VA home loans, in San Diego County, account for over 10% of the new mortgage originations. Our proximity to Camp Pendleton, MCAS Miramar, Coronado, 32nd Street Naval Station, and MCRD makes San Diego a haven for active duty and retired military. As such, the VA-guaranteed mortgage has been an important financing tool for San Diego County real estate.
Volume for government-insured mortgages spiked in the past two years in response to mortgage credit tightening. FHA is feeling the brunt of the "non-traditional" credit buyers so much that they've hired a new risk chief. Congress is worried:
Many lawmakers, especially on Capitol Hill, have expressed concerns that the FHA is taking on too much risk with its greater volume of insured mortgages, exposing itself to future defaults and delinquencies in much the same way as Fannie Mae and Ryan’s employer, Freddie Mac, did before the government took them over and pumped them up with billions of dollars in emergency capital.
Recently, default rates were released for San Diego County. VA home loans had the lowest default rate, outperforming FHA and conventional prime loans. Why does VA have superior performance?
VA home loans are employee-benefit loans, not pure "government" loans like the FHA.
The VA is an affinity group; a "club" if you will. It's current and past members share a common goal and feel a responsibility towards each other. As such, VA borrowers feel a greater moral compunction towards the insuring agency (the VA) and are less likely to default on their obligation. That "sense of duty" then, makes the veteran a more attractive borrower to lenders.
The VA actually cares about the condition of the collateral (house the veteran is buying)
The VA requires lenders to use assigned appraisers to perform a comprehensive appraisal report which includes commentary about the property condition. Influence from loan originators and REALTORs is diminished because of the "arms-length" nature of the appraisal assignment. The appraisal report is then reviewed by the Veterans Administration or a designated VA underwriter to complete the valuation process. The VA valuation process is so successful that conventional lenders adopted the process through the Home Valuation Code of Conduct. FHA plans to adopt this process next year.
Success of the VA home loan product comes down to this statement; the VA takes care of its own and expects them to appreciate that. It's been working since 1944; we expect to work for another 65 years.
Get Pre-Approved for a VA home loan online.
