What the H*** VA?

[timd354]

The low default rates have less to do with VA borrowers being 'better' than the rest of the crowd, and more to do with VA's residual income test (which actually tests the veteran's ability to repay), the VA's loss mitigation efforts (VA steps in directly to assist in these matters), debt payment by servicers in the event of default, etc.

At the end of the day, there's no evidence to suggest veteran borrowers are any 'better' than non-veteran borrowers. The VA system, however, is handily superior to the GSE system - at least in regards to default and delinquency rates.

As an MI company in first loss position, we analyze the hell out the factors that cause loan defaults and what could improve loan performance. Part of what we have looked at is residual income and our studies determined that only about 15% of GSE loans would fail to meet the VA's residual income test and most of the loans that would fail the VA residual income test are loans with low income borrowers that have a high DTI. Even if you exclude these loans and you control for other loan and borrower characteristics, including credit scores, VA loans still perform significantly better than GSE loans.

Regarding loss mitigation efforts, that does not affect the 60+ default rate as a VA lender will not even send out a loss mitigation letter to the borrower until day 45 of a default and the VA does not even assign a VA loan technician to the case until day 61 of default.

 

[alebrewer]

As an MI company in first loss position, we analyze the hell out the factors that cause loan defaults and what could improve loan performance. Part of what we have looked at is residual income and our studies determined that only about 15% of GSE loans would fail to meet the VA's residual income test and most of the loans that would fail the VA residual income test are loans with low income borrowers that have a high DTI. Even if you exclude these loans and you control for other loan and borrower characteristics, including credit scores, VA loans still perform significantly better than GSE loans.

Regarding loss mitigation efforts, that does not affect the 60+ default rate as a VA lender will not even send out a loss mitigation letter to the borrower until day 45 of a default and the VA does not even assign a VA loan technician to the case until day 61 of default.

Gotta love those 'we know more than you because we have the data' folks. That's cool - I'll just take your word as fact that VA borrowers are better borrowers than non-VA borrowers. Is there any public location for this data that I might cite your work?

 

[CCAAMO]

I had one that came in +- $40,000 short of sale price with the seller paying $20,000 towards buyer's closing costs. The Loan Agent was hopping they could get the VA to increase the value by $20,000. The VA increased it $40,000. My attitude is that its still a good system because the VA did not come and bang on me to change the appraisal, they did it on the loan side, based on what criteria i do not know but it's their loan. The Veteran knew what the appraised value was so he made an informed decision that he was willing to pay over market for the home, and maybe for him it was worth it. The Appraiser is only hired to appraise the property, after that what the lender, buyer do i don't care.

 

[glenn walker]

VA has mortgage insurance its called the Funding Fee paid up front or rolled into the mortgage but no separate monthly MI fee.

It can range from.05% to 3% dependent on different issues.

 

[Digger88]

The VA has the lowest default rate they tell you you are advocating for the veteran and to alert them is the value is coming in low before sending it in. It's wacky but it works for them and they generally have our back so, carry on