Veterans are missing out on innovative mortgage products because of congressional inaction on unrelated issues, lenders told a House subcommittee June 30. The House passed legislation Sept. 21 to increase the VA loan guaranty level to $50,750 from $46,000, pushing the maximum allowable loan for veterans from $184,000 to $203,000. The bill, H.R. 949, is an amendment to Title 38 of the U.S. Code. It was unanimously approved in the House and also had strong support in the Senate. But the bill has been snagged by controversial provisions related to veterans benefits, and the increase has been mired in conference with no compromise date in sight, this despite an approving consensus among lawmakers. We are concerned that the delay in raising the limits is adversely affecting veterans use of the [loan guaranty] program, said Ron J. McChord, president of American Mortgage & Investment Co., of Oklahoma City, Okla., during a House Veterans Affairs Housing and Memorial Affairs Subcommittee hearing. Although the hearing wasnt intended to address the delay in enacting the loan limit increaseit revolved around other, more cosmetic changesMcChord, speaking on behalf of the Mortgage Bankers Association, stres-sed the current system has the effect of preventing veterans from using their entitlement, and that the increase would expand homeownership opportunities in high cost areas. McChord also suggested that Congress authorize VA to begin guaranteeing the two-step mortgage that has become successful in the market recently. The two-step program, which Fannie Mae unveiled June 23 (see story, Page 4), blends characteristics of fixed and adjustable rate loans and allows home buyers to benefit from the low initial fixed interest rates for the first five to seven years, then adjusts to a market rate for the remainder of the mortgages term. The two-step provision wasnt included in the draft legislative package the subcommittee released, but it could be added as an amendment later. In the meantime, it appears some changes are likely for the loan guaranty program. The yet-unnamed bill is expected to be introduced by the committee chairman, Rep. George E. Sangmeister, D-Ill., shortly after the July Fourth recess, said a House Veterans Affairs Committee staffer, and opposition is expected to be minimal. The bill would: Authorize veterans to refinance adjustable-rate mortgages to fixed-rate mortgages; Extend loan guaranty eligibility for surviving spouses of reservists who died on active military service; Grant loan guaranty eligibility for reservists discharged because of service-connected disability discharges; Guaranty home refinancing loans for energy efficient improvements, which would allow vets to include energy efficient improvements in an interest rate reduction refinancing loan; Permit the VA to accept property in certain overbid situations; and Amend the minimum active duty service requirement for loan guaranty benefits to clarify that an exception to the rule exists for people who failed to meet the 24-month minimum active duty service requirement because of a reduction in force or an early discharge for the convenience of the government.
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