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[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]

  A REVIEW OF VA'S LOAN GUARANTY AND SPECIALLY ADAPTIVE HOUSING GRANT 
                             PROGRAMS (SAH)

=======================================================================

                                HEARING

                               before the

                  SUBCOMMITTEE ON ECONOMIC OPPORTUNITY

                                 of the

                     COMMITTEE ON VETERANS' AFFAIRS
                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             SECOND SESSION

                               __________

                      WEDNESDAY, FEBRUARY 10, 2016

                               __________

                           Serial No. 114-54

                               __________

       Printed for the use of the Committee on Veterans' Affairs

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         Available via the World Wide Web: http://www.fdsys.gov
         
         
         
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                     COMMITTEE ON VETERANS' AFFAIRS

                     JEFF MILLER, Florida, Chairman

DOUG LAMBORN, Colorado               CORRINE BROWN, Florida, Ranking 
GUS M. BILIRAKIS, Florida, Vice-         Minority Member
    Chairman                         MARK TAKANO, California
DAVID P. ROE, Tennessee              JULIA BROWNLEY, California
DAN BENISHEK, Michigan               DINA TITUS, Nevada
TIM HUELSKAMP, Kansas                RAUL RUIZ, California
MIKE COFFMAN, Colorado               ANN M. KUSTER, New Hampshire
BRAD R. WENSTRUP, Ohio               BETO O'ROURKE, Texas
JACKIE WALORSKI, Indiana             KATHLEEN RICE, New York
RALPH ABRAHAM, Louisiana             TIMOTHY J. WALZ, Minnesota
LEE ZELDIN, New York                 JERRY McNERNEY, California
RYAN COSTELLO, Pennsylvania
AMATA RADEWAGEN, American Samoa
MIKE BOST, Illinois
                       Jon Towers, Staff Director
                Don Phillips, Democratic Staff Director

                  SUBCOMMITTEE ON ECONOMIC OPPORTUNITY

                     BRAD WENSTRUP, Ohio, Chairman

LEE ZELDIN, New York                 MARK TAKANO, California, Ranking 
AMATA RADEWAGEN, American Samoa          Member
RYAN COSTELLO, Pennsylvania          DINA TITUS, Nevada
MIKE BOST, Illinois                  KATHLEEN RICE, New York
                                     JERRY McNERNEY, California

Pursuant to clause 2(e)(4) of rule XI of the Rules of the House, public 
hearing records of the Committee on Veterans' Affairs are also 
published in electronic form. The printed hearing record remains the 
official version. Because electronic submissions are used to prepare 
both printed and electronic versions of the hearing record, the process 
of converting between various electronic formats may introduce 
unintentional errors or omissions. Such occurrences are inherent in the 
current publication process and should diminish as the process is 
further refined.

                            C O N T E N T S

                              ----------                              

                      Wednesday, February 10, 2016

                                                                   Page

A Review of VA's Loan Guaranty and Specially Adaptive Housing 
  Grant Programs (SAH)...........................................     1

                           OPENING STATEMENTS

Honorable Ryan Costello, Acting Chairman.........................     1
Honorable Mark Takano, Ranking Member............................     2
Honorable Amata Radewagen, Member................................    12

                               WITNESSES

Ms. Heather Ansley, Associate General Counsel for Corporate and 
  Government Relations, Paralyzed Veterans of America............     2
    Prepared Statement...........................................    20
Mr. Ross A. Meglathery, MPA, Director, VetsFirst.................     4
    Prepared Statement...........................................    23
Mr. James H. Danis II, CMB, AMP, President, Residential Mortgage 
  Corporation, On behalf of the Mortgage Bankers Association.....     6
    Prepared Statement...........................................    26
Ms. Sherri Meadows, 2016 Vice President, National Association of 
  Realtors.......................................................     7
    Prepared Statement...........................................    31
Mr. Mike Frueh, Director, Loan Guaranty Service, Veterans 
  Benefits Administration, U.S. Department of Veterans Affairs...     9
    Prepared Statement...........................................    34

 
  A REVIEW OF VA'S LOAN GUARANTY AND SPECIALLY ADAPTIVE HOUSING GRANT 
                             PROGRAMS (SAH)

                              ----------                              

                      Wednesday, February 10, 2016

            Committee on Veterans' Affairs,
                    U. S. House of Representatives,
                                                   Washington, D.C.
    The Subcommittee met, pursuant to notice, at 2:07 p.m., in 
Room 334, Cannon House Office Building, Hon. Ryan Costello 
presiding.
    Present: Representatives Costello, Radewagen, Takano, and 
Rice.

      OPENING STATEMENT OF RYAN COSTELLO, ACTING CHAIRMAN

    Mr. Costello. Good afternoon, everyone, and the 
Subcommittee will come to order. Chairman Wenstrup has a 
scheduling conflict and apologizes for not being able to join 
us today. I am pleased that we were still able to reschedule 
this important hearing following the snowstorm that caused us 
to postpone it last month.
    The subject of today's hearing is the Loan Guaranty Service 
of the Department of Veterans Affairs. The major mission of 
this service is the administration of the VA Home Loan Program. 
This benefit was originally authorized by the Servicemembers' 
Readjustment Act of 1944 and has provided over 22 million loans 
to veterans since its inception. While the home loan program is 
a wonderful benefit that helps veterans achieve their piece of 
the American dream, it is also a win-win for taxpayers. Unlike 
most other VA benefits programs, the home loan program operates 
as a partnership between the VA and the private mortgage 
industry. It is because of this partnership and the VA's high 
underwriting standards that VA-backed loans consistently have 
one of the lowest foreclosure and delinquency rates in the 
country.
    While the benefit provides a great service to veterans, 
there is always room for improvement. I am concerned there are 
veterans who are unaware of this benefit and I look forward to 
hearing from the VA about their outreach efforts. I am also 
concerned that the current cap on loan guaranty amounts 
excludes as many as 12,000 veterans who live in high cost areas 
from using this benefit. Yesterday, the House passed a version 
of Mr. Zeldin's legislation that removed this cap. I am hopeful 
that our colleagues in the Senate will consider this proposal 
quickly and send it to the President's desk.
    The other issue we will examine this afternoon is the 
administration of VA's Specially Adaptive Housing Program that 
provides grant funding for severely injured veterans to adapt 
their homes to make them more accessible for their needs. Some 
of our witnesses have raised concerns about the amount of 
paperwork and processing delays associated with this benefit. 
While I understand there is a need to examine each veteran's 
circumstances to appropriately fund the adaptation that fits 
their needs, we must strive to improve timeliness of service 
for all veterans.
    Finally, I would like to commend Mr. Frueh and the staff of 
VA's Home Loan Guaranty Service for their dedication and their 
willingness to work with the Members and staff of this 
Subcommittee. They truly represent the model for positive 
interactions with Congress, and I wish other parts of the 
department would take a page out of their play book.
    With that, it gives me great pleasure to recognize Mr. 
Takano for any opening remarks he may have.

                OPENING STATEMENT OF MARK TAKANO

    Mr. Takano. Thank you, Mr. Chairman. The VA's Home Loan 
Guaranty Program leverages the non-government world of 
realtors, lenders, builders, and servicers with the veterans 
who want to buy a home. Because the government protects lenders 
from loss on these loans, and because of the safeguards built 
into the law barring lenders from entering into loans that are 
risky, more VA loans go to closing than any other product in 
the industry. Veterans are able to find the homes they want and 
get into them with a minimum of time and hassle, clearly a win-
win for all involved.
    Today's hearing is a check-in on this popular program as 
well as on the Specially Adaptive Housing Program, which helps 
service-connected disabled veterans build or adapt homes so 
they can live with greater ease after being catastrophically 
injured. The Specially Adaptive Housing Program has seen an 
increase of 65 percent since fiscal year 2013. Today we will 
hear how VA's improvements in outreach have contributed to this 
increase, and what is needed in terms of funding and staffing 
to meet the challenges ahead if growth continues at that pace.
    Both programs embody successful public-private 
partnerships, and I think that makes all of us happy here. I 
want to thank the witnesses for being here today and I look 
forward to their testimony. Thank you, Mr. Chairman, I yield 
back.
    Mr. Costello. Thank you, Mr. Takano. On our first and only 
panel we have Ms. Heather Ansley with Paralyzed Veterans of 
America; Mr. Ross Meglathery, with VetsFirst; Mr. James Danis 
testifying on behalf of the Mortgage Bankers Association; Ms. 
Sherri Meadows testifying on behalf of the National Association 
of Realtors; and finally, Mr. Mike Frueh, who is the Director 
of VA's Loan Guaranty Service. Thank you all for being here. 
Each of you will be recognized for five minutes for your oral 
statement. Ms. Ansley, let's start with you.

                  STATEMENT OF HEATHER ANSLEY

    Ms. Ansley. Thank you, Representative Costello, Ranking 
Member Takano, and Members of the Subcommittee. Paralyzed 
Veterans of America would like to thank you for the opportunity 
to testify this afternoon regarding the Department of Veterans 
Affairs Loan Guaranty and Specially Adaptive Housing Grant 
Programs. Our testimony this afternoon will focus on VA's 
Adaptive Housing Grant Programs.
    PVA's members are veterans who are catastrophically 
disabled by a spinal cord injury or disease. Many of them have 
benefitted from VA's Specially Adaptive Housing or SAH Grant 
Program. Providing a catastrophically disabled veteran with an 
accessible home is an investment that pays dividends in lower 
health and long term care costs. We hope that every effort will 
be made to strengthen VA's Adaptive Housing Program and 
increase the benefits available for these veterans by making 
investments in staffing, streamlining and expediting grant 
processing for veterans with terminal illnesses, and improving 
outreach.
    Investments in staffing are needed to increase the number 
of SAH agents serving veterans. In many parts of the country, 
inadequate staffing contributes to delays in processing grants 
and results in poor customer service for veterans. According to 
PVA's service officers, many veterans have a difficult time 
contacting their SAH agents as phone calls and emails are not 
returned in a timely manner. PVA believes that veterans' 
inability to connect with their SAH agents is not only unfair 
to them, but also to these agents who are sincerely trying to 
serve veterans despite too many tasks and too few resources. 
Insufficient staffing also leads to retention problems as 
agents leave their positions due to excessive workload and 
extensive travel requirements. PVA's service officers report 
frequent turnover, which overburdens agents who must carry 
increased workloads when other agents leave. In addition, some 
agents cover large geographic areas and travel hundreds of 
miles one way to meet the eligible veterans, which also leads 
to delays in responding to veterans and processing grants.
    One of the biggest challenges PVA encounters in the SAH 
Grant Program is the length of time it takes for grants to be 
processed and approved. This is especially true for veterans 
living with amyotrophic lateral sclerosis, or ALS. Veterans 
with ALS are critical users of the SAH Grant Program and the 
housing adaptation assistance it provides. VA's SAH grant 
process, however, is not well suited to veterans with rapidly 
changing diseases like ALS. As a result, it may be difficult 
for a veteran with ALS to get the adaptations he or she needs 
when he or she needs them.
    In its recommendations to the 114th Congress, the coauthors 
of the independent budget, which include PVA, Disabled American 
Veterans, and the Veterans of Foreign Wars, recommended that VA 
expedite these grants for veterans who are terminally ill, 
including those who have ALS. This includes encouraging the use 
of waivers to prevent adaptations that are unneeded due to the 
veteran's level of disability.
    Ultimately, the SAH Grant Program must be flexible enough 
to assist veterans who have relatively static disabilities such 
as spinal cord injuries, and those who have rapidly changing 
diseases such as ALS.
    Delays in processing grants for veterans with diseases such 
as ALS can also prevent these veterans' families from accessing 
the mortgage protection that is available through the VA's 
Veterans Mortgage Life Insurance, or VMLI program. The VMLI 
program is designed to provide a mortgage insurance option for 
veterans who otherwise would not be able to seek such coverage. 
Coverage begins when an eligible veteran receives final 
approval of the grant. VMLI must be available to these veterans 
earlier in the grant process. One incremental change would be 
to approve VMLI at the same time as the final grant instead of 
waiting until funding is in escrow. Another option would be to 
approve those that are eligible for VMLI coverage as soon as VA 
determines that they meet all applicable requirements with the 
exception of the final approval of the adaptive housing grant.
    PVA strongly supports VA's adaptive housing programs 
because the benefits available through this program are not 
only life-changing, but also life-saving.
    When a veteran is determined by VA to be eligible for 
ancillary benefits including adaptive housing, VA provides the 
veteran with a decision that includes information about these 
benefits, and such a notice typically includes the requisite 
forms to apply. We have noticed, however, that the required 
forms are not always provided with the notice of eligibility 
and for veterans who are not represented by a veterans service 
organization like PVA, it may be difficult for them to navigate 
the sea of benefits for which they are eligible.
    PVA provides significant outreach related to the benefits 
of adaptive housing. Our service officers communicate with our 
veterans to ensure they understand the benefit and the 
importance of the program. We also seek to increase awareness 
by providing information on our Web site, and in our meetings, 
and in our membership magazine. We also work to provide 
information about how to design a wheelchair accessible for 
home and we support efforts to increase affordable accessible 
housing for all people with disabilities.
    We appreciate the Subcommittee's focus on VA's adaptive 
housing program. We hope additional resources will be 
available, and we thank you for the opportunity to share our 
thoughts today.

