President Bush has signed into law legislation that raises the Department of Veterans Affairs loan limit by 40% and has been termed highly significant by a VA official.The bill., S. 2486, effectively allows lenders to make VA-guaranteed loans up to the Fannie Mae/Freddie Mac loan limit of $333,700 in principal amount, up from $240,000. The law also indexes the VA loan limit to the conforming loan limit, so that on Jan. 1 it will rise to $359,650. Keith Pedigo, director of the VA loan guarantee service, told MortgageWire that the law will boost the ability of veterans living in high-cost areas to take advantage of the VA guaranty benefit. VA originations totaled $44 billion in fiscal year 2004. Lenders and veterans supported the increase, saying that home price appreciation -- especially in high-cost areas -- left many veterans without access to the VA program. The bill also renews the VA's authority to guarantee one-year adjustable-rate mortgages, which had expired in 1995, and gives the VA secretary authority to change the maximum adjustment allowed on hybrid ARMs. Previously, hybrid ARMs could not adjust by more than one percentage point, a limit that made it difficult for lenders to offer hybrids with an initial term of five years or more, Mr. Pedigo said. Mr. Pedigo deemed the new law "probably the most significant piece of legislation for the VA program in the last 35 years."
