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Mr. Harry H. Dinham

Mr. Harry H. Dinham, National Association of Mortgage Brokers, President

Chairwoman Herseth-Sandlin, Ranking Member Boozman, and members of the subcommittee, thank you for permitting the National Association of Mortgage Brokers (“NAMB”) to submit this written testimony on the Veteran Home Equity Conversion Mortgage Act of 2007 (“HR 2475”).  We are confident that this important piece of legislation will help elderly veterans stay in their homes longer, improve their quality of life, and satisfy increased financial obligations.

NAMB is the only national trade association exclusively devoted to representing the mortgage brokerage industry, and as the voice of the mortgage brokers, NAMB speaks on behalf of more than 25,000 members in all 50 states and the District of Columbia.  NAMB members are typically small business men and women, who act as independent contractors and serve as a principal conduit for delivering loan products, developed by state and federally-regulated lenders, directly to consumers.  Mortgage brokers play a critical role in helping the American economy and in making the dream of homeownership a reality for America’s veterans. 

Today, mortgage brokers originate a majority of all home loans, and remain a key distribution channel for U.S. Department of Veterans Affairs (“VA”) guaranteed home loans.  As such, mortgage brokers are familiar with veterans’ needs when it comes to buying or refinancing a home.  Over the years, Congress, the VA, and other entities have worked to break-down barriers and make it easier for veterans to become homeowners.  NAMB applauds these efforts, and today we urge Congress to work to break-down another barrier, and make it easier for elderly veterans to remain in their home while continuing to meet the financial burden of steadily increasing medical and homeownership costs.      

Roughly one quarter of the nation’s population – about 70 million people – are potentially eligible for benefits and services through the VA.  These benefits and services have been earned through the great sacrifices made to provide for our freedom and our security.  We believe extending the VA home loan benefits to include home equity conversion mortgages (“HECMs”) is a small, but meaningful way to acknowledge that we have not forgotten the service our elderly veterans have given to this country.

With the rate of American homeownership at a near-record high, HECMs have become a mainstream and highly successful financial planning tool for elderly homeowners.  In the most recent fiscal year, ending September 30, 2006, the Federal Housing Administration (“FHA”) insured 76,351 HECM loans.  That number is up from 43,131 the previous year. 

Elderly veterans represent a large and growing market for HECM loans.   Elderly veterans should be offered this valuable product, which will allow them to cash-out the equity that they have built-up in their homes over 20, 30 or 40 years in order to meet the demands of increasing health, housing, and sustenance costs, without the risk of losing their home.  A VA HECM loan program will provide elderly veteran homeowners with: 

  1. A higher available loan limit than the FHA HECM loan program, which means more cash out to the veteran;
  2. A loan product that meets a Veterans needs better than existing HECM programs.
  3. An effective savings of roughly 0.5% in interest rate, because monthly mortgage insurance premiums are not required with VA-guaranteed loans;
  4. Greater access to HECM loans, since the VA does not impose burdensome audit and net worth requirements on originators wishing to participate in the program;
  5. An opportunity for Veterans to remain in their homes longer, without incurring additional monthly expenses;
  6. An opportunity for Veterans to choose in-home care, as opposed to the often more costly option of long-term care at a VA Hospital or other facility; and
  7. Zero chance of default.

Some have expressed concern that this proposed legislation does not fit the mission of the VA program.  We believe it does.  This program would help Veterans retain their home and would allow Veterans to take equity out of their home, as they can do currently with a VA refinance.  Additionally, a VA HECM loan would be viable loan product to the secondary market, as the VA guarantee of the HECM loan would be the same as it is for VA loans that are currently purchased by the secondary market.  Another positive point is that the program would not incur any additional cost. Currently, the VA funding fee charged on VA home loans not only covers the cost to administer the program, but also generates excess revenue.  As currently drafted, this proposed VA HECM legislation would grant the Secretary of the VA discretion to establish the funding fee at an amount that would cover the cost of administering this new loan product.

NAMB sincerely appreciates the opportunity to share its position with this Subcommittee.  We commend Chairwoman Herseth-Sandlin and Ranking Member Boozman for taking the time to convene a hearing on this very important issue.  It is imperative that we seek out ways to sustain this country’s near-record rate of homeownership, and authorizing the VA to guarantee HECM loans to eligible elderly veterans is a noble start.  We urge the committee to support HR 2475 and greatly improve the home loan benefits earned by our veterans. 

Respectfully submitted, Harry H. Dinham, President.