Recently, congress came together to put together the economic stimulus package and in affect, temporarily raising the conforming loan limits in high cost areas. What did this do for people in Honolulu, Hawaii? Essentially raise the conforming loan limits from $625,500 to $793,750 for a one unit property. Unfortunately this increase limits will only affect Fannie Mae, Freddie Mac and FHA loans – not VA-backed loans.
Why did VA get left out on this? Well, according to House Veterans Affairs Committee Chairman Bob Filner, (D – CA), “I don’t think (the plan drafters) understood the situation” – specifically that lawmakers probably assumed that VA loan limits would automatically increase along with Fannie and Freddie limits.
This oversight caught the attention of Hawaii Senator, Daniel K. Akaka (D-HI), Chairman of the Veterans’ Affairs Committee, and on March 14 he introduced legislation to rectify the oversight and raise the maximum guaranty for veterans’ homes.
Here’s a copy of Sen. Akaka’s floor statement introducing the bill:
Mr. President, today I introduce a bill that would rectify an oversight made in the recent passage of the Economic Stimulus Act of 2008. If enacted, this bill will allow thousands of veterans to realize the American dream of owning a home. Senators Reid, Durbin, Burr, Rockefeller, Murray, Obama, Sanders, Brown, Baucus, Clinton, Kerry and Boxer join me in offering this legislation.
The VA Home Loan Guaranty was part of the original GI Bill in 1944. It was signed into law by President Franklin D. Roosevelt and provided veterans with a federally guaranteed home loan with no down payment. So, as World War II was ending, landmark legislation made the dream of home ownership a reality for millions of returning veterans. They were able to build new homes and otherwise begin new lives following their service and with the assistance of the federal government.
Today, more than 25 million veterans and servicemembers are eligible for VA home loan guarantees. Eligibility extends to veterans who served on active duty for a minimum of 90 days during wartime or a minimum of 181 continuous days during peacetime, and have a discharge other than dishonorable. Members of the Guard and Reserve who have never been called to active duty must serve a total of six years in order to be eligible. Certain surviving spouses are also eligible for the housing guarantee.
The amount of the home loan guaranty was last adjusted by the Veterans Benefits Act of 2004. The maximum guaranty amount was increased to 25 percent of the Freddie Mac conforming loan limit determined under section 305(a)(2) of the Federal Home Loan Mortgage Corporation Act for a single family residence, as adjusted for the year involved. Using that formula, since the Freddie Mac conforming loan limit for a single family residence in 2008 is $417,000, VA will guaranty a veteran’s loan up to $104,250, or 25 percent of the Freddie Mac limit. This guaranty exempts homeowners from having to make a down payment or secure private mortgage insurance.
The newly enacted Economic Stimulus Act of 2008, however, temporarily reset the Fannie Mae, Freddie Mac, and FHA home loan guarantee limits to 125 percent of metropolitan-area median home prices, without reference to the VA home loan program. This had the effect of raising the Fannie Mae and Freddie Mac limits to nearly $730,000, in the highest cost areas, while leaving the VA limit of $417,000 in place.
The measure I am introducing today would correct the oversight in the Economic Stimulus Act and extend the temporary increase to veterans as well.
Unlike the economic stimulus legislation, my legislation would extend the temporary increase to Dec. 31, 2011, rather than just through 2008. This would enable more veterans to utilize their VA benefit to purchase a home. In fact, VA expects that there would be an increase of approximately 4,313 loans as a result of increasing the VA loan limit through December 2011.
I urge all of my colleagues to support this measure, so that this important group of Americans might reap the benefits of an increased home loan guaranty in this time of economic uncertainty.
Mr. President, I ask unanimous consent that the text of the bill appear in the Record at the conclusion of my remarks.