Congress wants to hike VA loan fees

HousingWire

On today’s episode, Editor in Chief Sarah Wheeler talks with Gay Veale, chief experience officer at Vetted VA, about the VA loan fee hikes being proposed in Congress and what they would mean for veterans and lenders.   Related to this episode:   VA loan fee hike proposal advances in Congress, drawing industry pushback  https://www.housingwire.com/articles/hr-6047-va-irrrl-fee/  HousingWire | YouTube⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠  https://www.youtube.com/channel/UCXDD_3y3LvU60vac7eki-6Q  More info about HousingWire  https://lnk.bio/housingwire   The Top 5:   Why Fed President Beth Hammack wants more rate hikes  https://www.housingwire.com/articles/fed-president-beth-hammack-more-rate-hikes/  GSEs release historical FICO 10T data, expand VantageScore 4.0 file  https://www.housingwire.com/articles/fico-10t-credit-data/  Why Carlisle Companies targets Owens Corning for an M&A combo  https://www.housingwire.com/articles/carlisle-companies-owens-corning/  The ROAD housing bill’s biggest breakthrough isn’t the investor ban. It’s supply.  https://www.housingwire.com/articles/factory-built-housing-small-mortgages/  Mortgage rates drop, but is it the start of a trend?  https://www.housingwire.com/articles/mortgage-rates-dip-applications/   Want more from Sarah? Don’t forget to subscribe!   The HousingWire Daily podcast brings the full picture of the most compelling stories in the housing market reported across HousingWire. Each morning, listen to editor in chief Sarah Wheeler talk to leading industry voices and get a deeper look behind the scenes of the top mortgage and real estate.

Transcript

00:08Welcome, everyone. My guest today is Gay Veal, Chief Experience Officer at Vetted VA and a

00:14veteran herself, to talk about a VA loan fee hike that's being proposed in Congress right now

00:19and what it would mean for veterans and lenders. Before we dive in, here's the recap of the top

00:24five trending stories on HousingWire.com. First is why Fed President Beth Hammock wants more rate

00:30hikes, followed by GSE's release historical FICO 10T data and expand Bandage Score 4.0 files.

00:38We also have a home building story, why Carlyle Companies is targeting Owens Corning for an M&A

00:43combo, and a contributor article on the Road to Housing Act's biggest breakthrough isn't the

00:48investor ban, it's supply. Finally, we have mortgage rates drop, but is it the start of a trend?

00:53Always a lot of news, but I want to get to today's important topic. Gay, welcome to the podcast.

01:00Thank you so much for having me. I'm so incredibly honored to have the opportunity to talk to you

01:06about this really important topic. It is a really important topic, and it's one that I felt like,

01:11you know, maybe our industry wasn't paying so much attention to. There's so much going on right now,

01:17but I know that people in our community really care about veterans and these programs. So

01:23let's talk about what we want to talk about is the VA loan fee hike proposal, right? We've got some

01:28things going through Congress, and I think that it's important to think that, like, maybe you can

01:33walk us through first what they're trying to do, and then we can talk about why maybe, you know,

01:37the industry might think that maybe that's not the best thing to do.

01:41Sure. So let me just start with the bill numbers just so that, you know, the listeners can,

01:48you know, and viewers can go back and, like, look these up themselves because you can get the full

01:53text from, you know, our Senate's website. And so it's HR 9237 and S4744. And this is a really large

02:06bill titled Taking Care of America's Veterans. And it combines several smaller bills that do a lot

02:17of really good things for veterans, a ton of really good things, actually. But the reason why I wanted

02:24to talk to you and what we're going to talk about today is these bills are, or this culmination of

02:32a

02:32bill is not being paid for exclusively with, you know, funding from the VA or the Department of

02:40Defense, Department of War, or anything like that. Instead, there are some pay-fors that I'll call it

02:48within the bill that are changing veteran benefits, and in particular, the VA funding fee for the VA loan

02:57in order to help foot the bill for, again, you know, some really amazing changes that they're making

03:04for veterans. So what the bill would do is increase the VA funding fee on a VA oral or interest

03:11rate

03:12reduction refinance loan, which is a streamlined refinance for VA, would increase that funding fee

03:18for those veterans who are not exempt from the funding fee from half a percent to 1.42 percent,

03:26so nearly tripling the bill, excuse me, nearly tripling the funding fee. And then it also increases

03:33the funding fee on VA assumptions, which is, I think, lesser used, but, you know, still important

03:39that it goes from half a percent to a full percent on that particular funding fee.

