Sunday, November 11, 2007
By CONNIE POTTER The demand for Oregon veterans' home loans is increasing with the large numbers of troops returning from Iraq and Afghanistan. Federal legislation co-sponsored by Oregon Rep. Earl Blumenauer will help make sure the program has the funds to serve them.
The "Heroes Earning Assistance and Relief Tax Act of 2007" (the HEART Act) would, among other things, increase Oregon's bond limits to $100 million. Under present law, the program's annual issuance cap is $10 million in 2007 and $15 million for 2008.
Blumenauer is hopeful the bill, which was passed out of the Ways & Means Committee with unanimous approval, will win House and Senate approval and be enacted later this month.
"Over the years I have heard a great deal about the program," said Blumenauer, a Democrat. "I just became a fan of the program as I saw the difference it made in people's lives all over the state."
Oregon Department of Veterans Affairs (ODVA) home loans are available to honorably discharged veterans who served at least 210 consecutive days on active duty or who served during a war for which ribbons or medals were given. The maximum loan amount is $417,000, and the home that is purchased must be the veteran's primary residence.
Eligibility for the program expires 30 years after the veteran was discharged from the military. That differs from the federal VA program, which doesn't have an eligibility time limit.
The number of ODVA loans issued has soared the last couple of years, from 59 loans in 2003 to 236 loans in 2006. Aggregate loan demand is running about $60 million per year.
A major difference between ODVA and federal VA loans is the interest rate. ODVA offers interest rates of three-fourths to 1 percent or more lower than conventional or federal VA loans.
Borrowers also prefer ODVA because of its easier application process, said Doug Brown, a mortgage broker with Community Mortgage Services. When veterans inquire about financing with a federal VA loan, Brown said he usually steers them instead to ODVA.
"They're so easy to work with," said Brown. "ODVA allows you to use your own appraisers. They don't have the added disclosures and huge application processes that typical VA (loans) do. They're as easy or easier than most lenders I typically use."
ODVA is an actual lender, and the loans are serviced at ODVA's Salem headquarters. In contrast, the federal VA insures loans made by other mortgage lenders. The guaranteed amount of the loan -- called an entitlement -- is $36,000 for loans up to $144,000 and $60,000 for loans over $144,000.
VA loans can be sold to other lenders, but with ODVA, "you make your first and last payment to us," said agency director Jim Willis.
Veterans who receive an ODVA loan are still eligible for the federal VA home loan program.
Other mortgage options available to veterans include Federal Housing Administration (FHA) loans and conventional loans.
"If we can't help, we steer them back to their broker for other programs," said Steve Schlag, ODVA loan program services manager.
Each program has its advantages. With the federal VA program, veterans don't need a down payment and aren't required to purchase private mortgage insurance. Also, sellers can pay all closing costs. The federal program requires less military service time than the state program -- 181 days of continuous service during peace time compared to 210 days for ODVA.
With Federal Housing Administration (FHA) loans, the federal government insures the mortgage, so it's easier for applicants with credit problems to qualify. FHA loans have a low 3-percent down payment, and that can come from a family member or as a gift. Mortgage insurance is required for borrowers making a down payment of less than 20 percent.
Connie Potter is a Portland-based freelance writer. She can be reached at conpotter@comcast.net.
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