VA Volume Dives to 20-Year Low

Originations of VA-guaranteed loans declined by 44% in fiscal year 2005 to the lowest level in 20 years, according to the Department of Veterans Affairs.Lenders made only 165,854 single-family VA loans in fiscal 2005, compared with 335,788 loans in fiscal 2004. In dollar terms, loan volume fell from $44.1 billion in fiscal 2004 to $24.9 billion. "It was a bad year in terms of volume," Keith Pedigo, director of the VA loan guarantee program, told MortgageWire. The VA director attributed the dropoff to a dramatic reduction in refinancings, which also affected the rest of the mortgage industry. But he also noted that veterans are turning to subprime loan programs and nontraditional products such as interest-only and payment-option adjustable-rate mortgages. The VA has been waiting for Congress to pass legislation that would make improvements to its 5/1 hybrid ARM program. "If we had a more marketable hybrid ARM, we probably would have made more loans," Mr. Pedigo said.