03:45I think this is what was so striking to me is that, like you said, the bill is, it's really

03:50aimed at,

03:51you know, disability benefits, helping disabled veterans completely support that. Why then would

03:58you make veterans pay more for their VA loan in order to do that? Like, it just feels like it

04:03pits

04:03veterans against veterans in some ways. Yeah, exactly. It really does. And, you know, it,

04:12like, it's so frustrating for me as a veteran myself, you know, so I served in the military

04:17for 30 years and I have been in the mortgage industry now for about five and a half years.

04:24And the fact that we're saying to veterans that we, we believe that you should be paid more.

04:32So these are for our catastrophically disabled veterans. By the way, there's tons of different

04:39benefits. I mean, from healthcare providers to staffing, there's a lot, right? But, but the two

04:46really biggest, you know, increases and in particular that the VA funding fee is going to pay for

04:51is to increase disability pay for catastrophically disabled veterans and for surviving spouses.

04:59Um, but it, it's, it's saying like, Hey, these are important and we want to increase these and

05:04everybody agrees upon that, but we're not actually going to give you any money for it.

05:08VA, you have to figure out how to pay for this. And what's most striking for me is that these

05:14increases impact active duty veterans more so than they do any other group of veterans. Um, and it's

05:23completely disproportional to that group of veterans because, you know, the, the bar for,

05:29becoming exempt from the funding fee is to be eligible for VA compensation, which the vast

05:36majority of the time only happens after you've separated from the military or retired from the

05:41military. So it doesn't apply to that group of veterans as much as it does to active duty veterans

05:47who are already moving around more frequently, who are already, um, uh, you know, get, get,

05:54get less pay more than likely, uh, they're more junior. Um, so they're not only do they get less

06:00pay because they're active duty, but they get less pay because they're, you know, they haven't

06:03been in the military for very long. Um, and so it's just really disproportional and it's just

06:08mind boggling to me that we say these things are really important, but we're only going to do it on

06:11the backs of other veterans. Well, first of all, thank you for your service 30 years in that's,

06:16that's an amazing career. Um, I'm an army brat and, you know, lots of people in my family still serve

06:22and having grown up all over the world on different military bases and then in, you know,

06:26base housing or other, you know, other places, it's like this strikes home. Like if you're active

06:31duty, this is the last thing you should have to be worried about. I'm just saying like, yeah,

06:36yeah, it really is. So, um, let's talk about what the, what the impact, um, on veterans will be like

06:44from a monetary standpoint, like over the life of that loan or, um, so this is just for refis. Can,

06:49can you walk us through a little bit on that? The general math that's, that's been done,

06:54uh, you know, and we'll just for simplicity stakes stick to, you know, kind of like the average,

07:00uh, you know, average loan amounts, so on and so forth. It will have about an $8,000 impact over

07:06the life of a loan for, you know, kind of like across the nation averages. But when you get into

07:10places with, you know, higher loan limits, of course, or higher loan amounts, things like that,

07:16you know, it's going to have a bigger impact than, than that even. Um, but you know, like,

07:20like when I just look at it, like just very simplistically on the surface, you have a group

07:27of people that are moving around a lot, every, we'll say three to four and a half years or so,

07:33um, that are using their VA loan benefit as was intended, which is to provide shelter, uh, for them

07:39as they, as they move throughout their careers and after their career. And, you know, they're,

07:45they're buying a home in an elevated rate environment. And if they want to take advantage

07:53of a rate reduction, the amount of money that is then tacked on what, like what it is now compared

08:00to what it will be is a huge difference. And the amount of money that gets tacked on to the

08:06remaining principal balance really has the potential. Well, first of all, it has the