    [The prepared statement of Heather Ansley appears in the 
Appendix]

    Mr. Costello. Thank you. Mr. Meglathery?

                  STATEMENT OF ROSS MEGLATHERY

    Mr. Meglathery. Representative Costello, Ranking Member 
Takano, and other distinguished Members of the Subcommittee, 
thank you for giving VetsFirst the opportunity to testify 
regarding VA's Loan Guaranty and Specially Adaptive Housing SAH 
Grant Programs.
    VetsFirst has represented our disabled veterans, their 
families, and their caretakers since 1946 when paralyzed World 
War II veterans came together to claim their rights. We 
advocate for the programs, services, and disability rights that 
help all generations of veterans with disabilities remain 
independent and fulfill their desire to reintegrate into 
society. Today through our parent organization, United Spinal 
Association, we are not only a VA-recognized national veterans 
service organization, we are a leader in advocacy for all 
people with disabilities. We are honored to have the 
opportunity to testify about the VA's Loan Guaranty and SAH 
Grant Programs and offer some suggestions for improvement.
    The VA's Loan Guaranty Program is a critical benefit to 
veterans across the Nation and it is an example of what the VA 
is doing right by veterans. More than 80 percent of veterans 
utilize this program as a result of its affordability and ease 
of use. VA's delinquency rate is quite low as a result of the 
holistic approach to ascertain the veteran's income based on 
monthly expenses. On a personal note, I have taken advantage of 
this benefit, and it allowed me to purchase a home in an area 
with an extremely high cost of living.
    From the perspective of the VSO, this benefit is one of 
ease. We just determine the eligibility of the veteran, and the 
lender does the remainder of the work. It is an example of a 
program that supports VetsFirst's core principle one of 
independence, and core principle two of timely access to VA 
benefits.
    VetsFirst supports all programs that are designed to 
enhance the independence of veterans with disabilities. For 
this reason, community integration and independence is our 
first core principle. The ability to own a home that is adapted 
to the unique needs of each individual is critical for both the 
emotional and physical well-being of the veteran. VetsFirst 
wholeheartedly backs SAH. We would like to highlight areas 
where we see that improvements are warranted and would make 
this program even more successful.
    Currently, both SAH and Vocational Rehabilitation and 
Employment Program are in the business of housing modifications 
for veterans. VetsFirst believes this is a less efficient way 
to utilize limited resources. SAH staff are experts in the 
arena of home modification. While VR&E staff are hardworking 
and diligent, they are not solely focused on this benefit. 
Additionally, as you know from a prior hearing, VR&E staff are 
currently overworked with large caseloads supporting vocational 
rehabilitation. By taking home modification off their 
portfolio, VR&E would be able to focus on their area of 
expertise.
    In the last few years, SAH has seen an increase in approved 
grants. The addition of VR&E's caseload would add to that 
growing number. For this reason, VetsFirst would like to 
emphasize its desire to see that SAH is fully funded and 
staffed to support this upward trend, and would like to see 
that commensurate with any addition of the VR&E caseload.
    VetsFirst does not advocate removing VR&E from the process 
altogether. If a veteran is getting vocational rehabilitation 
in conjunction with home modifications, VetsFirst recommends a 
three-way dialogue amongst the veterans, SAH, and VR&E 
personnel.
    Currently, SAH gives the veterans the chance to choose 
which contractor to use for home modification. VR&E does not. 
We recommend shifting VR&E's home modification to SAH. Giving 
the veteran the choice of contractor is important on several 
levels. It allows the veteran to have the independence they 
would seek and it allows them to quickly address any problems 
or complaints with the intent of not having to bring in a third 
party to settle the dispute.
    With regard to grant money that is funded, VetsFirst is 
concerned that the benefit is not a large enough amount. SAH 
has been indexed based on inflation. However, we are concerned 
that the baseline was too low. Currently, the maximum amount of 
a grant is just under $74,000. Often, with that money, the 
veteran is forced to make choices as to what to modify and what 
not, or pay the remainder out of pocket. Another point of 
concern is the amount of the grant is not based on the cost-of-
living, but rather standard across the board. Anyone who has 
lived in the Washington, D.C. metro area is aware that the cost 
of living here, for instance, is a lot higher than in Boise, 
Idaho, for example.
    The last point I have to make about SAH based on feedback 
from my VSOs and our online help desk, Ask VetsFirst, is that 
the SAH process takes longer than desired. This should not be 
seen as a criticism of the individual SAH staff members as they 
work in the local community. It is a way to identify an 
opportunity to find a solution for rapid response.
    VetsFirst would like to express its thanks for the 
opportunity to testify today on the Loan Guaranty and SAH 
Programs. We appreciate your leadership on behalf of this 
Nation's veterans. I would be happy to answer questions.

    [The prepared statement of Ross Meglathery appears in the 
Appendix]

    Mr. Costello. Thank you. We will recess and reconvene very 
shortly.

    [Recess.]

    Mr. Costello. I call the hearing back to order and 
recognize Mr. Danis on behalf of the Mortgage Bankers 
Association.

                  STATEMENT OF JAMES H. DANIS

    Mr. Danis. Chairman Costello and Members of the 
Subcommittee, thank you for the opportunity to testify this 
afternoon on VA's Home Loan Guaranty Program.
    I have been in the mortgage business for 23 years and have 
worked with the VA Home Loan Guaranty Program the entire time. 
My company, Residential Mortgage Corporation, is an independent 
mortgage lender located in Fayetteville, North Carolina. 
Approximately 70 percent of the loans we issue are VA loans. In 
North Carolina with our large military population centered 
around Fort Bragg, loans guaranteed by VA are an important part 
of our market. In fact, their use is steadily increasing. In 
the latest fiscal year alone, more than 14,000 VA purchase 
loans were originated in our state, up 13 percent from 2014.
    For many reasons I am a staunch advocate of the VA Home 
Loan Guaranty Program. You see, the homes my parents purchased 
and where my siblings and I were raised were bought with VA 
loans. In keeping with our family tradition of military 
service, I served my country, and my first home was financed 
with a VA loan.
    Much like our company, MBA has been a consistent supporter 
of the VA Home Loan Guaranty Program. Our industry is united in 
the belief that the VA remains an important and viable program 
for veterans and active duty military personnel. Providing 100 
percent LTV loans is a tremendous benefit to our veterans who 
have dedicated their lives to serving our country and is 
crucial in military communities. But as credit markets have 
tightened and loan underwriting has become stricter, finding 
low downpayment mortgages has become increasingly difficult.
    Despite most VA borrowers not having skin in the game, VA 
loans have continued to outperform their counterparts. In fact, 
the VA portfolio has been able to sustain production, and 
weather the turbulent market largely due to its historically 
conservative underwriting standards which includes a residual 
income test. VA mortgages have always been fully documented, 
and fully underwritten loans and owner occupied properties. 
That is why they continue to perform so well today.
    Additionally, the borrowers who use the VA program are as 
diverse as the entire U.S. population. According to VA's 2015 
Annual Benefits Report, African Americans comprise 10.6 percent 
of VA loans; American Indian and Alaskan Natives 8.3; Hispanics 
7.8; and Asian and Pacific Islanders 2.6 percent.
    In our written testimony, MBA offers a number of policy 
recommendations for improving VA programs. Chief, among them, 
we urge the VA to issue a final qualified mortgage rule that 
establishes clear bright lines for VA lending, and once the 
rule is issued, we hope that they will permit an appropriate 
implementation period so that smaller lenders like our company 
have the time we need to test our systems and ensure we are in 
full compliance.
    MBA also calls on Congress to reauthorize the extended 
foreclosure protections afforded to active duty military by the 
Servicemembers' Civil Relief Act, or SCRA. During the financial 
crisis, SCRA's foreclosure moratorium for active duty military 
members was extended from three years to a year. Unfortunately, 
that important consumer protection lapsed at the end of last 
year. In our view, it should be extended immediately and 
ultimately made permanent.
    I want to conclude my testimony by commending VA and its 
excellent staff for the collaborative approach they take to 
policy making, as well as their overall emphasis on maintaining 
open lines of communication with our industry. We are grateful 
for our strong partnership, and look forward to continuing to 
work together on the issues I have outlined here today.
    Once again, I want to thank you for holding this hearing 
and shining a spotlight on the importance of this vital path to 
home ownership. We look forward to working with you to help our 
members of our military, past and present, achieve the American 
dream.

    [The prepared statement of James H. Danis appears in the 
Appendix]

    Mr. Costello. Thank you, Mr. Danis. Ms. Meadows testifying 
on behalf of the National Association of Realtors, welcome.

                  STATEMENT OF SHERRI MEADOWS

    Ms. Meadows. Good afternoon. I have been a realtor in North 
Central Florida for 33 years. I serve in a volunteer position 
as the 2016 Vice President of the National Association of 
Realtors, and represent its more than one million members 
working in all aspects of real estate.
    The National Association of Realtors is a strong supporter 
of housing opportunities for veterans. According to the U.S. 
Census, there were 19.3 million veterans in the United States 
in 2014 and 2015, and one in five home buyers was a veteran or 
active duty servicemember according to our NAR survey.
    In 2015, the homeownership rate was 76 percent for 
veterans, more than 12 points above the national average. The 
Department of Veterans Affairs Home Loan Guaranty Program 
serves a large population and has been doing it well for over 
70 years, including in the aftermath of the recent recession. 
VA's strong, yet flexible underwriting allows veterans the 
ability to purchase a home of their own without depleting their 
savings. More than 82 percent of veterans utilize the zero 
downpayment option provided by the VA.
    Despite this VA delinquency, rates are very low, comparable 
even to today's tight conventional lending. Despite all the 
talk about the skin in the game, loans with appropriate 
underwriting, especially VA's use of the residual income test, 
and zero downpayment can successfully balance risk, and provide 
sustainable homeownership.
    A realtor in Atlanta once told me the story of a veteran 
who lost his job, and as a result his home, during the Great 
Recession. When he found a new job, he moved with his family to 
Atlanta. He worked to rebuild his credit and was able to use 
his VA guaranty to buy a home for his family just two years 
after being out of work and down on his luck. This would have 
been impossible without the VA.
    VA also protects their borrowers. Extensive counseling, and 
active negotiating helps veterans who run into financial 
difficulty. Since 2009, the VA has prevented more than half a 
million veterans and their survivors from losing their homes, 
while saving our taxpayers more than $16 billion in claims 
payments.
    NAR also supports grant programs that allow disabled 
veterans to own a home that accommodates their needs. VA 
provides two types of grants to servicemembers and veterans 
with service-connected disabilities to help purchase or 
construct an adapted home or modify an existing home to 
accommodate a disability. These grants provide a significant 
benefit that allows our disabled veterans to retain their 
independence.
    We support the comments by the two veterans service 
organizations urging that staffing and financial levels are 
sufficient to operate the program efficiently.
    In recent years, this Committee has made tweaks to the home 
loan program to make it even more useful for veterans. The 
National Association of Realtors is here today to offer several 
other changes that could further enhance the program. Number 
one, consider higher cost loan limits. The VA Home Loan 
Guaranty Program is unique. It is not simply a Federal loan 
program, it is an entitlement promised to our military members 
in return for their service to our Nation. Veterans should be 
able to purchase a home wherever they choose to live and should 
not be prevented from using their entitlement due to the low 
loan limits. We urge this Committee to increase the VA loan 
limits and not penalize veterans for geographic differences in 
the housing market.
    Number two, VA fee requirements. NAR believes that VA 
borrowers should be allowed to negotiate fees with sellers, 
just as non-VA buyers do, as part of the home purchase 
transaction. A realtor in Ohio recalled a client who wanted to 
use his VA benefit to purchase his first home. His lender tried 
to discourage him from using the VA, saying it was too time 
consuming and complicated. Moreover, he lost offers on the 
first several homes he bid on because the seller did not want 
to deal with the VA requirements. While the veteran was able to 
buy the home, he ended up using FHA and paying 3.5 percent 
downpayment to get the home he wanted. We urge VA to create a 
level playing field and provide veterans with the flexibility 
to negotiate all fees so they are not disadvantaged when trying 
to buy a home.
    Number three, incentivize a program for renovation and 
rehabilitation. NAR urges the U.S. Department of Veterans 
Affairs to incentivize lenders to use existing authority to 
offer a veterans renovation pilot program, similar to the FHA's 
203(k) Program. The 203(k) Program provides a loan for post-
renovation appraised value. It is a safe and viable way for 
veterans to purchase a home that is in need of renovation while 
still using their guaranty.
    The National Association of Realtors strongly supports the 
VA Home Loan Guaranty Program and the Specially Adaptive 
Housing Grants. It is our hope that the Subcommittee will 
support our recommendations for enhancing and improving the VA 
Home Loan Guaranty Program, so it may be a real benefit to 
those who bravely served our country.
    I would also like to thank the Members of this 
Subcommittee. Each of you have served your communities and our 
Nation's veterans very well in areas such as protecting private 
property rights, advocates for affordable housing, the 
disabled, domestic violence victims, and those that are less 
fortunate than us. It has been an honor and I thank you for the 
opportunity just to be here today.

