MADAM CHAIRWOMAN AND MEMBERS OF THIS SUBCOMMITTEE:

On behalf of the 2.3 million members of the Veterans of Foreign Wars of the United States and our Auxiliaries, I would like to thank you for the opportunity to testify before this distinguished body. The subprime mortgage crisis is an issue that is affecting the entirety of our nation. We appreciate this committee’s rigor in recognizing the affects it will have upon American veterans. The thought of America’s heroes in the streets due to their use of a bad financial tool makes us all shudder. It is of the utmost importance, that if nothing else, we learn from our mistakes and insure this never happens again.

Unfortunately, we have no veteran specific information on veterans’ exposure to the subprime mortgage market because it is not tracked. It is important to note that Department of Veterans’ Affairs (VA) home loan guarantees did not apply to subprime loans and are not being directly affected by the subprime mortgage crisis. However, veterans have used multiple financial tools to purchase their homes, including subprime mortgages. We do have some opinions as to why some veterans may be finding themselves faced with a subprime mortgage foreclosure: the veteran was working with predatory lenders, the veteran did not have access to prime loans, the veteran lacked knowledge or qualification for a VA home loan, the veteran lived in a large urban area in which housing averages exceeded the VA home loan cap, or the veteran had a bad or lower credit score due to deployments, or any combination of the above.

The VA home loan process is very lengthy, and costly, to both lenders and veterans. This bureaucratic red-tape may have become an incentive for lenders and real-estate agents to discourage VA home loans and may have led to veterans using subprime mortgages. Also, VA home loans are capped at a level cost prohibitive to certain geographic regions. The unreasonable VA loan cap in expensive urban districts may have led several veterans to subprime loans in those areas. In comparison to VA home loan guarantees, Federal Housing Authority home loan caps vary by state and county allowing prospective mortgagees more flexibility.

We strongly recommend that measures be introduced to strengthen and expand the use of the VA home loan guarantee program for veterans. In the housing market crunch, veterans are likely to rely more heavily on VA home loans as access to capital becomes more difficult and guaranteed loans become more attractive to lenders.

Our primary recommendations for the VA home loan guarantee program are: raise the maximum cap of VA home loans specific to the needs and averages of individual communities, decrease the completion time of a VA guaranteed home loan (thereby decreasing the likelihood of lenders to encourage alternative less attractive mortgage options), repeal the funding fee to obtain a VA loan guarantee, and increase outreach and access to VA home loan specific information.

The Veterans of Foreign Wars are appalled that there are individuals in our country who targeted veterans and others for substandard loans knowing they would likely default after the initial rates were raised. Those individuals have done their country, and the men and women who served it so proudly, a great disservice.

Let us all work hard for our future and those affected by this terrible tragedy. We are a great nation and our people deserve better.

Madam Chairwoman, Ranking member Boozman, and members of this Subcommittee I thank you for the opportunity to testify and am happy to answer any questions you may have.