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How VA Lending Has Changed
Loan Origination How VA Lending Has Changed
By Brian Honea
One of the goals of the Blue Water Navy Vietnam Veterans Act of 2019, which was passed last year by Congress and went into effect on January 1, 2020, was to make it easier for servicemembers to obtain mortgage loans. Much has happened in the nearly one year since this legislation took effect, including more changes brought on by a global pandemic that first slowed things down for the mortgage industry but then saw things take off as homebuyers and homeowners rushed to take advantage of low interest rates. Michael “Mo” Oursler, chief operating officer with VA fintech lender, NewDay USA, recently discussed with The MORTGAGE BANKER Magazine how this legislation has changed VA lending.
MBM: What exactly was the big change that went into effect on January 1 as part of the Blue Water Navy legislation? Michael Oursler: The VA made a change which made the limits not applicable on a large portion of loans, which helps military affordability, because now there are more homes over the county loan limit that they’re able to purchase. The VA will guarantee 25 percent of the loan amount regardless of the county loan limit, which makes the finances more accessible. That was a pretty big change.
MBM: What changes were brought on by COVID? Michael Oursler: There were some process changes in May. The VA did a really good job of being flexible with mortgage loans while the rest of the country was in lockdown and they still have some of these flexible policies in place. Generally speaking, regarding appraisals and all those property-related inspections that the VA requires, they’ve given lenders and appraisers a lot more autonomy to make judgment calls when they are unable to get to the property. In certain cases, they might allow them to do a drive-by appraisal, or in certain cases they may allow them to do a desk appraisal and they wouldn’t have to go out to the property; they can just do it based on data available.
There are certain other changes like when you’re already in a VA loan, you no longer have to get a water test because the veteran is already living there. The VA loosened up a lot of their property requirements while understanding the COVID implications of the loan process.
MBM: Since it’s been months since these changes took place, what effect has that had on VA lending? Michael Oursler: VA lending is extremely robust right now. In fact, it’s so robust that NewDay USA is projected to surpass its 2020 estimates while more than doubling its revenue to over $300 million this year, up from $152 million in 2019. We are on pace to serve over 20,000 veteran families in 2020, and we expect to serve more than 40,000 in 2021.There are record levels of VA loans being done in the market right now and I believe the rate environment is the primary driver of that, although the changes also played a role.
MBM: Have these changes given veterans better access to loans? Michael Oursler: The short answer is yes. We’ve seen it in our business. There’s no denying that the changes give veterans more access and makes it a better experience for them. A VA home loan is a great product for the military. There are a lot of good reasons that military personnel would want a VA loan. Anything that’s done at the program level that makes the process streamlined or more accessible is a positive for everybody.
The VA no longer caps their guarantee of 25 percent at the county loan level. They will guarantee 25 percent of the loan even if it’s over the county loan limit as long as the veteran hasn’t used his or her entitlement before.. It allows military buyers to look at properties over the jumbo limit in their corresponding counties and regions, giving them access to 100 percent loan-to-value, and no down payment loan products even if it’s higher than the county loan limit. It definitely gives them more access to make offers on those properties. MBM
By Luke Shankula, Paragon Digital Marketing
Like any other market, the mortgage market is subject to changes in supply and demand. As soon as we get a hint of where supply and demand are going, we better understand where the market itself may be headed.
Many people were predicting 2020 would be a major year for the mortgage market. The problem? COVID-19. As early as March, optimism over buying a home shifted from 75 percent to 43 percent, almost as if demand was about to collapse overnight.
This presents an overwhelming opportunity for mortgage lenders. But before we get to what you can do to ramp up your marketing in Q4, first it’s time to establish two basic facts:
Mortgage demand is doing just fine. In fact, the Federal Reserve recently announced it could keep rates this low until 2023. This is ample time to market mortgages to new home buyers. Supply and demand show that home buying is healthy. I dug into it with some research below.
WHY SUPPLY MAY BOOST THE MORTGAGE MARKET
It’s easy to point to the COVID-19 pandemic and new social distancing rules and declare: “housing is about to crash.” But if the future were that easy to predict, we’d all be rich. Turns out, it isn’t. It takes honest research and a sense of multiple variables to understand where the mortgage industry is heading. And, as I reviewed the numbers, some things stood out about supply:
• Sellers took their homes off the market,
reducing supply. One of the first impacts of the
COVID-19 pandemic on housing supply? People simply started removing their homes from the market. Some reports have this rate moving from 3 percent to 16 percent. This is why you need to consider multiple variables: demand alone isn’t always enough to move the market downward.
• Experts call the changes in supply/demand a
“temporary softening.” Keep in mind that these numbers are back when things seemed really dire, just as the pandemic kicked off. The chief economist of NAR, the National Association of
Realtors, called the COVID-19 impact on the real estate market a “temporary softening.” Mortgage marketing takeaway: You can honestly tell people that this is still a hot time for a mortgage. The research doesn’t just back that up, but it points to a potential rebound in the fourth quarter of 2020.
PROJECTING THE MOVES IN THE REAL ESTATE MARKET IN LATE 2020 AND 2021
More recent statistics point to continued pressure on supply keeping prices up. For example, new listings have been down 12 percent. Total inventory? Down 39 percent. That comes from Realtor.com data released on September 5,2020.
What should we make of this data? It isn’t complete until we also look at new home sales, which have also been higher than expected. For instance, the Home Purchase Sentiment Index increased during August, suggesting that there is some momentum for the mortgage market going into the last quarter of 2020. Mortgage marketing takeaway: There is plenty of ample sentiment out there. If your mortgage marketing efforts don’t resonate with people, you do not have a lagging market to blame.
MARKETING IN A UNIQUE ENVIRONMENT—AND CAPITALIZING IN QUARTER 4 OF 2020
So, with the above in mind, what are my conclusions about how you can better position your mortgage marketing?
• Capitalize on enthusiasm—because it’s there.
Let people know that it won’t be every year the
Federal Reserve says that rates will be this low.
Mortgage borrowers can capitalize on a unique time in monetary history by acting sooner rather than later. • Set yourself up for a strong 2021. Use lead nurturing tactics to keep people around, such as creating an email newsletter for your website.
This will enable you to tap potential leads in 2021; and, as we know, the statistics suggest that those leads may still want a home in 2021. • Start a lead generation program. You need to have a lead generation strategy in place. If you don’t, you may lose out to a company that does.
As the old saying goes, “If you’re failing to plan, you’re planning to fail.” Lead generation needs to be a top priority as you market in this unique environment. • Leverage today’s software tools. Whether you’re using a site like LeadPages to create landing pages for your mortgage offerings, or using MailChimp to boost your email marketing, now is the time to create the infrastructure.
Because, as I’ve demonstrated, the mortgage market isn’t going anywhere. • Use social distancing and stick to the rules. If you’re showing a lot of homes as a real estate agent, for example, utilize tools like Calendly to set up Zoom calls and virtual meetings. There’s no reason you can’t still get work done.
The mortgage market is healthy and it looks like it may stay that way for a while. As I looked through the research, I found that the fourth quarter of 2020 may be the ideal time to position yourself in for success in 2021. And considering where the winds are pointing, there may not be another opportunity to prepare yourself quite like this one. MBM