    [The prepared statement of Sherri Meadows appears in the 
Appendix]

    Mr. Costello. Thank you, Ms. Meadows. Mr. Frueh, who is the 
Director of the VA's Loan Guaranty Service, welcome.

                    STATEMENT OF MIKE FRUEH

    Mr. Frueh. Thank you, Mr. Chairman, Ranking Member Takano, 
and Members of the Subcommittee. Thank you for this opportunity 
to appear before you today and discuss the status and 
accomplishments of the Loan Guaranty Program and the Specially 
Adaptive Housing Program.
    Our program's mission is a very simple one. We work to 
maximize veterans' and servicemembers' opportunity to obtain, 
retain, and adapt homes. However, our program does not 
generally make loans, build or sell homes, service loans, nor 
do we build adapted homes. Instead, we rely on lenders. We rely 
on realtors, appraisers, servicers, builders, and many others 
in the mortgage industry to help us deliver these benefits that 
our veterans have earned, many at great sacrifice.
    We have worked relentlessly to increase our program's 
efficiency and effectiveness by delegating functions to our 
mortgage industry stakeholders. And I would like to take this 
opportunity to thank my colleagues at the Mortgage Bankers 
Association, the National Association of Realtors, and others 
like the National Association of Home Builders and the 
Appraisal Institute that have worked with us over the years to 
help make our program work better for our Nation's veterans.
    To ensure this relationship is effective, we maintain a 
robust oversight and risk management program to secure a world 
class veteran experience, ensuring these private sector 
stakeholders adhere to our program goals, values, statutes, and 
regulations. Our work centers on creating success on all sides 
of the program. We work constantly to remove barriers veterans 
may face when using their benefits and ensure that veterans 
experience high quality consistent services no matter where 
they live. This work ranges from in home grant consultations 
with SAH eligible veterans and their families, to creating 
informational YouTube videos and the Google Hangout feeds, to 
making prudent policy changes that facilitate timely appraisal 
and loan closings, more efficient SAH grant processing, or 
innovative loss mitigation efforts.
    We also work to ensure our program is easy to understand 
and at the forefront of industry processes and technology so 
that our private sector stakeholders succeed in their missions 
to make and service loans, construct or renovate homes, and 
manage and sell properties. On this front, we facilitate daily 
electronic transmission of loan and property data, we 
established permanent liaisons to all of the lenders and 
servicers across the Nation, and we hold regular forums, 
trainings, and calls, so stakeholders have open access to our 
leadership to ask questions, and obtain realtime answers and 
timely explanations of program or industry changes. We built 
systems that streamlined the flow of information between the 
industry and VA and provide analytical tools that decrease the 
time from application to closing so veterans benefit directly.
    Through these strong partnerships, our focus on veterans, 
and our continuous drive to innovate and enhance operations and 
performance, we have built a high performing program that works 
for veterans, our stakeholders, and the American taxpayer. We 
have seen tremendous results from our efforts in removing 
barriers and enabling access. For the past few years, VA loans 
have equaled or exceeded industry benchmarks for time to close, 
percent of applications that actually do close, serious 
delinquency rate, and foreclosure inventory rate. We know our 
approach works because by creating ways to help our industry 
partners more effectively deliver these benefits, they have 
responded by offering veterans an interest rate lower than that 
for any other type of loan.
    Veterans prove our approach works as well. At the same 
time, we guaranteed our largest number of loans last year, 
while preventing the largest number of foreclosures, the VA 
loan program maintained the second highest satisfaction rating 
in J.D. Power's Primary Mortgage Origination Satisfaction 
Study, significantly higher than the industry average.
    The VA loan is not a good loan, it is a great loan. VA 
loans are viewed by lenders as safe and viable and viewed by 
veterans as an important financial benefit that helps them 
obtain a home for their families. Additionally, the work we 
have done to streamline policies and procedures in the SAH 
Program have enabled us to process a record number of grants 
for veterans who want to live independently in their own homes.
    We have done some amazing things over the past few years. 
But could we do better? Of course we could. We can always do 
better. And no matter how successful we have been, we are 
always looking forward to see how we can make the program 
successful for veterans a decade from now. To that end, we are 
focusing on a number of initiatives that will empower veterans 
with information and access to innovative, effective, high 
quality products and services.
    We have made incredible progress in our ability to manage, 
market, and sell foreclosed properties, and we have been able 
to increase our return on sale to almost 90 percent while 
decreasing our time in inventory to under 120 days.
    We created a Federal Housing Agency Task Force, where FHA, 
USDA, VA, and others meet regularly to talk about best 
practices in the mortgage industry. And we are happy to report 
that USDA thought our processes were so good that they asked us 
to start managing and marketing their REO properties. And in 
the past three months, we have already made inroads in selling 
their properties, and they look to save about $10 million a 
year by using our processes.
    Finally, Mr. Chairman, I would like to leave you with three 
thoughts about the impact our program has on veterans, on the 
taxpayers, and on the U.S. housing market. The record 631,000 
borrowers obtaining a VA guaranteed home loan last year enjoyed 
an interest rate that was on average more than a quarter point 
below the rate for conventional loans. In addition to the 
longstanding no downpayment feature of VA loans, because they 
require no mortgage insurance premiums, those 631,000 borrowers 
saved over $40 billion in their mortgage payments for the life 
of their loans. Even here in D.C. that is serious money. The 
savings in downpayment and mortgage insurance are a strong 
benefit to veterans who may need those funds in the future to 
overcome unforeseen financial obstacles.
    Since 2009, we have worked with private sector loan 
servicers to help over half a million veterans and their 
families retain their homes or avoid foreclosure, helping a 
record 90,000 last year alone.
    And finally, in the past three years, we have helped over 
4,000 severely disabled veterans build or adapt homes to help 
them live independently in the house of their choosing. And the 
1,800 we helped last year represents almost a 50 percent 
increase from the record setting year before.
    Obtain, retain, and adapt. It is that simple. Mr. Chairman, 
I appreciate the opportunity to speak today. I would like to 
thank the Subcommittee for your support of our veterans and for 
the productive working relationship that we have had with your 
Committee Members and your staff. I will continue to identify 
opportunities to enhance our program and stand ready to provide 
any information or technical assistance that the Subcommittee 
requires on ideas the members believe would help deliver our 
benefits to our veterans. This concludes my testimony.

    [The prepared statement of Mike Frueh appears in the 
Appendix]

