VA 'Ready to Act' on Hybrid ARMs

Legislation awaiting the president's signature would give the secretary of the Department of Veterans Affairs the authority to change the VA's hybrid ARM program so that it conforms to the industry norm.But the secretary is ready to act as soon as President Bush does, according to Keith Pedigo, director of the VA's Loan Guaranty Service. The bill allows the agency to insure five-year or longer hybrids with 2% annual rate caps and 6% life-of-loan rate caps "at the secretary's discretion," but "the plan is to fix the hybrid ARM problem right away" by making the switch from 1% annual caps, Mr. Pedigo said at the Mortgage Bankers Association's Government Housing Finance Conference. The VA official also said his office will soon begin testing a program that will allow veterans to determine their eligibility for VA-insured mortgages online and on their own. He told the meeting he's "not too" concerned with the recent dropoff in the agency's loan volume. "I think it will come back," he said. The VA backed 165,854 mortgages in fiscal 2005, down from the most recent high of nearly 500,000 in fiscal 2003 and an all-time high of some 600,000 in 1994.