08:10potential to make it less attractive in the first place and makes it harder for that group of veterans

08:17to, um, you know, qualify or become eligible, if you will, or for it to make sense to, to do

08:23that

08:24refi. Um, but it, it, it has the potential, I think in the worst case scenarios to put these veterans

08:31upside down on their homes. And we don't want that. Nobody wants that. Um, and so I,

08:36you know, my concern is that we'll deter people from taking advantage of a lower rate environment

08:40because of the amount of time it takes to recoup the costs. I think that's, that's such a difference

08:46when you think about the military people in the military and, and this VA financing, like when

08:50you're looking at, um, uh, how, how beneficial is this refi going to be to me? And I plan on

08:57living

08:57in this house for 10 or 15 years, totally different. If you know, you're going to be moved in two,

09:02three, four years. I mean, there were times that, uh, we were stationed for one year, as you know,

09:07like, uh, two years is not out of the question. So if you make it so hard, if you can't

09:13recoup that

09:14financing within 36 months, um, you, you would be potentially underwater. It just doesn't make

09:19sense to do it. Yeah, absolutely. And again, I mean, just the fact that we're, we're just pitting

09:27veterans against veterans is like, you know, you said it in the beginning. It just, it really doesn't

09:31make sense to me. It is, to me, this is a bill when you're talking, especially when you're talking

09:36about the most severely disabled veterans, this is a bill that all Americans owe, not just, and,

09:44you know, and I'm, you know, let me be careful not to put my, my big patriotic jacket on. Right.

09:49But,

09:49but, um, you know, really, I mean, at the end of the day, it is a bill that all Americans

09:54owe. It's not

09:55something that we, you know, that we should impact so drastically for other veterans.

10:00I love that. Well, um, what is the, you know, it seems like the industry has been pushing back and

10:06being like, Hey, we need to, we need to galvanize people to, to call their Congress people while this

10:11is still going through. What kind of reception have you seen there? And what do you, what do you want

10:15people to do? Yeah. Thank you so much. So, um, you know, there, there is a lot of pushback on

10:22this

10:23bill across a couple of different industries. So a lot of veteran organizations are pushing back on

10:28it as well. Um, but in particular, the broker action coalition, um, which I was the former chair

10:35of the veteran homeownership committee. Um, I recently opened my own brokerage. So I had to put,

10:40I'm still a member of that committee, but I had to step down from the responsibilities of being the

10:45chair, uh, but still as involved as possible. But that group is, um, made it very easy for the

10:54housing industry. You don't have to be a broker. Let me just say this. Okay. It can be anyone,

10:59anyone, you don't even have to be in the housing industry to, um, hop onto their webpage,

11:05get on their call to action. The letters are already pre canned for you, but you, we highly

11:12recommend making it personal. Um, and based on your personal physical address, it will send letters,

11:20uh, to your elected officials in, you know, on both, both sides, both, uh, in the house and in the

11:27Senate, uh, to tell them what your concerns are and that, uh, you know, that, that this, this bill

11:32doesn't make any sense. It doesn't make any sense. Like I said, disproportionate to active duty

11:37veterans. Um, but it just doesn't make sense to ask other veterans to pay for this, uh, very

11:43important benefit for, for our most severely disabled and surviving spouses. And it's just

11:49super easy. So, so far the broker action coalition has, gosh, we we've sent over 800 letters, uh, to

11:57elected officials, which is really incredible. We're very excited about that, but we need more,

12:01uh, to make sure that this bill gets the appropriate, you know, that, that this concern

12:08gets the appropriate attention and it gets stopped. And the good news is, is it's working,

12:12right? It's working, but we need more. Um, the house was supposed to vote last week. They postponed

12:18it. We expected, uh, the Senate to vote this week. They also postponed. Um, and so it's, we're

12:24definitely getting the attention. And when I say we, I just mean collectively people that are,

12:29uh, you know, opposed to, to this bill, but, uh, you know, because as I said, there's a lot of

12:35VSOs

12:36or veteran service organizations that are weighing in as well. Um, and we really need to make our voice

12:41on the housing side heard as well, because it is such a huge bill to pay.