    Mrs. Radewagen. [Presiding] I thank the panel for their 
testimony and I now recognize myself for five minutes of 
questions.
    Ms. Meadows, can you please expand on your suggestion for 
VA to enter into a pilot program that would authorize a veteran 
to borrow money to rehabilitate and renovate their homes?
    Ms. Meadows. Thank you, Acting Chairman. The FHA 203(k) 
program, we want VA to be a very similar program to that. The 
203(k) program is a rehabilitation and renovation loan. An FHA 
buyer can purchase a home that they plan to renovate. The costs 
of that renovation are included in the loan amount. Working 
with a specially designed plan and a trained appraiser, the 
value of the completed renovations is included in the loan and 
put in escrow. The work is done by an approved contractor and 
the renovation part of the loan is paid out as the work is 
completed. VA has the authority for a similar program, but has 
not promoted it with lenders. We believe some kind of incentive 
program for lenders, whereby they get an enhanced fee due to 
the extra work required, would make this type of program 
available to veterans.
    Mrs. Radewagen. I have got a follow-up question. Should the 
program be approved, what could be done to ensure that our 
veterans who live in remote areas such as the U.S. Territories 
would be made aware of and included in the program? By the way, 
I think it is a good idea.
    Ms. Meadows. We have, as I said in my opening statement, 
thank you for the opportunity to answer this question. We have 
1.1 million realtors across the United States and Territories. 
The realtors have worked very hard to promote VA loans. I have 
with me a VA Toolkit, Home Loan Guaranty Services, that each of 
our realtors has the opportunity to obtain. So I believe by us 
continuing to educate our members and realtors working within 
the community and with the lenders in those areas, that we 
would be able to promote this product. Thank you.
    Mrs. Radewagen. Mr. Frueh, in her written statement, Ms. 
Ansley raises concerns about inadequate staffing levels and 
high turnover rates for SAH agents. What can be done to reduce 
caseloads and improve services in this area?
    Mr. Frueh. Well as part of our evolution in the loan 
guaranty process to enable veterans to use their benefits, we 
look at efficiency and effectiveness across the Board. And SAH 
agents, by their very nature, need to be located, dispersed 
throughout the country, so that they can actually get to and 
meet with veterans in their homes. In fact, we have a 
requirement within 30 days of being deemed eligible for the 
grant, we want to be in your house, speaking with your family, 
and looking at your living conditions, and talking about what 
you want and what ideas we might have for your future needs. So 
we do need to keep those staff dispersed, but we have taken a 
lot of time the last several years to move the rest of the work 
that we can across the Nation. So that just because there is a 
spike in originations in a state such as California, it does 
not mean that our office that serves California is the only 
office that is affected. We spread that work nationwide.
    We have seen a lot of efficiencies in that the last couple 
years and we are making a couple changes as we proceed through 
that process of allocating those efficiencies. And one of those 
changes is focusing on SAH and saying where are the most 
disabled veterans living, where we need this help? We had a 50 
percent increase in SAH grants authorized last year, which 
means 1,800 over 1,200 from the year before. That is a 
significant increase in work for approximately the same number 
of SAH agents. So we are working to free up the other staff 
that we do have in our budget across the Nation so that more 
agents can be put out to work on what we think is a very 
essential, very in person, very unique benefit that requires 
one on one development.
    Mrs. Radewagen. Mr. Frueh, yesterday the House passed H.R. 
3016 as amended, which included legislation from our colleague 
Mr. Zeldin that would eliminate the home loan guaranty cap. Can 
you please share with us how the current cap is affecting 
veterans in high cost areas of the country? Additionally, how 
many veterans does the current cap affect?
    Mr. Frueh. First let me say thank you for passing that 
particular piece of legislation. H.R. 3016 eliminates the cap, 
which to explain is actually a little bit convoluted because it 
relies on several different organizations to set a cap in 
virtually every single MSA around the country. So it depends on 
where you live. If a veteran decides to move to a particular 
area or finds a house that they like in a particular area, what 
they might find by looking up our caps in the particular area 
is that the house they want to buy is greater than the amount 
that we are willing to guarantee or we are able to guarantee.
    I think a misnomer is that it is a lending cap. VA does not 
set a limit on how much a veteran can purchase, we set a limit 
on how much we will guarantee. Which basically means that a 
lender can offer a loan to that veteran with no downpayment up 
to what that cap is, which is predominantly $417,000 around the 
country.
    We did some analysis last year and found that there were 
about 15,000 veterans who wanted to buy a home in an area that 
was, where the price of the home was greater than the amount 
that is allowed. And we do not know how many veterans did not 
pursue purchasing a home with their VA benefit in an area where 
the cap was less than the amount of the home that they want 
because they never started the process. What we do know is that 
from the inception of the program, almost 90 percent of our 
loans have been made with zero downpayment. It is a cornerstone 
of the program for 72 years. Our average loan to value, our 
percentage of money that people put in on loans that they do 
put money in, it's 98 percent. So people put two percent down. 
The only other national housing program with a small 
downpayment is FHA, which is a 3.5 percent downpayment program. 
So I think that our records for the last almost 22 million 
loans indicate that no downpayment is important. And setting an 
artificial cap on the amount that we can guarantee is going to 
limit people that want to buy a home above that cap because 
that no downpayment is a very important part of the benefit.
    Mrs. Radewagen. I now recognize Mr. Takano for five minutes 
for any questions he may have.
    Mr. Takano. Thank you, Madam Chair. Ms. Meadows, we 
recently had a field hearing on veterans homelessness in my 
district and one of the witnesses was someone who worked on the 
VA Loan Guaranty, or the advising and educating veterans about 
the benefit. And I think they also work with realtors. But he 
said something that I vaguely recall, and I may not have it 
correctly, but I recall him saying that often realtors may 
have, not a vindictive or a malicious bias against directing 
veterans toward the benefit, but that there may be easier ways 
to get the veteran into a home. And so often they may not 
mention the benefit to them, even though that benefit may be 
advantageous. And that similarly the sellers, you know, may not 
wish to go, I want to kind of understand what that's about, if 
you know what I'm talking about.
    Ms. Meadows. So there is a misconception among lenders as 
well as realtors and they discourage veterans from using the VA 
benefit because of that. You mentioned homelessness, and when I 
was the 2014 President of Florida Realtors, we as a leadership 
team traveled around the state to our 140,000 members to raise 
awareness on homelessness, to bring a face to the invisible 
homeless, and I believe we helped eliminate homelessness in 
many communities. Of the 500,000 homeless in the United States, 
eight percent of them are veterans. We have 40,000 homeless 
veterans. So that is an issue that NAR is looking at. It is one 
of our objectives this year, to try to decrease homelessness, 
and especially among our vets.
    I was just speaking with a few of my colleagues earlier, 
and in my office what I have learned in working with the VA 
loans is that it's just a misperception. And I taught 20 of my 
agents yesterday that the first question that we should ask as 
a realtor when we have a buyer approach us is number one, have 
you served? Have you served in the military? Because if they 
have, we want to thank them for their service, but number two, 
we need to tell them about the VA Guaranty Funding Program. The 
toolkit explains a lot of things. And I believe that realtors, 
we just need to educate them and we can overcome this 
misconception of the VA process being difficult.
    As well as I believe if we, you know, are able to negotiate 
the closing fees in the transaction and we raise those limits, 
because those individuals want to live in areas where their 
family is from. And I wrote some numbers down earlier. You were 
asking earlier the prices around the United States. And the 
average price around the United States is $222,700. But when 
you move into areas like San Jose, California, it's $940,000. 
Areas like San Francisco, it's $781,600. So the higher loan 
limits, or removing the cap are absolutely necessary. Thank you 
for your question.
    Mr. Takano. Yes, just if I could follow-up. So you did hear 
about the legislation by Mr. Zeldin that did pass, and I am 
happy that we have addressed the loan limit issue and I am 
hopeful that the Senate will pass similar language, so we can 
make it law and actually make this happen. But help me 
understand, what is the misconception? If you could just----
    Ms. Meadows. That the VA process is clunky. That appraisers 
come in with low appraisals. That there are repairs that need 
to be made to the property in protecting the vet. And when you 
have an investor come in with cash, and you have somebody with 
a VA loan, the seller tends to believe in the misconceptions of 
this being a clunky process, and they are going to take the 
cash deal over somebody having to go get VA financing because 
those fees that the seller has to pay in the closing, play a 
part in what their net proceeds will be in the transaction.
    Mr. Takano. So is that beyond a misconception? I mean it 
sounds like, you know, the idea that cash is king, I mean, is 
very real. So I mean, it is not that maybe the realtors are 
under a misconception, it is maybe that they are looking for a 
quicker transaction, right? And so if the veteran has some 
other way, so I did recall that I had a conversation with a 
realtor about the appraiser coming in, the cost of that 
appraiser. So are there elements of the process which sort of 
burden the veteran who wants to go through the VA program? And 
I want to know how we can fix it because I want to make sure 
that veterans are able to use it. If there's advantages, I want 
the veterans to have that advantage.
    Ms. Meadows. I think being able to negotiate those fees, 
you have the termite inspection fee, the escrow closing fee, 
the tax service fee, the document recording fee, attorneys 
fees, brokerage fees, postage and delivery charges, these are 
fees that a veteran cannot pay. So if they were able to 
negotiate that into the contract, I believe that you would see 
a more level playing field for the veteran.
    Mr. Takano. Well so it is not just a misconception. There 
are some real things that we need to address, and realtors are 
not behaving, you know, in a rational manner. I thank you for 
the spirit and attitude that you brought to Florida. But you 
know, that caught my attention and I want to work with the 
industry and the VA in looking at how we can incentivize 
realtors to use the program. Thank you.
    Ms. Meadows. Thank you.
    Mrs. Radewagen. Mr. Frueh, would you like to comment on the 
fees?
    Mr. Frueh. Yes, actually on several things that you brought 
up. One is an overall misperception that I call my father's VA. 
You know, the way the VA operated before is really what is 
living in a lot of realtors' minds and others in the industry, 
bankers, and others, that say it takes a long time. And that is 
what we have been working to address very very directly the 
last several years, is to survey the landscape and say, what is 
taking the most time that we control at VA? And moving it out 
of the way. And closing time is very important. So for the last 
several years, we look every month at industry benchmarks to 
say how long does it take to close a VA loan compared to a 
conventional loan? Which is someone that puts 20 percent down, 
or pays mortgage insurance, someone that has got pristine 
credit versus our borrowers who may or may not have pristine 
credit. We don't have a credit requirement. They may or may not 
put something down. We do not have a downpayment requirement. 
We try to compare ourselves to the best of the best. And we 
have been at industry standard closing times around 47 days, 49 
days for most of the year. As of December, the last time I saw, 
we were about two days slower than the average conventional 
loan in the industry. Which to me is two days of opportunity 
that we can get back. But for the last several years, we have 
been dead even.
    So we look at things like appraisal turn times, how quickly 
can we work our appraisal process from order to receipt. And we 
track that very diligently. And we know that at eight and a 
half days on average for each of our 600,000 appraisals last 
year, we are pretty much on par with industry. However, there 
is another five days of notice of value issuance, which is five 
days that we can control. And we have provided tools that this 
year we anticipate will drive down that five days to one day or 
less. And then, we will be at a four-day better than what we 
were today in the process. So we are continually looking at 
what we can do to take little steps out of the way that VA 
controls to make the process more efficient.
    I did note that 74 percent of loans started as a VA loan 
actually closed last year, which is the highest rate in the 
industry. Conventional loans was only 72 percent. So our loans, 
if a veteran wants to use their benefit, they have a greater 
likelihood of actually getting the home that they want and 
completing that transaction than if they use any other type of 
mortgage, more than anyone else that tries to use the mortgage.
    As for closing costs we do agree, and we take what Sherri 
said seriously. We are looking at the ability for veterans to 
negotiate what fees they pay. We are kind of balancing, we have 
been for 72 years, protecting veterans from getting into a 
situation they don't like versus protecting them from buying a 
house that they want. And that balance in some periods has 
shown to be more protective than less. And I think this is a 
regulatory option that we have for some of these fees and 
charges that are allowable, and we are certainly willing to 
work with our partners in the industry to find a balance that 
works better.
    Mrs. Radewagen. I now recognize Ms. Rice for five minutes 
for any questions she may have. Thank you.
    Miss Rice. So I just want to add, New York has got to be up 
there in terms of housing prices, right? I mean, I do not know 
how they compare to California, but I cannot believe that they 
are not as high because this is a perennial complaint that I 
hear about from our veteran community.
    I have one question and it really is a question that every 
meeting we have with the VA, every hearing we have, the 
question is, and we just did a round table out in my district 
last week. How is it--so there's 40,000 homeless veterans. You 
mentioned some of the ways that you try to reach out to make 
them aware, whether it is upon separation or when they are 
still active duty. We have got to be able to do this better. I 
mean, one of the great failures, I think, of our government is 
we let too many veterans fall through the cracks, whether it is 
for mental health care, physical health care, these benefits, 
G.I. benefits. So is there a plan that you have, more than 
just--well we are going to do these pamphlets, that--where are 
they going to get them, how are they going to, do you 
understand what I am saying? How do we reach more veterans?
    Mr. Frueh. Well that is a very very important question to 
ask. And I can address some of it. And we actually have a 
department at VA called the Ending Veteran Homelessness which 
is focused 100 percent on combining all of VA's resources that 
can help in the homeless arena and reach out with the private 
sector and other public sector entities to address the needs 
and various entities. Because, you know, as real estate is all 
about location, location, location, homeless veterans are in 
pockets in different areas. And we have to reach them where we 
are.
    You know one thing that we did as an organization last 
month, VA had their point in time count. And in about 40 
communities around the Nation, VA employees and local 
representatives from all the different constituencies went out 
to count the homeless and to meet with the homeless and to talk 
to them about services that they could avail them right then, 
they could find out whether these are homeless veterans or non-
veterans, what we can do to help them. And those are things 
that we do repeatedly to find out how big is the problem. 
Because 40,000 veterans is a number that is out, but there is 
different numbers on different days in different communities. 
So we are trying to continually address it.
    In the Loan Guaranty Program, we deal with a single 
benefit, the home loan benefit. And one thing that we focused 
on a lot in the last nine years is how do we stop a veteran who 
is already in financial distress from progressing down towards 
foreclosure? And what we have seen in the last nine years is--
we have put together a formula, working with servicers around 
the country, working with the Mortgage Bankers Association and 
others, we have found a way to avoid foreclosure more than any 
other major loan product out there. And what we have started 
thinking about it more as we are not just avoiding foreclosure, 
we are helping prevent homelessness by keeping a family in a 
home, by not allowing one more family or one more veteran or 
one more member of a community to not have a roof over their 
head. So to that end, we work with our Ending Veteran 
Homelessness group. And when we have a veteran that is in 
default and a foreclosure date is set, we communicate that with 
them to say here is a potential for homeless. We need to 
conduct outreach to this family now and see do they have 
opportunities for housing afterwards. Not every deed in lieu of 
foreclosure or every short sale or every foreclosure leads to 
homelessness, but we do take it very seriously and we call this 
at risk for homelessness. And we identify a veteran family is 
at risk and we communicate with that process. But for 
everything else that VA is doing, I would have to put you in 
touch with our EVH group, the Ending Veteran Homelessness 
group.
    Miss Rice. I think it is one of our great moral failures as 
a country that we have even one homeless or jobless veteran. I 
applaud all of you for doing your part to reduce that number of 
homeless veterans. Thank you. I yield back my time.
    Mrs. Radewagen. Thank you all for your testimony and 
questions, and I thank the witnesses for taking time out of 
their busy schedules to be here. Finally, I ask unanimous 
consent that all Members----
    Mr. Takano. Madam Chair, I just wanted to ask one more. Mr. 
Danis, is it?
    Mr. Danis. Yes, sir.
    Mr. Takano. You looked like you wanted to say something 
earlier and I just wanted to give you a chance to say it.
    Mr. Danis. I did, and thank you. As far as the 
misconception with the question that you asked earlier, I have 
to agree with most of what Ms. Meadows says. Most of my 
business is done in North Carolina, which is veteran heavy of 
course. But I also work in other states that do not have a 
military presence, and I have come up against the same issues 
that Ms. Meadows has talked about where as realtors or 
homeowners in that area are being discouraged from using their 
VA benefits. And I think it is more of a lack of education with 
the lenders, the veterans, and the realtors in that area 
because they do not understand the program. They think it is a 
difficult and cumbersome program to work through when in 
reality VA is a very easy loan program to do. With Mr. Frueh, 
when he talks about his closing times, you know, being in 40-
day range, there have been times where I have originated a loan 
on a Monday and closed it that next Monday. So it can be a very 
streamlined process. There is no reason why veterans should be 
discouraged from using their benefits as far as a lender is 
concerned. The fees can be an issue, but that can always be 
worked around. Where you talked about where a veteran was 
discouraged from using his VA benefits, that should not come 
about. The program is a very easy, a very workable loan program 
to do.
    Mr. Takano. Well I am very happy to hear this. And you 
know, I want to find out ways in which we can make sure the 
industry, you know, overcomes this misconception.
    Mr. Danis. I think it is just education. It is educating 
lenders and realtors about the program. And then a little bit 
of experience. We have that experience, but it is not something 
that is difficult to gain at all.
    Mr. Takano. Well thank you. And I appreciate the 
chairwoman's indulgence.
    Mrs. Radewagen. Finally, I ask unanimous consent that all 
Members have five legislative days in which to revise and 
extend their remarks and include any extraneous material on 
today's hearing. Hearing no objection, so ordered.
    This hearing is now adjourned.

    [Whereupon, at 3:29 p.m., the Subcommittee was adjourned.]

                            A P P E N D I X

                              ----------                              

                  Prepared Statement of Heather Ansley
    Chairman Wenstrup, Ranking Member Takano, and members of the 
Subcommittee, Paralyzed Veterans of America (PVA), thanks you for the 
opportunity to testify for this oversight hearing regarding the 
Department of Veterans Affairs' (VA) Loan Guaranty and Specially 
Adaptive Housing Grant programs. Our testimony will be directed to the 
adaptive housing grant programs which are vital to veterans who have 
acquired a disability as a result of their service to our nation.
    PVA is an organization of veterans who are catastrophically 
disabled by a spinal cord injury or disease. Access to housing, 
employment, and transportation are critical to ensuring that these 
veterans are able to fully return to their communities. Many of our 
members have benefited from VA's Specially Adapted Housing (SAH) grant 
program as they worked to rebuild their lives after acquiring a life-
altering disability. Veterans who are unable to obtain accessible 
housing are in danger of being forced to live in more restrictive 
settings, away from their friends and family members.
    Authorized under Chapter 21 of Title 38 of the United States Code, 
VA's SAH program provides assistance to veterans and servicemembers who 
need to remodel an existing home or build or purchase a home that will 
accommodate their disability-related needs. Accommodations may include 
wider doorways, ramps, roll-in showers, and other modifications that 
allow individuals with significant disabilities greater independence.
    VA's SAH program is an ancillary benefit available to veterans who 
are permanently and totally disabled as a result of their military 
service. Some of those veterans who are eligible for SAH include those 
who have lost or lost the use of both legs or both arms, those who have 
lost or lost the use of one leg together with the residuals of organic 
disease or injury, or those who have lost or lost the use of a leg 
together with the loss or loss of use of one arm. Veterans are eligible 
to use the grant a maximum of three times up to the current grant 
maximum. The benefit is indexed for the cost of construction. For 
fiscal year 2016, the grant is $73,768. In fiscal year 2014, VA 
approved 1,154 SAH grants for a total amount of $61,353,253. \1\
---------------------------------------------------------------------------
    \1\ Department of Veterans Affairs, Veterans Benefits 
Administration, FY 2014 Annual Benefits Report-Home Loan Guaranty 
Section, available at: http://benefits.va.gov/REPORTS/abr/ABR-
LoanGuaranty-FY14-10202015.pdf.
---------------------------------------------------------------------------
    The VA's Special Housing Adaptation (SHA) grant is available for 
veterans who have blindness in both eyes with 20/200 visual acuity or 
less, those who have lost or lost the use of both hands, those who have 
severe burn injuries, and those with certain severe respiratory 
injuries. Like the SAH grant, SHA eligible veterans may use the grant 
three times up to the current grant maximum. For fiscal year 2016, the 
amount available is $14,754, as indexed for the cost of construction. 
In fiscal year 2014, VA awarded 99 grants for a total amount of 
$960,930. \2\
---------------------------------------------------------------------------
    \2\ Id.
---------------------------------------------------------------------------
    Providing a catastrophically disabled veteran with an accessible 
home is an investment that pays dividends in lower health and long-term 
care costs. Veterans with catastrophic disabilities who are able to 
live safely in their homes with their families also reap benefits 
beyond those that are easily quantifiable. Consequently, we hope that 
every effort will be made to strengthen VA's adaptive housing grant 
programs and increase the benefits available for these veterans. This 
includes investments in staffing, streamlined and expedited grant 
processing for veterans with terminal diseases, increased benefits, and 
improved outreach.

