The Department of Veterans Affairs will issue several policy changes in a few weeks that should make it easier for mortgage bankers and other financial institutions to grant VA home loans, the head of the departments Loan Guaranty Service said.

R. Keith Pedigo said that, under the changes:

The VA will look at constancy of income rather than stability of employment. The agency used to demand that applicants have at least two consecutive years of employment at the same place.

Unemployment benefits can be considered as part of a persons income history.

Money saved at home now can be counted among a borrowers income, if the borrower can provide a reasonable explanation of how they saved money.

The VA will permit more mechanisms to establish credit when a credit history doesnt exist. Among them are records of paying rent and utilities.

The fact that a prospective borrower will get credit counseling is a positive factor in a lending decision.

Were not asking you to violate any standards, Pedigo said Oct. 11 in Boston at the annual convention of the Mortgage Bankers Association. Were asking you to look with a flexible approach.

The planned changes in the VA rules affect all financial institutions that deal with the Department of Veterans Affairs.

Several other changes also are in the works once President Clinton signs recently approved VA-related legislation, Pedigo said. One part of the bill increases the limit on a house that can be purchased with no down payment to $203,000 from $184,000.

Another measure on its way to Clintons desk will permit VA loans to be refinanced in order to make improvements for energy efficiency and refinances of an adjustable-rate into a fixed-rate mortgage even when the fixed rate is higher than the ARM. Other parts of the same bill extend eligibility for VA loans to reservists who suffer a disability and thus were forced out before the end of their six-year term; widows of military personnel; and people who were forced out of the service by a reduction in force before their 24-month tour of duty expired.

One thing that wont change soon regards appraisers. The Federal Housing Administration recently permitted more flexibility in the choice and use of appraisers, but Pedigo said the VA is mandated by law to require that appraisers must be assigned on a rotating basis from a VA- approved list.

Nevertheless, Well watch what [the Department of Housing and Urban Development] does with its innovations, Pedigo said. If it works, wed support legislation to do the same.

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