12:48I think the other thing is this is where, um, the expertise of those in housing really comes into play,

12:53because if you don't know that much about loan fees, if you don't understand how these things work

12:59and you're focusing on the really great things about this bill, which we've talked about, and you're

13:03like, well, it's 1.5% or it's this, or it's that if you're not in the weeds, you don't

13:07understand what

13:08the impact is. And yet the people in the, in, you know, who are in the weeds every day with

13:12veterans

13:12can be like, here's the impact. Let me show you. This is, this is not, you know, this is going

13:18to make

13:19a negative impact. And again, I don't think that's anybody's, um, desire. So I think this is

13:24where the expertise of our industry, of all you guys out there, make your voices heard because

13:29they need to know, they don't know, they guarantee you, they don't know their staffers probably don't

13:34know. They have no idea what the IRRL fee is and, or how it, you know, affects, or if they

13:41look at

13:41it, it's like, Oh, it's still a pretty small percentage. Right. And, and not realizing, uh, what all the

13:47implications are. Right. When you look at it, you know, on the surface, when you hear the number

13:52half a percent to 1.42, it really doesn't sound like a lot, but I can tell you, and listen,

13:58the

13:58staffers that work for our elected officials are incredibly smart. They're just amazing, uh,

14:07young leaders in our nation. And, and I have the utmost respect for them, like beyond a shadow of a

14:13doubt. Um, many of them are not homeowners have never purchased a home before. And again,

14:19no shade to them. There's a lot of things that they're, that they're asked to be experts on that

14:23they don't have any experience in. Um, but, but we really have a unique opportunity here to share

14:30our experience and our actual expertise in this area and explain to them just what a big deal this

14:38makes. And again, you know, I just, I know I keep coming back to this disproportional impact to

14:43active duty, but that's the part that's got me most on alert, like most, you know, fired up,

14:51if you will, is like, are you kidding me? Like of all the people that were asking to pay this

14:56bill,

14:56it's just crazy. I think too. I mean, if, if the mortgage professionals, housing professionals who work

15:03with active duty, they know what they make. Let's just be honest. I mean, these are, this is a

15:09population of people who are not rolling in dough, right? And so these kinds of changes make a big

15:15difference to them. And if you work with, with veterans, you know, you know what the salary looks

15:19like if they're still active duty and that's the job that they're doing an important job that we all

15:23want them to do. Um, but they, you know, they don't need fees raised in order to pay for, you

15:29know,

15:29something else that's really good. And I think what we've seen, you know, what we saw with the

15:33road to housing act is that there's bipartisan support around housing. And then you combine

15:38that with veterans, there's bipartisan support for our veterans or should be. So this is just

15:43that comment. I just think it's an education, um, issue. That's my one feeling. I don't know how

15:47you feel about that, but it's like, if people, if lawmakers really understood what this means,

15:52I don't think that they would be for it. I hope they're not. Yeah, I agree. And it definitely is

15:58education. I mean, really anything related to the VA loan at, like all of the issues I see

16:04surrounding the VA loan. And there are many. And when I say issues, I just mean like utilization

16:09rate and, you know, myths surrounding the VA loan, like just, it gets a bad rap for really no good

16:16reason. Well, the reason is because 30 years ago, it wasn't as good as it is today, really at the

16:22end

16:22of the day, but that's education. And just like this, you know, it's really education. It's the

16:27education for our lawmakers to say the recoupment goes from about one and a half years to five years

16:34on a refinance. And it's just, it's too much. And it just, it really, it just really hinders our,

16:43you know, our active duty service members. I always want to say airmen, our active duty airmen,

16:49because I was in the Air Force, but it hinders our active duty service members' ability to take

16:54advantage of, you know, a lower rate and be able to afford housing, you know, that better when they're

17:02moving around the nation, doing the important duty of protecting our way of life.

17:09Absolutely. It's so funny you say that about airmen because, you know, base versus post,

17:14it's like, well, I've lived on both posts and bases. It really depends on where you are in that.