STAFFING CONCERNS AND RESPONSIVENESS

    In many parts of the country, it appears that there are too few SAH 
agents charged with too many responsibilities. PVA's service officers 
overwhelming report that insufficient numbers of SAH agents is a 
problem for their veterans. Inadequate staffing contributes to delays 
in processing and results in poor customer service for veterans. Agents 
are not able to handle the large workload, including the influx of 
veterans living with amyotrophic lateral sclerosis (ALS).
    According to our service officers, many veterans have a difficult 
time contacting their SAH agents. Phone calls and emails to agents are 
often not returned in a timely manner. PVA believes that veterans' 
inability to connect with their SAH agents is not only unfair to them 
but also to the agents who are trying to serve veterans despite too 
many tasks and too few resources.
    In general, we believe that most agents genuinely try to fulfill 
their duties to the veterans in their caseloads. Many are simply 
stretched too thin due to the demands on their schedules. For example, 
SAH agents are required to review VA appraisals, which is unrelated to 
their role in helping veterans with housing adaptations. We understand 
that VA is hoping to eliminate this process through the use of 
electronic reports. In light of the chronic staffing needs of this 
program, which serves veterans with the most significant service-
connected disabilities, we hope that VA will reassign these and other 
similar duties so that agents will be able to fully focus on their SAH-
related duties.
    Insufficient staffing also leads to retention problems as agents 
leave their positions due to the excessive workload and extensive 
travel requirements. PVA's service officers reported frequent turnover 
which overburdens agents who must carry increased workloads when other 
agents leave. In addition, we understand that some agents cover large 
geographic areas and must travel hundreds of miles one way to meet with 
eligible veterans, which also leads to delays in responding to veterans 
and processing grants.
    Limited numbers of SAH agents mean that every agent must do his or 
her part to fulfill their obligations to the veterans in their 
caseloads. Increased accountability measures are needed to ensure that 
all agents are performing at peak capacity. Underperforming agents are 
a burden to other agents struggling to keep up with the demands of 
their positions.

VETERANS LIVING WITH ALS

Grant Processing and Approval

    One of the biggest challenges PVA encounters in the SAH grant 
program is the length of time it takes for grants to be processed and 
approved. This is especially true for veterans living with ALS. ALS is 
presumptively related to a veteran's military service and is rated at 
100 percent regardless of how advanced the veteran's disease is at the 
time of rating. ALS veterans are also presumed medically eligible for 
SAH even if the disease has not yet resulted in loss of use of limbs or 
other significant impairments.
    Veterans with ALS are critical users of the SAH grant program and 
the housing adaptation assistance it provides. VA's SAH grant process, 
however, is not well suited to veterans with rapidly changing diseases 
like ALS. As a result, it may be difficult for veterans with ALS to 
receive the types of accommodations they need when they need them.
    In its recommendations to the 114th Congress, the co-authors of The 
Independent Budget (IB), Disabled American Veterans, PVA, and the 
Veterans of Foreign Wars, recommended requiring VA to expedite SAH 
grants for veterans who are terminally ill, including those with ALS. 
This includes encouraging the use of waivers where appropriate to 
prevent adaptations unneeded due to a veteran's level of disability. 
Projects that take a long time to complete are not able to meet the 
needs of a rapidly progressive disease like ALS.
    Ultimately, the SAH program must be flexible enough to assist 
veterans who have relatively static disabilities, such as spinal cord 
injuries, and those who have rapidly changing diseases such as ALS. For 
example, SAH agents should be given permission to approve all paperwork 
needed in order to get these projects underway instead of following 
standard procedures which require the agent to gather the paperwork and 
submit it for approval to the regional loan center (RLC). We believe 
that this will eliminate months of waiting and delays, which will allow 
veterans with ALS to have faster access to bathrooms and other crucial 
areas of their homes.
    Implementation of expedited procedures for veterans living with ALS 
may also help VA continue to streamline the grant process for all 
eligible veterans. Although VA recently revised its internal processing 
procedures, some veterans continue to encounter bureaucratic processes. 
The need for waivers of project requirements and delays in receiving 
final grant approval once agents have submitted all paperwork to the 
RLCs continues to cause concern for many veterans.

Veterans' Mortgage Life Insurance

    VA's Veterans' Mortgage Life Insurance (VMLI) program provides 
veterans who are eligible for an adaptive housing grant with insurance 
benefits that pay down or off their home's mortgage in case of their 
death. The VMLI program is designed to provide a mortgage insurance 
option for veterans who would otherwise not be eligible for such 
coverage due to their catastrophic disabilities. Coverage begins when 
an eligible veteran receives final approval of his or her adaptive 
housing grant. Unfortunately, delays in processing grants for veterans 
with diseases such as ALS can delay final approval and prevent 
veterans' families from accessing the mortgage protection available 
through VMLI.
    To ensure that veterans with ALS and other similar diseases are 
able to receive mortgage protections available through VMLI for their 
families, VMLI must be available to these veterans earlier in the grant 
process. One incremental change would be to approve VMLI at the same 
time as the final grant instead of waiting until the funding is in 
escrow. Another option would be to approve eligibility for VMLI 
coverage for these veterans as soon as VA determines that they meet all 
applicable requirements, with the exception of final approval of the 
adaptive housing grant. If the veteran's adaptive housing grant does 
not receive final approval, then VMLI coverage could be terminated.

CONTRACTORS

    Another difficulty many veterans face is locating a contractor who 
will agree to work through VA's adaptive housing grant process. Due to 
the length of the process, many contractors are no longer willing to 
work with VA. In addition, VA provides veterans with little guidance 
about how to locate contractors who are willing to work through the 
process. We understand that VA is working to improve its relationship 
with contractors and educate veterans. We applaud these efforts.
    VA should work more closely with contractors to ensure that they 
are aware of VA requirements up front. Providing contractors with this 
information might prevent all the haggling over materials and equipment 
in the early stages of the contract. Additional thought should also be 
given to the level of detail involved in providing information about 
the project.
    For example, floors tiles must have the slippage coefficient and 
color identified and approved prior to final grant approval. While the 
slippage coefficient is understandable, requiring identification of the 
color in most cases is not. There are many examples of too much 
information being required from contractors that is not critical to 
ensuring completion of a quality, safe project.

SUPPLEMENTAL GRANT FOR ADAPTATION OF A NEW HOME

    Although veterans with catastrophic disabilities are able to access 
VA's adaptive housing grant programs three times, up to the statutory 
funding limit, this benefit may be insufficient to assist a veteran who 
must move due to employment, health, family, or other needs. For 
veterans who have used up their remaining eligibility for these 
programs, they may have fewer options to acquire a new accessible home. 
Many homes are not built with universal design or other features that 
would allow these veterans the opportunity to live independently and 
remain healthy.
    The IB for the 114th Congress recommends establishing a 
supplementary housing grant to cover the costs of housing adaptions for 
veterans who have already exhausted their eligibility. This grant would 
be available to allow veterans with catastrophic disabilities to build 
or adapt another home to ensure safety and independence. Without proper 
living accommodations, veterans who could otherwise live in their homes 
may be forced to reside in expensive, restrictive settings.
    Providing a supplemental grant is an investment in veterans who 
have acquired catastrophic disabilities as the result of their military 
service. It ensures that veterans will not be forced to choose between 
the need to relocate and having a home that accommodates their needs. 
Until the nation's housing stock provides a greater supply of homes 
universally designed to accommodate individuals with varying abilities, 
the lack of affordable, accessible housing will remain an issue.
    Alternatively, Congress could choose to increase the amount of 
funding available through the current adaptive housing grant programs 
to provide veterans with more funding throughout their lifetimes. 
Public Law 110-289 increased the maximum allowable grant amounts 
available through VA's adaptive housing grant programs and also 
provided for indexing the grants based on the cost of construction. Due 
to indexing, the SAH grant amount has risen from $60,000 to $73,768 as 
of October 1, 2015.
    Despite these increases, which have been crucial to the program, 
the total amount of funding remains inadequate. It can be difficult for 
veterans with catastrophic disabilities to have the kitchen or 
additional bathrooms adapted. Consequently, additional funding for the 
grant would not only allow veterans to better adapt their homes to 
fully meet their needs but would also increase the probability that 
veterans would have funds remaining to allow them to adapt another home 
in the future. It would also make it easier for veterans to get the 
help they need without being forced to cobble together assistance from 
other programs such as the Home Improvements and Structural Alterations 
grant program.

IMPROVED OUTREACH TO ELIGIBLE VETERANS

    Access to housing adaptation assistance is fairly limited outside 
of VA. Discovering the benefits available through VA for housing 
adaption may not only be life changing, but also lifesaving. When a 
veteran is determined by VA to be eligible for ancillary benefits, such 
as the adaptive housing grant programs, VA provides the veteran with a 
decision that includes information about those benefits. Such a notice 
typically includes the requisite forms to apply for the benefits.
    We have noticed, however, that the required forms are not always 
provided with the notice of eligibility. For veterans who are not 
represented by a veterans service organization, it may be difficult for 
them to locate these forms and subsequently navigate the sea of 
benefits for which they may be eligible. This may be especially true 
for veterans and their families who are overwhelmed by their 
circumstances and unable to fully appreciate the ancillary benefits 
available to them, including how to obtain them.
    Without additional staff support for the adaptive housing grant 
programs, PVA is concerned that efforts to increase outreach would only 
lead to increased wait times for veterans who are seeking to use them. 
Aside from increased staffing to perform new outreach efforts, VA 
should seek to implement partnerships with nonprofit organizations that 
assist veterans with catastrophic disabilities. It is important to 
ensure that partners are aware of VA's adaptive housing grant programs 
and how to direct veterans to VA for assistance. Additional outreach 
will also be critical to assisting veterans who have ALS to ensure that 
they understand the importance of beginning the adaptation process 
before it is needed so that they will be able to remain as independent 
as possible, for as long as possible.
    Everyone has a role to play in increasing awareness of VA's 
adaptive housing grant programs. For its part, PVA's service officers 
communicate with the veterans they assist to ensure that they 
understand the benefit and its importance. Some service officers even 
provide agents with veterans' contact information as soon as 
eligibility is established to ensure that the agent is prepared to move 
forward as soon as he or she is assigned the case.
    In addition, PVA seeks to increase awareness by providing 
information about adaptive housing benefits on our website and by 
including articles on the grant program and housing adaptation in our 
membership magazine. PVA also assists veterans with disabilities by 
providing information about how to design a wheelchair accessible home. 
Furthermore, PVA supports broader efforts to increase affordable, 
accessible housing for all people with disabilities.
    Recent efforts include supporting increased assistance for veterans 
who need help with housing adaptations beyond that available through 
VA. Specifically, we support the Veterans Homebuyer Accessibility Act 
of 2015 (H.R. 3975). This legislation, sponsored by Representatives 
James Langevin (D-RI), Paul Cook (R-CA), and Dina Titus (D-NV), would 
provide a veteran first-time homeowner or a current veteran homeowner 
with a refundable tax credit of up to $8,000 for adaptive housing 
improvements. The credit may also be assigned to another individual 
making the improvements. We support these and other efforts to expand 
the help available to our members.
    We appreciate the Subcommittee's focus on VA's adaptive housing 
programs. Many of PVA's members have greatly benefited from the SAH 
program. We hope that additional resources will be provided to this 
program and that it will continue to serve as a cornerstone in the 
efforts of veterans with catastrophic disabilities to remain 
independent.
    PVA thanks you for this opportunity to express our views. We would 
be happy to answer any questions that you may have.

Information Required by Rule XI 2(g)(4) of the House of Representatives

    Pursuant to Rule XI 2(g)(4) of the House of Representatives, the 
following information is provided regarding federal grants and 
contracts.

                            Fiscal Year 2016

    Department of Veterans Affairs, Office of National Veterans Sports 
Programs & Special Events - Grant to support rehabilitation sports 
activities - $200,000.

                            Fiscal Year 2015

    Department of Veterans Affairs, Office of National Veterans Sports 
Programs & Special Events - Grant to support rehabilitation sports 
activities - $425,000.

                            Fiscal Year 2014

    No federal grants or contracts received.

