Hon. Steve Buyer
Chairwoman Herseth Sandlin and Ranking Member Boozman, I am very pleased you have included my bill, HR 4539, the Department of Veterans Affairs Loan Guaranty Cost Reduction Act of 2007, for the subcommittee’s consideration.
When I introduced the bill last December with Mike Michaud, the full extent of the mortgage and financial sector crisis had not yet appeared and frankly, this bill was intended to improve the day-to-day operations of loan guaranty program. But events since I introduced HR 4539 have convinced me of the need to make the kinds of changes included in my bill.
I would note that subsequent to introduction of H.R. 4539 by Mike Michaud and I, Chairman Filner introduced a similar bill, H.R. 4884, and I take that similarity as confirmation of the need to improve the loan guaranty program. I believe that between us, veterans will find it easier to achieve the American dream.
I also ask unanimous consent to include a copy of a January 28, 2008 letter to Speaker Pelosi and Leader Boehner cosigned by Mike Michaud and me regarding the need to include the VA loan Guaranty program the recent stimulus package in the hearing record. I was very disappointed it was not addressed when the stimulus package increased the loan limits for FHA mortgage loans to move people from risky subprime loans to federally guaranteed loans. I did appropriately bring this matter to you and thank you for your attention.
In addition to the details of the bill, I note that VA’s loan guaranty program is not experiencing the same financial difficulties as the broader market because VA maintained its standards while others did not. I must also emphasize that H.R. 4539 has no affect on VA’s underwriting standards.
Madame Chairwoman, H.R. 4539 would do the following:
Increase the maximum loan amount guaranteed by VA to 125 percent of the Freddie MAC conforming limit. This will enable service members and veterans living in high cost areas to purchase homes using the VA loan guaranty.
Extend some of the fees through 2017. These fees provide the funds VA needs to pay for the guaranty on homes that go to foreclosure. These fees have also provided PAYGO offsets for improvements to other VA benefits.
Increase the guaranty amount for certain refinanced loans making VA refinancing more attractive and competitive in the marketplace.
My bill reduces the equity requirement for a VA-guaranteed refinancing loan to zero. This is especially important for those service members and veterans whose home equity has decrease solely because of the current market forces despite the fact that they are not behind on their mortgage payments.
To make loans more affordable in the high cost areas, my bill would limit the total loan guaranty fees to the maximum dollar amounts in effect on the day of enactment.
To encourage an increase in the supply of affordable housing, HR 4539 would increase the guaranty amount to 30 percent of the mortgage.
And finally, my bill would require the Secretary to provide a small measure of assistance in offsetting closing costs associated with the purchase of a home. The Secretary would determine the amount – if any – based on the income from guaranty fees in the previous year.
Madame Chairwoman, as you know, I support your GI Bill, H.R. 5684. I mention this because it is a good bill and you have worked with our side in a bipartisan manner to make a few changes we felt important. Additionally, we all know the train is moving quickly on this issue so major restructuring of all VA education programs is not feasible at this time. In the spirit of full disclosure, I am in the process of drafting an extensive reorganization of chapters 30, 32, 34, 35 and 36 into one or two chapters to standardize the administrative rules and education and training options to those receiving education benefits. I hope we can work together on this approach to bring some order to these programs in the not too distant future.
Chairwoman Herseth Sandlin, I thank you again for the bipartisan manner in which you have included H.R. 4539 and several other bills from our side of the aisle in today’s hearing. I look forward to working with you and all the Members of the full committee to improve the VA loan Guaranty program.