Activated Guardsmen, Reservists Qualify Faster for Home Loans
By Rudi Williams
American Forces Press Service
WASHINGTON, July 13, 2004 There has been a dramatic increase in the number of Department of Veterans Affairs home loans to members of the National Guard and reserves in recent years, according to a top VA official.
The number of loans would increase even more if all Guardsmen and reservists knew that being on active duty dramatically reduces the time it takes for them to become eligible for the loans, Keith Pedigo, director of the VA Loan Guaranty Service, said during a recent interview.
He said VA tries to get the word out to all Guardsmen and reservists, but it's difficult to reach all of them because they're spread out across the country.
"I would guess that many of them are not aware of the requirements for a home loan," Petigo said. "However, I would expect that those who are interested in buying a home would go to the trouble to find out exactly what it takes to use the home-loan benefit."
Normally, Guardsmen and reservists have to serve six years before becoming eligible for a VA home loan, Pedigo noted. But, he said, that requirement changes dramatically when they're called to active duty during wartime.
"They're then subject to the same eligibility requirements as a regular active- duty service member," he said. "During wartime, you only have to serve for 90 days to become eligible for a VA home loan."
Those who are discharged with a service-connected disability with less than 90 days are also eligible, Pedigo noted.
During peacetime, the eligibility requirement is 181 days of continuous active duty with an honorable discharge. Eligibility is also granted to those who are discharged with a service-connected disability with less than 181 days service.
Pedigo noted the VA is making "more and more" loan guarantees for Guardsmen and reservists, and officials expect that number to continue to climb.
"We try to promote this benefit to the reserves and National Guard through various means," he said. Currently, about 3.5 percent of VA-backed loans are made to those who qualified based on National Guard or reserve service, he said.
There are some differences in the basic eligibility requirements between home loans for active-duty and reserve-component troops, Pedigo noted.
He said the best way for Guardsmen and reservists to find out if they qualify for a home loan is to submit an application for a certificate of eligibility to one of the two VA Eligibility Centers. The center in Winston-Salem, N.C., handles states east of the Mississippi River. The Los Angeles center handles states west of the Mississippi.
"They should submit the application along with a copy of their service record," Pedigo said. The certificate of eligibility proves eligibility for the home- loan benefit.
Another difference between the reserve-component and active-duty benefit is in the amount of fees paid -- reservists pay a slightly higher fee, he noted.
The fee consists of a certain percentage of the loan amount: 2.75 percent for National Guard and reserve members, 2 percent for others. These percentages can be lowered with down payments of 5 or 10 percent.
The fee doesn't have to come out of the service member's pocket, Pedigo added. It can be included in the loan amount.
"So if you don't have the cash, that's not a problem," he said.
There are also minor changes to the program during wartime. For instance, reserve-component troops are eligible to benefit from the Soldiers and Sailors Civil Relief Act, which affords certain financial benefits.
Under the act, active-duty service members can get a reduction in the interest rate on their consumer credit obligations, including mortgages, Pedigo said.
Activated Guardsmen and reservists "can get a stay on an impending foreclosure and have an opportunity to wait until they're discharged in order to get back on their feet financially," he said.
Pedigo said financial institutions are more sympathetic to Guardsmen and reservists during wartime. "We have a very active outreach program with the mortgage-lending community, as well as the real estate profession," he said, noting that about 5,000 mortgage bankers and other financial institutions participate in the VA home-loan program.
VA encourages financial institutions across the country to participate in the home-loan program. "Real estate sales professionals are often the first point of contact with veterans or (service members) who are interested in buying a home," Pedigo noted. "We want to make sure that the lenders are aware of the numerous aspects of our program. Then they can promote this to the service member or veteran with accurate information."
Petigo was named director of the VA Loan Guaranty Service in 1987. He said he believes the VA home-loan program has two responsibilities. "One is to make sure that veterans and active-duty service members have the opportunity to use their home-loan benefit," he said. "But also, we consider it to be a serious responsibility for us to make sure that they have an opportunity to stay in that home if they encounter temporary financial difficulty."
VA has large staffs at nine Regional Loan Centers around the country that are actively involved in assisting veterans who have fallen behind on their loan payments, he noted.
"We make an effort to intercede on their behalf with the lending institution to set up repayment plans," Pedigo said. "When there's no way to avoid foreclosure, we continue to work with the veteran and active-duty service member to try to find the least costly way of terminating that loan transaction.
"So once the loan is made to the veteran, we don't consider that our responsibility is ended," he said. "We consider that we have to try to help that veteran stay in the home and assist them in any way we can."
Pedigo said most people aren't aware that VA will come to their rescue when they get into financial trouble. "Everybody who gets a home loan has an expectation that they'll be able to continue making the payments," he said.
"So the thought probably never occurs to them that the VA might be there to help them if they encounter financial difficulty," he continued. "I think many are surprised when they do fall behind in their payments and get a call from one of the VA loan service counselors offering assistance."
This year marks the 60th anniversary of the VA home-loan program, which was created in 1944 Serviceman's Readjustment Act. VA has made 17.7 million loans to veterans.
"We've made mortgage money available to the amount of $138 billion during that 60-year period," Pedigo said. "The vast majority of those loans have been made without a down payment. The centerpiece of the VA program in 1944 as well as today is the no-down-payment aspect."
He said the VA is unique in that regard in the mortgage industry. "Veterans need to be aware that they don't need the cash on hand that non-veterans might need to buy a home," he added.