                     Disclosure of Foreign Payments

    Paralyzed Veterans of America is largely supported by donations 
from the general public. However, in some very rare cases we receive 
direct donations from foreign nationals. In addition, we receive 
funding from corporations and foundations which in some cases are U.S. 
subsidiaries of non-U.S. companies.

                      Heather L. Ansley, Esq., MSW

    Heather L. Ansley is the Associate General Counsel for Corporate 
and Government Relations at Paralyzed Veterans of America.
    Ms. Ansley began her tenure with the organization in January 2015. 
Her responsibilities include corporate legal matters, government 
relations, and disability advocacy. She also works to promote 
collaboration between disability organizations and veterans service 
organizations by serving as a co-chair of the Consortium for Citizens 
with Disabilities (CCD) Veterans and Military Families Task Force. 
Additionally, she serves as an officer on CCD's Board of Directors.
    Prior to her arrival at Paralyzed Veterans of America, she served 
as Vice President of VetsFirst, a program of United Spinal Association. 
She has also served as the Director of Policy and Advocacy for the 
Lutheran Services in America Disability Network.
    Before arriving in Washington, D.C., she served as a Research 
Attorney for The Honorable Steve Leben with the Kansas Court of 
Appeals. Prior to attending law school, she worked in the office of 
former U.S. Representative Kenny Hulshof (R-MO) where she assisted 
constituents with problems involving federal agencies. She also served 
as the congressional and intergovernmental affairs specialist at the 
Federal Emergency Management Agency's Region VII office in Kansas City, 
Missouri.
    Ms. Ansley is a Phi Beta Kappa graduate of the University of 
Missouri-Columbia with a Bachelor of Arts in Political Science. Ms. 
Ansley also holds a Master of Social Work from the University of 
Missouri-Columbia and a Juris Doctorate from the Washburn University 
School of Law in Kansas.
    She is licensed to practice law in the State of Kansas and before 
the United States District Court of Kansas.

                                 
             Prepared Statement of Ross A. Meglathery, MPA
    At VetsFirst, our priorities are based on three core principles for 
improving the lives of veterans with disabilities.

    Core Principle-1: Community Integration and Independence
    VetsFirst supports policies that help veterans with disabilities 
reintegrate into their communities and achieve independence. Disabled 
veterans must have access to employment and educational opportunities 
that allow them to live meaningful and productive lives.
    Core Principle-2: Timely Access to Quality VA Health Care and 
Benefits
    Access to VA health care, compensation and pension benefits are the 
lifeline for many veterans with significant disabilities. Veterans who 
are unable to access these needed services and benefits due to delays 
or shortages of personnel will lack the foundation that will allow them 
to take advantage of opportunities in their communities.
    Core Principle-3: Rights of Veterans with Disabilities
    VetsFirst believes that discrimination against disabled veterans 
that produces barriers to housing, employment, transportation, health 
care, and other programs and services must be eliminated.

Introduction

    Chairman Wenstrup, Ranking Member Takano, and other distinguished 
members of the subcommittee, thank you for giving VetsFirst the 
opportunity to testify regarding VA's Loan Guaranty and Specially 
Adaptive Housing (SAH) Grant Programs.
    VetsFirst has represented our disabled veterans, their families and 
their caretakers since 1946 when paralyzed World War II veterans came 
together to claim their rights. We advocate for the programs, services 
and disability rights that help all generations of veterans with 
disabilities remain independent and fulfill their desire to reintegrate 
into society. Today, through our parent organization United Spinal 
Association, we are not only a VA-recognized national veterans service 
organization, but we are a leader in advocacy for all people with 
disabilities.
    VetsFirst is honored to have the opportunity to both underscore its 
support of the VA's Loan Guaranty and Specially Adaptive Housing Grant 
Programs while at the same time offer some suggestions for improvement.

Specially Adaptive Housing Grant Program

    VetsFirst supports all programs that are designed to enhance the 
independence of veterans with disabilities. For this reason Community 
Integration and Independence is the first of VetsFirst's three Core 
Principles. The ability to own a home that is adapted to the unique 
needs of each individual is critical for both the emotional and 
physical well-being of the veteran. With that said, VetsFirst 
wholeheartedly backs the Specially Adaptive Housing Program. VetsFirst 
would like to highlight areas where we see that improvements are 
warranted and would succeed in making this program even more 
successful.
    Currently, both SAH and Vocational Rehabilitation & Employment 
Program (VR&E) are in the business of housing modifications for 
veterans. VetsFirst believes that this is a less efficient way to 
utilize limited resources. Whereas the SAH staff are experts in the 
arena of home modification, VR&E personnel are not. While VR&E staff 
are hardworking and diligent, they are not solely focused on this one 
benefit alone. Additionally as you know from a prior hearing, the VR&E 
staff are currently overworked with large caseloads supporting 
vocational rehabilitation. By taking home modification off their 
portfolio, VR&E would be able to focus on their areas of expertise.
    In the last few years SAH has seen an increase in approved grants. 
The additions of VR&E's caseload would add to that growing number. For 
this reason VetsFirst would like to emphasize its desire to see that 
SAH is fully funded to support this upward trend and would like to see 
that commensurate with any addition of the VR&E caseload. But, by 
removing the stovepipe of two parallel programs, VetsFirst believes 
that in the longer term the taxpayers will see cost savings.
    That said, although VetsFirst does recommend shifting all home 
modification to SAH, it does not advocate removing VR&E from the 
process altogether. If a veteran is getting vocational rehabilitation 
in conjunction with home modification, VetsFirst recommends three-way 
dialogue amongst the veteran, SAH and VR&E.
    Currently, SAH gives the veteran the chance to choose which 
contractor to use for home modification. VR&E does not afford this 
opportunity. While it is unclear whether or not this lack of choice is 
based on statute or regulation, it serves as another reason why 
VetsFirst recommends shifting VR&E's home modification to SAH. Giving 
the veteran the choice of contractor is important on several levels. 
First off, it allows the veteran to have the independence that they 
would likely seek. Additionally, it allows them to quickly address any 
problems or complaints with the intent of not having to bring in a 
third party to address any disputes.
    With regard to grant money funded, VetsFirst is concerned that the 
benefit is not a large enough amount. SAH has been indexed based on 
inflation, however, we are concerned that the baseline was too low. 
Currently the maximum amount of a grant is $73,768. While in some 
geographical areas that number is reflective of the costs, in areas 
with a high cost of living that is not enough money and the veteran is 
forced to make tough choices as to what and what not to modify; or pay 
the remainder out of pocket. This brings up another point of concern 
which is the amount of the grant is not based on the local cost of 
living, but rather a standard, across the board amount. However, as 
anyone in the National Capitol Region is aware, the cost of living in 
Washington, D.C. for instance, is not the same as it is in Boise, 
Idaho.
    The last point I have to make about SAH based on feedback from my 
lead veterans service officer and veterans using our online helpdesk, 
Ask VetsFirst, is that the SAH grant process seems to take longer than 
desired. This should not be seen as a criticism of the individual SAH 
staff member as they work in and are from the local community in which 
their services are used. Rather, it is stated as a way to identify an 
opportunity to find a solution for more rapid response. VetsFirst 
cannot state if the slowdown is a result of grant request action that 
must first take place at Cleveland or if it occurs upon receipt by the 
local staff appraiser who works with the veteran.

    VA's Loan Guaranty Program

    Following the return of 16 million veterans, the VA experienced 
tremendous growth. Congress passed the GI Bill along with education and 
housing benefits. The home loan guaranty program began with the 
original Servicemen's Readjustment Act that was passed by the United 
States Congress in order to extend a wide variety of benefits to 
eligible veterans.
    The main purpose of the VA home loan program is to help veterans 
finance the purchase of homes with favorable loan terms and at a rate 
of interest which is usually lower than the rate charged on other types 
of mortgage loans.
    The VA's Loan Guaranty program is a critical benefit to veterans 
across the nation. During a period where VA has had much criticism 
leveled at it as an organization, the Loan Guaranty program is an 
example of the VA doing right by veterans.
    More than 80% of veterans utilize this program as a result of its 
affordability and ease of use. Although this nation has in recent years 
seen a housing crash, VA's delinquency rate is quite low as a result of 
its holistic approach to ascertaining the veteran's income based on 
monthly expenses.
    On a personal note, I have taken advantage of this benefit and it 
allowed me to purchase a home in an area with an extremely high cost of 
living.
    From the perspective of a veteran service organization the process 
by which we assist a veteran receive this benefit is one of ease. We 
help the veteran identify the requirements of eligibility and if/once 
eligibility is determined, they can contact a lender that will assist 
them through the process.
    The VA Loan Guaranty is another example of a program that supports 
VetsFirst's Core Principle 1 of Independence. Based on its ease of use 
and efficient processing, it further supports VetsFirst's Core 
Principle 2 of Timely Access to VA Benefits.
    VetsFirst would like to express its thanks for the opportunity to 
testify concerning its views on VA's Loan Guaranty and Specially 
Adaptive Housing Grant Programs. We appreciate your leadership on 
behalf of our nation's veterans who are living with disabilities. I 
will be happy to answer any questions.

    Information Required by Clause 2(g) of Rule XI of the House of 
Representatives
    Written testimony submitted by Ross Meglathery, Director of 
VetsFirst; VetsFirst, a program of United Spinal Association; 1660 L 
Street, NW, Suite 504; Washington, D.C. 20036. (202) 556-2076, ext. 
7103.
    This testimony is being submitted on behalf of VetsFirst, a program 
of United Spinal Association.
    In fiscal year 2012, United Spinal Association served as a 
subcontractor to Easter Seals for an amount not to exceed $5000 through 
funding Easter Seals received from the U.S. Department of 
Transportation. This is the only federal contract or grant, other than 
the routine use of office space and associated resources in VA Regional 
Offices for Veterans Service Officers that United Spinal Association 
has received in the current or previous two fiscal years.

Biography of Ross Meglathery

    Ross Meglathery is the Director of VetsFirst, a program of the 
United Spinal Association. Ross has devoted his life to serving the 
nation and its military/veteran community. Prior to his tenure at 
VetsFirst, Ross spent over 15 years in the military, Homeland/National 
Security and private sectors. As a high school student he interned for 
Representative Ted Weiss in his New York City district office. As a 
college student he attended Officer Candidates School where upon 
graduation, he was commissioned a second lieutenant of Marines. 
Highlights of his active duty career include a deployment to Western 
Sahara, Africa as a United Nations Military Observer serving as one of 
15 US military personnel in a multi-nation contingent. In 2004-05 Ross 
deployed with the 24th Marine Expeditionary Unit (Special Operations 
Capable) where he received the Combat Action Ribbon, and the Purple 
Heart Medal for wounds received by mortar fire. He deployed once again 
to Iraq as part of the 2007 Surge in Al Anbar where he performed the 
duties of a Joint Terminal Attack Controller (JTAC) and led a 
specialized team in support of US, and Iraqi Army units. For his 
service, he was awarded the Navy and Marine Corps Commendation Medal 
with Valor Device. In 2010, Ross was selected as a Congressional Marine 
Fellow where he worked for Representative Mike Coffman. In this 
capacity, he worked on Defense, Homeland Security, Veterans, Small 
Business and Rare Earth Metals issues.
    As a reservist, Ross has commanded an artillery battery and 
currently serves as a lieutenant colonel at MAGTF Staff Training 
Program Division, Marine Corps Base Quantico.
    As a civilian, Ross has worked as a Program Analyst at the Office 
of Special Programs at the Department of Homeland Security for 
Intelligence, Surveillance and Reconnaissance matters. Additionally, he 
has experience with unmanned aerial system policy, test & evaluation, 
modeling & simulation, intelligence production as a subject matter 
expert in both the public and private sectors.
    Ross is a graduate of Harvard University where he earned a Master 
in Public Administration. In addition, he holds a Master of Science in 
the Management of Information Technology degree from the University of 
Virginia and a Bachelor of Arts in History from Trinity College, 
Hartford.
    In his spare time, Ross is the president of the board of directors 
for Deeper Missions a 501 C 3 organization devoted to clean energy and 
safe water in Africa.
    As Director of VetsFirst, Ross's efforts support legislation that 
is designed to address the issues where veterans and disability 
community issues intersect. Ross seeks to bring attention to veteran 
issues such as PTS, TBI, MST, suicide, unemployment, VA accountability, 
dependent concerns and find ways to mitigate these problems. 
Additionally, he serves the Resource Center through VetsFirst's 
programs to answer veterans' question regarding educational, health, 
and disability benefits that they deserve based on their service.

