AMVETS TESTIMONY MARCH 16, 2000 SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS LOAN GUARANTY SERVICE
Mr. Chairman and Members of the Subcommittee: It is a pleasure for me to appear before you today on behalf of the more than 250,000 members of AMVETS to provide our recommendations for the Department of Veterans Affairs Loan Guaranty Service. Neither AMVETS nor myself has been the recipient of any federal grants or contracts during FY2000 or the previous two years. Originally established by the Servicemen’s Readjustment Act of 1944, the VA Loan Guaranty Service has enabled millions of American Veterans to purchase their own homes. With its no down payment feature, the Department of Veterans Affairs (VA) Loan Guaranty Service makes mortgage credit available to many veterans who otherwise would not have been able to become homeowners. We believe this benefit continues to be an important one for veterans. PROGRAM MANAGEMENT AND PERFORMANCE Today, the VA Loan Guaranty Program provides housing credit assistance to veterans, active-duty personnel and eligible surviving spouses. VA guaranteed loans are made by private lenders to eligible veterans for the purchase of a home which must be for their own personal occupancy. Once the loan is approved by a lender VA will guarantee a portion of it to the lender. This guaranty protects the lender against loss up to the amount guaranteed and allows a veteran to obtain favorable financing terms. A VA guaranteed loan can be used by veterans to purchase a home, build a home, repair a home, refinance an existing loan or to buy a manufactured home. AMVETS is encouraged by the efficiency of the VA Loan Guaranty Service and the timeliness in which veterans are receiving assistance in processing VA guaranteed home loans. One AMVET member and first-time homebuyer in the state of Delaware was overwhelmed by the assistance he received recently from his state VA Loan Guaranty office. This AMVET is also an active duty Staff Sergeant stationed at Dover Air Force Base, who due to mission requirements was unable to travel to the state VA office in Wilmington to receive his certificate of eligibility. Knowing that the loan process would be delayed until the certificate was received, the state VA Loan Guaranty representative delivered the certificate to the family readiness center on the Air Force Base, allowing this veteran to proceed with his home purchase in a timely manner. We are further encouraged by the proactive approach being taken by the national office to streamline the VA loan process and to further automate their services through the use of the Electronic Date Interchange (EDI) and by providing forms and information on the Internet. EDI allows members to transmit loan data to VA loan offices and receive notification of guaranty of the loan electronically, which will eventually lead to a paperless process. Many commercial lenders and mortgage companies have already converted to electronic systems of loan processing. We believe VA must continue to move forward in this area to remain consistent with the abilities of their private sector partners, thereby ensuring the availability of this important veterans benefit in years to come. Loan Underwriting and Servicing The VA Loan underwriting process has been improved in recent years by the automated loan underwriting system. VA, joined with Freddie Mac to develop a VA loan version of Freddie Mac’s automated underwriting system called, Loan Prospector. The VA version of Loan Prospector allows lenders to enter data into the system over their computer and receive an underwriting recommendation electronically within 4 minutes of transmitting the data. This allows veterans to take advantage of the same processes that are available to conventional borrowers. AMVETS applauds the VA Loan Guaranty Service for recognizing the trends in the commercial lending arena and implementing this valuable new service for veterans. One of VA’s critical functions is to assist veterans in keeping their homes, or when needed, helping a veteran through the foreclosure process. Once a lender has reported to VA that a veteran is seriously delinquent on their mortgage payments, VA will contact the veteran and offer assistance in retaining the home or resolving the issue at the lowest possible cost to the veteran and VA. Costs to the government are reduced when VA is able to pursue an alternative to foreclosure and veterans are helped by either saving their home or avoiding the expense and damage to their credit rating caused by a foreclosure. Alternatives to foreclosure can include refunding of the loan which allows the veteran to stay in the home and make loan payments directly to VA; VA intervention with the lender on behalf of the veteran to set up a repayment plan; a compromise claim for the difference of the loan when the lender is forced to sell at a cost lower than the amount of the loan; and accepting deeds in lieu of foreclosure. AMVETS applauds VBA for implementing the Loan Service and Claims System last year. This system automates routine service activities, improves efficiencies and allows employees to concentrate on supplemental servicing that directly benefits veterans. It also provides valuable support to the ongoing effort to consolidate guaranteed loan servicing at the nine Regional Loan Centers (RLC’s). Although the new system has improved the efficiency of the servicing program, AMVETS supports VA’s claim that a redesign effort is required to incorporate updated requirements and processes into the existing system. By further automating the servicing system, VA would improve overall efficiency, provide more accurate data, improve customer service and workload management and ultimately ensure that more veterans are able to keep their homes. Property Inventory Management and foreclosure rates AMVETS agrees with VA’s position on purchasing foreclosure properties when it is in the best interest of the government to do so. Before VA will purchase a property to avoid foreclosure, a review is made of the net value of the property, and the unguaranteed portion of the debt. VA accepts conveyance of the property if by purchasing the property it reduces the maximum claim payable to the lender. In 1997, VA reduced its claim liability by $136 million by acquiring foreclosure properties. Additionally, AMVETS supports the A-76 Cost Comparison being conducted by the VA. This study will provide a cost comparison of VA’s nationwide Property Management Operation to determine whether it would be more efficient and cost-effective to continue to perform the work of the operation using government employees and resources, or to obtain property management services through commercial sources. VA measures its success in assisting veterans who are facing foreclosure through the Foreclosure Avoidance Through Servicing (FATS) ratio. This measures the percentage of foreclosures that are avoided after VA intervention. Through continued automation of services, sufficient staffing and cost effective operations AMVETS believes that VA’s foreclosure avoidance goals will be achieved. The VA Loan Guaranty Program is effective and accomplishes it’s objective of effectively assisting veterans and active duty servicemembers in purchasing and retaining homes. Mr. Chairman, that concludes my report. On behalf of the members of AMVETS, I thank you again for this opportunity to present our views before this committee. Back to Witness List |