Reserve forces taking advantage of VA home loans Published July 14, 2004 By Rudi Williams American Forces Press Service WASHINGTON (AFPN) -- There has been a dramatic increase in the amount of Department of Veterans Affairs home loans to National Guardsmen and reservists in recent years, a top department official said.The amount would increase even more if they knew that being on active duty dramatically reduces the time it takes for them to become eligible for the loans, said Keith Pedigo, director of the VA Loan Guaranty Service.He said VA officials try to get the word out to all guardsmen and reservists, but it is difficult to reach all of them because they are spread out across the country."I would guess that many of them are not aware of the requirements for a home loan," Mr. Pedigo 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 must serve six years before becoming eligible for a VA home loan, Mr. Pedigo said. But, he said, that requirement changes dramatically when they are called to active duty during wartime."They're then subject to the same eligibility requirements as a regular active-duty servicemember," 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 service are also eligible, Mr. Pedigo said.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.Mr. Pedigo said VA officials are making "more and more" loan guarantees for guardsmen and reservists, and they 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, Mr. Pedigo said.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," Mr. 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 said.The fee consists of a certain percentage of the loan amount: 2.75 percent for National Guard and reserve servicemembers, 2 percent for others. These percentages can be lowered with down payments of 5 or 10 percent.The fee does not have to come out of the servicemember's pocket, Mr. Pedigo said. 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 servicemembers can get an interest-rate reduction on their consumer credit obligations, including mortgages, Mr. 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.Mr. 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, and about 5,000 mortgage bankers and other financial institutions participate in the VA home-loan program.VA officials encourage 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 (servicemembers) who are interested in buying a home," Mr. Pedigo said. "We want to make sure that the lenders are aware of the numerous aspects of our program. Then they can promote this to the servicemember or veteran with accurate information."Mr. Petigo said he believes the VA home-loan program has two responsibilities. "One is to make sure that veterans and active-duty servicemembers 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."The VA has large staffs at nine regional loan centers around the country who assist veterans who have fallen behind on their loan payments, he said."We make an effort to intercede on their behalf with the lending institution to set up repayment plans," Mr. Pedigo said. "When there's no way to avoid foreclosure, we continue to work with the veteran and active-duty servicemember 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 (our) responsibility (as) ended," he said. "We ... have to try to help that veteran stay in the home and assist (him or her) in any way we can."Mr. Pedigo said most people are not aware that VA officials 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 by the 1944 Serviceman's Readjustment Act. The 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," Mr. 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 nonveterans might need to buy a home," he said.