                                 
           Prepared Statement of James H. Danis II, CMB, AMP
    Chairman Wenstrup, Ranking Member Takano, thank you for the 
opportunity to testify on behalf of the Mortgage Bankers Association 
(MBA) \1\ on the status of the U.S. Department of Veterans Affairs (VA) 
Loan Guaranty Program and Specially Adaptive Housing Grant Programs. I 
am James H. Danis II, and President of Residential Mortgage in 
Fayetteville, North Carolina, a Certified Mortgage Banker, and MBA 
member.
---------------------------------------------------------------------------
    \1\ The Mortgage Bankers Association (MBA) is the national 
association representing the real estate finance industry, an industry 
that employs more than 280,000 people in virtually every community in 
the country. Headquartered in Washington, D.C., the association works 
to ensure the continued strength of the nation's residential and 
commercial real estate markets; to expand homeownership and extend 
access to affordable housing to all Americans. MBA promotes fair and 
ethical lending practices and fosters professional excellence among 
real estate finance employees through a wide range of educational 
programs and a variety of publications. Its membership of over 2,200 
companies includes all elements of real estate finance: mortgage 
companies, mortgage brokers, commercial banks, thrifts, REITs, Wall 
Street conduits, life insurance companies and others in the mortgage 
lending field. For additional information, visit MBA's Web site: 
www.mba.org.
---------------------------------------------------------------------------
    I have been in the mortgage business for 23 years and have worked 
with the VA Home Loan Guaranty Program since 1993. Approximately 70 
percent of the loans my company makes are VA loans. In North Carolina, 
loans guaranteed by VA are an important part of our market and their 
use is increasing. During fiscal year (FY) 2015, 14,353 VA purchase 
loans were originated in our state, up 12.9 percent from FY 2014. On a 
personal note, I am a beneficiary of the VA Home Loan Guaranty Program. 
The homes my parents purchased to raise me and my siblings were bought 
with VA loans. In keeping with our family tradition, I served my 
country and my first home was financed with a VA loan. For many 
reasons, I am a strong advocate of this guaranty program.
    In 1944, Congress established the VA Home Loan Guaranty Program, 
under which an eligible veteran could obtain a low-interest, up to 100 
percent loan-to-value (LTV) mortgage loan to buy a house. The program 
was one of the major innovations and an important part of the original 
Servicemen's Readjustment Act of 1944, commonly known as the ``GI 
Bill.'' Since its inception, the objective of the program has been to 
assist eligible veterans and active duty service members in becoming 
homeowners. The VA program is designed to benefit men and women because 
of their service to the United States, and is not intended to fulfill 
general economic or social objectives.
    MBA has always been a staunch supporter of the VA Loan Guaranty 
Program and we believe it remains an important and viable program for 
veterans and active duty military personnel. As credit markets have 
tightened and loan underwriting has become stricter, finding zero-
downpayment mortgages has become increasingly difficult. Providing 100 
percent LTV loans is a tremendous benefit to our veterans who have 
dedicated their lives to serving our country and is crucial in military 
communities.

I. Background

    Based on VA and MBA data, VA guaranteed 629,087 loans totaling 
$154.1 billion in calendar year (CY) 2015, to purchase or construct a 
home, or refinance an existing home loan. This number is up from CY 
2014, when VA guaranteed 483,229 mortgages totaling $111.7 billion. 
Though VA lending is still a relatively small percentage of the overall 
housing market, constituting 10 percent of the overall originations for 
CY 2015, VA home loans have gained market share, increasing from 9 
percent in CY 2014 and 7 percent in CY 2013. More remarkably, according 
to 2014 Census and the National Association of Realtors (NAR) data, as 
of January 7, 2016, homeownership among the veteran population is 76 
percent, compared to 62.5 percent for the general population. The 
borrowers who use the VA program for their homeownership financing are 
as varied as the U.S. population. According to VA's 2015 Annual 
Benefits report, African Americans comprised 10.6 percent of VA loans, 
American Indian and Alaskan Natives comprised 8.3 percent, Hispanics 
comprised 7.8 percent, and Asian and Pacific Islanders comprised 2.6 
percent.
    VA guaranteed loans are underwritten by private lenders to eligible 
veterans for the purchase of owner-occupied homes. These loans are 
comprised of both fixed- and adjustable-rate mortgages and can be used 
for purchase or refinance. Lenders will generally loan up to four times 
a veteran's available entitlement without a downpayment provided the 
veteran is income and credit qualified and the property appraises for 
the asking price. If the loan is approved, and the veteran is eligible, 
VA will guaranty a portion of the loan to the lender. Although the VA 
does not have a maximum loan amount, there are effective ``loan 
limits'' for high-cost counties. The basic or primary VA guaranty is 
$36,000, however, for loans that exceed $144,000, a guaranty of up to 
25 percent of the loan amount is possible, and for loans that exceed 
$417,000, a guaranty of the lesser of 25 percent of the VA county loan 
limit or 25 percent of the loan amount is available. This guaranty 
allows a veteran to obtain favorable financing terms while protecting 
the lender against losses up to the amount guaranteed.

II. VA Loan Performance

    Despite most of these borrowers not having ``skin in the game,'' VA 
loans have continued to outperform their counterparts (see chart below, 
based on MBA data). This demonstrates that the VA portfolio has been 
able to sustain successful production and weather the turbulent market, 
largely due to its historically conservative underwriting standards, 
which include a residual income test. VA mortgages have always been 
fully documented and fully underwritten loans on owner-occupied 
properties.

 
----------------------------------------------------------------------------------------------------------------
                                                       Seriously Delinquent 3rd
                                                           Quarter 2015, %             Foreclosure Starts, %
----------------------------------------------------------------------------------------------------------------
  ................................................                                             3rd Quarter 2015
VA................................................                          2.85                           0.38
FHA...............................................                          5.39                           0.61
Conventional......................................                          3.23                           0.34
U.S. Total........................................                          3.57                           0.38
----------------------------------------------------------------------------------------------------------------
Source: Mortgage Bankers Association

    Although VA requires no downpayment and has no monthly mortgage 
insurance, VA requires a mandatory funding fee that can be financed 
into the loan. This fee must be paid at closing unless a borrower 
receives service-connected disability payments each month that serve as 
an exemption from the fee. The fee ranges from 2.15 to 3.3 percent of 
the loan amount on purchases and 0.5 to 3.3 percent of the loan amount 
on refinances. The fee varies depending on the type of loan, the 
borrowers' type of military service (regular, Reserves, or National 
Guard), whether the borrower is a first-time or subsequent loan user, 
and whether the borrower makes a downpayment. First-time users' fees 
are less than subsequent users. For borrowers refinancing to lower the 
rate, the fee is 0.5 percent. This fee is a critical part of the VA 
Loan Guaranty Program and allows the program to maintain funding for 
future generations of military families.

III. Recommendations

    MBA appreciates VA's continued support of veterans through its 
policies and guidelines. MBA supports VA's primary objective of 
increasing access to credit for deserving veterans and their families 
through flexible underwriting criteria that gives lenders the ability 
to qualify more veterans for homeownership. This objective is reflected 
in VA's willingness to help veterans and lenders to achieve sustained 
homeownership with the inclusion of a waiting period after a 
foreclosure or bankruptcy, 100 percent financing options, and no 
minimum credit score requirements. Additionally, it is critical to 
acknowledge VA's responsiveness to lenders' concerns throughout the 
loan process in efforts to avoid significant delays and ensure that 
loans are processed in a timely manner. To this end, MBA recognizes 
VA's efforts to work effectively with lenders on a one-on-one basis, 
valuing the need to establish strong relationships with participating 
lenders. These efforts help keep the program relevant and encourage 
continued lender participation.
    Although the VA program has had an excellent track record of 
providing benefits to veterans and active duty military personnel, MBA 
has recommendations to further improve this important program. To this 
end, MBA supports the creation of a lender advisory panel to better 
align VA's standard policies with other industry programs to ensure VA 
programming remains current, competitive, and adaptive to the changing 
needs of its borrowers.

    1. Originating VA Loans

    MBA offers the following origination recommendations to keep the 
loan program effective and relevant in the marketplace today. Enhancing 
this important program will encourage more lenders to participate in 
the VA program and ensure direct benefits for military families.

    a. VA Guidelines:

    MBA recommends that VA issue a final QM rule that establishes 
clear, bright lines in response to questions lenders have raised 
following the release of the interim final rule on May 9, 2014. When 
this final rule is issued, MBA urges VA to allow for an appropriate 
implementation period so that lenders can change processes and 
procedures and to obtain any necessary clarifications from the VA. When 
guidance is promulgated and effective immediately, many lenders are not 
afforded the sufficient time necessary to test their systems to ensure 
that they are in compliance with VA guidelines.
    MBA commends VA for making a number of clarifications in its 
recently released Circular 26-16-03, specifically clarifying that the 
``allowable fees'' included in the Interest Rate Reduction Refinance 
Loan (IRRRL) recoupment calculation are not intended to include prepaid 
items such as real estate taxes and homeowners insurance. In the 
interim final rule, for an IRRRL to be accorded QM safe harbor status, 
all allowable fees and charges financed as part of the loan or paid at 
closing had to be recouped within 36 months through regular mortgage 
payments, which caused certain IRRRL originations to fall outside of QM 
safe harbor status in one month, and inside it in the next, based on 
proximity to tax season.
    This Circular, however, also changed VA policy by clarifying that 
for an IRRRL to be QM safe harbor, the loan being refinanced must have 
been originated at least six months before the new loan's closing and 
at least six payments have been made on the original loan. In VA's 
interim final rule, a lender needed to only wait six months from 
closing. The inclusion of a six month payment requirement adds an 
additional 45-60 day period after closing. This policy change will have 
implications on the way in which lenders are processing IRRRLs and will 
result in lender confusion without further clarification or a delayed 
effective date for this policy change.
    MBA urges VA to repeat these clarifications in its final QM rule. 
Providing clarity to IRRRL guidelines through a source as authoritative 
as a final rulemaking will create a sense of certainty for lenders and 
a consistent application of the rules throughout the industry. Without 
such authoritative guidance, some lenders may still be hesitant to take 
on the risks associated with loans that are not formally deemed safe 
harbor loans.

    b. Certificate of Eligibility Process:

    Once an active duty service member or veteran establishes their 
eligibility for a VA guaranteed loan, eligibility to obtain VA home 
loan benefits must be confirmed by obtaining a Certificate of 
Eligibility (COE). A COE is an official document, issued upon proof of 
military service, to verify to the lender a borrower is eligible for a 
VA-backed loan. Without a COE, lenders are unable to complete the 
processing of a VA guaranteed loan. The COE can be obtained by the 
prospective VA borrower themselves, online, by mail, or by visiting a 
nearby Regional Loan Center, or the document may be obtained by a VA 
approved lender through VA's Automated Certificate of Eligibility (ACE) 
system. The ACE system was designed to automatically generate a COE, 
which is intended to make it easier for the veteran and lender to 
obtain eligibility verification. Though ACE automatic certifications 
have been significantly improved for veteran borrowers over the past 
year, some lenders still struggle with the additional verification 
needed for COEs generated and housed in the ACE system. In order to 
protect lender guarantees, lenders must be able to verify the original 
date a COE was issued due to individual lender requirements. 
Additionally, there is no mechanism for lenders to verify whether a COE 
has already been used by another lender. Though ACE has created a 
centralized database to hold all veteran COEs, without the ability to 
obtain additional verification information on these issuances, lenders 
will still be unable to accept these certifications, which ultimately 
will delay the VA loan process for a deserving veteran who is eligible 
for a loan.
    MBA appreciates the strides VA has made in significantly improving 
the COE process for veterans. In order to make this system even more 
user-friendly, MBA encourages VA to continue to improve the COE process 
and create a business to government communication system that assigns a 
case number to each COE request. By streamlining the processing system, 
similar to other loan program systems, lenders will have easier access 
to COE information.

    c. Appraisals:

    Accurate and timely appraisals are critical to a successful 
origination process. MBA recommends VA work with the industry to refine 
its appraisal process. Currently, VA operates a ``closed'' panel of 
appraisers who must be approved by VA to be a part of the panel. VA 
approved appraisers must be licensed, and have at least five years of 
experience. To maintain the independence of the appraisal process, VA 
completely controls the valuation process by setting fees, turn times, 
and assigning appraisers to assignments on a rotating and randomized 
basis. VA may also remove an appraiser from the panel based on failure 
to follow VA guidelines.
    Although this process works well for many, some have voiced 
concerns regarding appraiser availability and the length of appraisal 
processing times. Due to the limited number of VA-approved appraisers, 
some lenders are concerned about sufficient appraiser availability to 
cover the demand for VA appraisals. Additionally, some lenders have 
reported the overall VA appraisal process can result in extended 
processing times that have the potential to delay the VA loan process.
    With these concerns in mind, MBA welcomes the opportunity to work 
with VA on improving the appraisal process within the bounds of VA's 
statutory framework. MBA encourages VA to re-evaluate its appraisal 
process and we look forward to working with VA staff on developing 
enhancements that will improve appraiser efficiency while maintaining 
the independence and integrity of the current process.

    d. Technology Support:

    Given increasing developments in technological capabilities and a 
fast-changing market, VA requires additional support for technology 
developments in order to increase program competitiveness and support 
increased efficiencies within its loan processes. MBA supports the 
allocation of increased funding and resources for VA to work with its 
participating lenders to improve its technology interface, including 
its appraisal software and lender portal, to meet the needs of both 
lenders and VA and increase technological integration with the 
industry. This will also enable VA to improve current systems and 
databases to make processes more user-friendly for both lenders and 
veterans. Additionally, MBA requests resources to support VA efforts to 
educate veterans on its homeownership program by better understanding 
the decision-making process of veterans when financing a home and to 
monitor and measure individual VA appraiser performance to help 
streamline the appraisal process. These initiatives are critical to the 
further improvement and expansion of the VA loan program.