17:20So, and this comes, it's interesting because, you know, the U.S. Department of Veterans Affairs just

17:25updated several really important home loan appraisal requirements, you know, making that

17:30better, right? Maybe you can walk us through what happened there. Yeah. So there's, you know, I'll just,

17:36let me just say in the past, let's see, well, since about 2019 or so, the VA has just been

17:43making

17:43continual improvements and they've made themselves more available to and receptive to feedback from

17:51veterans, from housing industry professionals to hear the concerns about the VA loan, the concerns

17:58around education, the concerns about the appraisal process, so on and so forth. And so they really are

18:03trying to make the VA loan even better, like day by day. You know, most recently they changed some of

18:11the

18:11minimum property requirements or NPRs, which, you know, again, I mean, these are constantly

18:18happening. Like they've done things like, just even a few years ago, they did things like they got rid of

18:26like easement requirements, you know, shared road. You had to have a shared road agreement.

18:30I provided a shared road agreement from like 1962 one time because the VA required it, right? Like,

18:36it's like those people don't even live there anymore. They didn't even know there's a shared road

18:39agreement that exists, right? But somebody somewhere dug it from the, you know, depths of the,

18:45you know, whatever, county records that there was a shared road agreement, which was great and it

18:51helped us close, but it was ridiculous that it was required in the first place. But they've done

18:55things like that. They've gotten, they've eased up on peeling paint. They've, I'm trying to think of

19:03some of the other things that they, they made changes to recently when they changed those NPRs,

19:09but, but just by and large, they're making it as easy as possible for veterans to utilize their VA

19:15home loan and, and really removing as many barriers. I think this is more important, removing

19:21as many barriers as possible as, you know, things that were seen as barriers anyway, by others,

19:27by real estate agents, by sellers, so on and so forth. So that veterans can use it and not be

19:34deterred from using it or steered away from it. We did a story in 2021 when it's sort of at

19:41the height

19:41of like multiple offers on housing, you know, just the crazy post pandemic or pandemic housing market

19:49where, you know, that VA offer on the house was at the bottom of the pile. You know, that was

19:56the

19:56outdated thinking that real estate agents are, you know, might be telling their sellers or whatever.

20:01And that is old thinking. So much of that has changed, but we, you know, we're not in that

20:05environment anymore, but it, depending on where they're stationed, I mean, things are still can be

20:09very competitive and you never want to be like they're disadvantaged because they're active duty.

20:17Yeah. It still does have an impact. There's a very prevalent VA broker in our community that told a

20:25story just a couple of days ago about how she had an offer. She had a client who had made

20:33an offer

20:34and she followed up with the agent a couple of days after the offer was made and said,

20:38this was directly to the listing agent because there was no buyer's representation here.

20:44But she made a call to the listing agent and said, Hey, what's, what's going on? And they said,

20:49Oh yeah, we didn't accept it. The sellers didn't accept it. And they said, she said, Oh,

20:54Oh, why? And she said, Oh, there was a, it got to the point where there was a $40,000

20:58difference.

20:59And so initially she thought that it was a $40,000 higher offer that they had received,

21:03but no, the VA offer was actually $40,000 higher. But because the VA loan is so hard,

21:11the agent advised the sellers to go with the offer that was $40,000 lower because it would be easier

21:19because it was conventional. Which is crazy. That's just old thinking. That's not true

21:25anymore. The way that it used to be. Yeah, absolutely. Absolutely. So, uh, you know,

21:32that, that it, it still exists. We're still battling those, um, those, those barriers and

21:39roadblocks and myths and just bad information every single day. And when you do things like this,

21:45it just compounds the problem. Okay. Thank you so much for being on. I really appreciate you,

21:51um, you know, informing our audience of what's happening and what they can do. We are going to

21:56include that link, that call to action link, um, in the show notes for this podcast episode. So you

22:01guys can easily go and it's already tailor-made to, um, your, your address where, what it needs to go.

22:08That's why they asked for your address on that. But thank you so much for raising awareness on this

22:13issue for your work with veterans and for your service. Really appreciate you.

22:16Oh, it's such an honor. Thank you so much for having me. I really do appreciate it.

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