans. Specifically, we believe the Department of Veterans Affairs (VA) should explore how VA mortgage loans can compete in today's marketplace and ensure veterans have negotiating power throughout the home buying process.

As you may know, buyers are facing an incredibly competitive housing market and have been for some time. According to the National Association of REALTORS®, February 2022 saw a median sales price of $357,300 and 1.7 months of inventory. The median sales price is up 15% year-over-year, and inventory was down 0.3 months from February 2021. This marks 120 consecutive months of year-over-year increases, the longest-running streak on record. Sellers have benefitted the most from this intense housing market, typically earning their full asking price.

Historically, VA mortgage loans were appealing and competitive to sellers. 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. 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. This is particularly concerning given the alarming levels of veteran homelessness in our nation. In 2021, 19,750 veterans experienced homelessness.

Our nation's veterans have provided an invaluable service to protect our freedoms and American way of life. It is only fitting we ensure they receive the benefits they deserve. We call on your department to improve the VA mortgage loan process and ask for a report on the steps the VA is taking to increase loan competitiveness. It is imperative veterans receive a competitive loan that provides them the opportunity to purchase a home. To gain a better understanding of the issue, we request answers to the following questions:

1. How is the VA working to improve appraisal policy and procedure, such as minimum property requirements, to improve the ability of veterans to compete, while also maintaining appropriate levels of protection to the loan guaranty program and veteran home buyers?

2. What level should the funding fee be set at to strictly cover the risk of default and the 25% guaranty payments in the home loan program? Does VA have the resources it needs to commission a study identifying what percentage of VA funding fee is currently dedicated to the home loan guarantee program, and what percentage is being diverted to other programming?

3. How is the VA working to improve the public perception of the VA mortgage loan program?
How can Congress assist the VA in its efforts to improve the competitiveness of the mortgage loan program?

4. We look forward to your response and to working with you to address this important issue for our veterans.