Lenders Considering Downpayments on VA Loans

Lenders are tightening underwriting standards on Veterans Administration-guaranteed mortgages even though the VA delinquency rate is lower than on prime loans. "VA has received anecdotal evidence and reports from industry partners that stricter requirements are being imposed on their VA loans," an agency official told members of the House Committee on Veterans Affairs. VA associate deputy secretary Thomas Pamperin said many lenders are using credit scores to qualify veterans, which is not required by the agency. Also, some lenders are considering a downpayment requirement. The VA program is designed to provide no-downpayment loans to veterans. "VA does not have the authority to prohibit lenders from imposing this extra layer of requirements, but additional lender requirements may make it more difficult for veterans to obtain homes," Pamperin testified. The latest Mortgage Bankers Association delinquency report shows that 5.29% of VA single-family mortgages are 90 days or more past due and in foreclosure, compared to 7.08% for prime mortgages. Meanwhile, VA loan production is on track to match fiscal year 2009 when lenders originated $68 billion in such loans. As of April 30 (the first seven months of FY 2010), lenders had originated $36 billion in VA-backed mortgages.