    2. Servicing VA Loans

    MBA appreciates VA's continued support of veterans through its 
servicing guidance and believes that VA's efforts towards efficient 
communication benefits the program by providing transparency within key 
processes. MBA recognizes many useful communication tools VA uses to 
help lenders access contact information for specific groups such as 
Regional Loan Centers and the Construction and Valuation Section (C&V) 
to make the loan process more efficient. Additionally, the 
functionality of the VALERI Helpdesk serves as a great resource for 
loan-level answers. MBA also values VA's open guidelines that give 
servicers the opportunity to do what is in the best interest of the 
veteran borrower. Though guidelines state a required end result, no 
specific actions are required to achieve it. This flexibility allows 
servicers to work with a borrower to make decisions that best benefit 
their particular circumstances. This program flexibility benefits 
lenders, borrowers, and the VA in adjusting to a borrower's specific 
needs.
    Though there are many positive VA servicing guidelines, there are 
some changes VA could make to allow its servicing partners to better 
serve veteran borrowers and address the challenges unique to servicing 
VA loans. MBA offers the following servicing recommendations to 
simplify and create more cost-effective processes that will further 
improve the program.

    a. Reauthorization of the Extended Foreclosure Protections in the 
Servicemember Civil Relief Act (SCRA).

    MBA calls on Congress to reauthorize the extended foreclosure 
protections afforded to active-duty military provided by the SCRA. 
During the financial crisis, Congress extended the SCRA's foreclosure 
moratorium for active-duty military from three months to one year. This 
extension has been continuously renewed until Congress failed to extend 
this provision at the end of 2015. MBA urges the House to reauthorize 
SCRA as the Senate did late last year and to ultimately enact a 
permanent extension of this important protection for active duty 
military.

    b. Assumptions:

    With many in the industry anticipating a rise in interest rates 
over the next few years, a growing opportunity for veterans seeking 
homeownership will be the assumption of an existing VA loan that was 
previously originated at lower than market rate. Today, many VA loans 
are assumable at the discretion of the servicer of the original loan. 
However, VA rules cap the maximum amount a lender is allowed to charge 
to process an assumption at either $250 or $300, plus the credit 
report, depending on whether the lender has automatic authority to 
underwrite the file on behalf of VA. This fee cap was set many years 
ago, and has not been increased or indexed for inflation. In practice, 
the actual cost of processing a loan assumption for a new borrower is 
several times this amount. Additionally, many servicing platforms are 
not properly equipped to process the required elements of an 
assumption, such as a creditworthiness review of the assuming party.
    In order to make processing VA assumptions viable for servicers, 
MBA encourages VA to ensure that those processing VA assumptions are 
able to cover their processing expenses. This can be achieved by 
increasing the maximum assumption fee servicers are allowed to charge. 
MBA offers to assist VA with this initiative to offer veterans the 
opportunity to utilize assumptions to further expand homeownership 
opportunities at below market rates. The availability of assumptions 
will also increase home values for veterans looking to sell their homes 
by making below market rate loans available to any buyer, ultimately 
expanding access to credit for all American consumers.

    c. Improve the Issuance Process for Disability Benefits:

    MBA commends VA on its ability to work with VA's loan technicians 
to push for disability benefits to get veterans to workout options. In 
fact, MBA urges VA to reduce turnaround times so servicers can help 
more veteran borrowers. In some instances veteran borrowers are unable 
to make their payments because their disability benefits have not been 
processed. As a result, these veterans may be flagged as being in 
danger of losing their home. The delay in processing disability 
benefits not only hurts veterans by putting them in danger of losing 
their homes, despite their ability to make their loan payments if 
benefits were paid on time, delays also have the potential to raise VA 
costs because in cases of defaulted loans, VA will have to pay the cost 
of the guaranty.
    MBA recommends that VA establish a formalized process to issue 
disability benefits owed to deserving veterans. Through this process, 
VA would be able to coordinate the payment of disability benefits in 
tandem with housing loan payment due dates. A formalized process will 
grant veterans the benefits they are owed, keep deserving veterans in 
their homes, and decrease VA costs by improving VA program 
coordination.

    d. Train Regional Loan Center team members for specific states:

    While centralizing the Regional Loan Center staff has 
organizational and communication benefits, the process has resulted in 
the loss of some expertise in state specific rules or requirements. MBA 
encourages VA to retain the benefits of centralization by training some 
Regional Loan Center staff to cover specific state laws and 
requirements.

    e. Expand Loss Mitigation Options:

    There is a balance in loss mitigation between doing everything 
possible to keep a borrower in their home while protecting the taxpayer 
investment in the program. While VA loss mitigation options do afford 
some flexibility to servicers, the available program options could and 
should be expanded to allow servicers more leeway to meet the needs of 
the borrower. To this end, MBA suggests working with Ginnie Mae to 
develop programs that would facilitate pooling of longer term-extension 
modifications and other similar programmatic solutions that may help 
increase the tools a servicer can deploy in loss mitigation.

    3. Specially Adaptive Housing Grant Programs

    VA provides two types of grants to service members and veterans 
with permanent and total service-connected disabilities to help 
purchase or construct an adapted home or to modify an existing home to 
accommodate a disability. These programs are the Specially Adapted 
Housing (SAH) grant and the Special Housing Adaptation (SHA) grant. 
Specifically, the SAH grant program helps veterans with certain 
service-connected disabilities to live independently in a barrier-free 
environment by providing funds to construct a specially adapted home on 
land to be acquired, build a home on land already owned if it is 
suitable for specially adapted housing, remodel an existing home if it 
can be made suitable for specially adapted housing, or to apply against 
the unpaid principal mortgage balance of an adapted home already 
acquired without the assistance of a VA grant. These grants are 
critical to allowing disabled veterans to live independently after they 
return home from their dedicated service. According to VA data, in FY 
2014, VA approved more than 1,154 SAH grants totaling over $61 million 
in home modifications for disabled service members.
    MBA urges Congress and the VA to ensure that this program is fully 
funded and fully staffed to provide disabled veterans with access to 
the valuable resources and benefits afforded by SAH grants. These 
benefits can be used for, but are not limited to, the building of wider 
doorways and hallways to accommodate wheelchairs, ramps or platform 
lifts, and wheelchair accessible bathrooms. Adding these housing 
features can be time consuming and expensive, but these grant programs 
are designed to reduce burdens and costs for deserving veterans. The 
robust continuation of this grant program is critical to the care and 
rehabilitation of our wounded veterans and a necessary benefit that 
will help our veterans regain their independence.

IV. Conclusion

    MBA welcomes the opportunity to work with the VA and Congress to 
enhance the already-existing benefits of the VA Loan Guaranty Program. 
MBA and its members are willing and eager to work with this 
subcommittee and the VA staff in an effort to develop and implement our 
recommendations in order to increase the attractiveness of the VA 
program and, ultimately, the number of available homeownership 
opportunities for the many deserving eligible veterans and their 
families.
    We thank this subcommittee for giving MBA the opportunity to voice 
our appreciation for and dedication to the VA Home Loan Guaranty 
Program. This program is invaluable to the brave men and women who have 
sacrificed for our country. MBA is confident the enhancements suggested 
today will help make the program even more beneficial to veterans and 
their families. We look forward to working with you and the 
administration to help sustain the VA Home Loan Guaranty Program for 
many generations of veterans to come.

                                 
                  Prepared Statement of Sherri Meadows

                              INTRODUCTION

    Chairman Wenstrup, Ranking Member Takano, and members of the 
Subcommittee, My name is Sherri Meadows. I have been a REALTOR for 33 
years, and am the broker/owner of three Keller Williams offices in 
Florida. In 2014 I was elected President of the Florida Association of 
REALTORS, and today I serve as the 2016 Vice President of the NATIONAL 
ASSOCIATION OF REALTORS. I am here representing more than one million 
REALTORS working in all aspects of real estate.
    The NATIONAL ASSOCIATION OF REALTORS is a strong supporter of 
housing opportunities for veterans. REALTORS commend the Subcommittee 
for its attention to issues impacting American veterans. According to 
the US Census, there were 19.3 million military veterans in the United 
States in 2014. The Department of Veterans Affairs (VA) Home Loan 
Guaranty program serves a large population and is doing it well. The 
homeownership rate for veterans was 76 percent in 2014 - well above the 
national average of 64 percent.

                   The VA Home Loan Guaranty Program

    In 2014, the GI bill turned 70 years old, and with it, the VA Home 
Loan Guaranty program did as well. The very first loan was made that 
same year right here in Washington, DC. This entitlement program 
encourages private lenders to offer favorable home loan terms to 
qualified veterans. Today, the VA has guaranteed nearly 22 million 
loans to American veterans, with a total loan volume of over $1.7 
trillion. The number of veterans eligible to buy a home is increasing. 
Active military and veterans comprised 21 percent of all home buyers in 
2015, according to NAR's 2015 Profile of Home Buyers and Sellers report 
released in November 2015.
    The VA home loan guaranty program is a vital homeownership tool 
that provides veterans with a centralized, affordable, and accessible 
method of purchasing homes as a benefit for their service to our 
nation.
    VA's strong yet flexible underwriting allows veterans the ability 
to purchase a home of their own without depleting their savings. More 
than 82 percent of veterans utilize the zero-downpayment option 
provided by VA. Yet, despite this, VA's delinquency rate is very low. 
In fact, VA's foreclosure inventory rate (the percentage of loans in 
foreclosure) has bested that of even prime mortgage loans for 25 of the 
last 30 quarters, according to the Mortgage Bankers Association's 
National Delinquency Survey data. According to the 2015 3rd quarter MBA 
data, VA's seriously delinquent rate was 1.46 percent, and the 
foreclosure rate was even lower at 1.39 percent. That number is very 
comparable to conventional lending products, which had a foreclosure 
rate of 1.10 percent, and a delinquency rate of 0.97 percent. This is 
the experience even when conventional lending rules are widely believed 
to be very tight with high downpayment requirements. \1\
---------------------------------------------------------------------------
    \1\ National Delinquency Survey, Mortgage Bankers Association, 
Q315.
---------------------------------------------------------------------------
    How does VA have such a successful program with zero down? VA 
requires participating lenders to ensure that the loan payments are 
appropriate for the veteran's present and anticipated income and 
expenses and solidly underwrite the loans using debt-to-income ratios 
and credit history. But, in contrast to conventional lending and even 
FHA, VA also uses a residual income test. Residual income calculates 
how much income a borrower will have left for other monthly expenses 
after home payments. This calculation considers the borrower's complete 
financial picture, and ensures money is available for emergencies or 
other contingencies.
    VA also requires the use of manual underwriting for those veterans 
who marginally qualify. For these borrowers, lenders must look at non-
traditional factors and give veterans the benefit of the doubt when 
making a decision.
    This program shows that accurate and proper underwriting is the key 
to successful low-downpayment lending programs. Despite all the talk 
about ``skin in the game'', loans with appropriate underwriting and 
zero down can successfully balance risk and provide for sustainable 
homeownership.
    In addition, the VA home loan program offers protections for 
veteran borrowers when unexpected financial difficulties occur by 
offering a variety of supplemental loan servicing programs to help 
military families avoid foreclosure. VA offers financial counseling and 
can serve as an intermediary between the veterans and the private 
lender holding the loan. VA will try and negotiate repayment terms for 
veteran borrowers in financial difficulty. Under some specific 
conditions, VA may also purchase the loan and allow the borrower to 
make payments directly to the VA at a reduced interest rate.
    These interventions not only help the veteran retain their home, 
but save the VA money by avoiding the payment of a guaranty claim. 
Since 2009, more than half a million veterans, active-duty members, and 
survivors kept their homes, at a savings to the Government of over 
$16.3 billion.

                   Specially Adapted Housing Programs

    In addition to our strong support for the underlying VA loan 
program, NAR strongly supports grant programs that allow disabled 
veterans to own a home that accommodates their needs. VA provides two 
types of grants to service members and veterans with service-connected 
disabilities to help purchase or construct an adapted home, or modify 
an existing home to accommodate a disability. These grants are critical 
to allowing disabled veterans to live independently, and a critical 
part of our commitment to the benefits provided in return for their 
service. In FY 15, VA approved more than 1,800 grants totaling $96M in 
home modifications for seriously injured service members.
    NAR urges Congress and the VA to ensure that this program is fully 
funded and fully staffed, so that veterans with disabilities can access 
this valuable resource. Making a home suitable for an individual's 
disability is expensive and time consuming. The Specially Adapted 
Housing programs are designed to reduce these costs for our veterans. 
Our wounded warriors need assurances that their needs will be met 
through this program, and that applications will be received, reviewed 
and approved without unnecessary delay, so they can move forward with 
their lives and regain their independence.

     REALTOR Outreach to Veterans and Active Duty Service Members

    Many REALTORS are veterans themselves, and NAR is proud to support 
our military members and has created special pins that recognize the 
service of REALTORS in each of the military branches. Our members wear 
these proudly to display their veteran status.
    The National Association of REALTORS has also created an 
educational program for our members to learn how to best service our 
military families. The Military Relocation Professional Certificate 
program focuses on educating real estate professionals about working 
with current and former military service members to find the housing 
solutions that best suit their needs and take full advantage of 
military benefits and support. To date 6,868 REALTORS have earned the 
certification.
    NAR also has an ongoing partnership with the Department of Veterans 
Affairs. Each May, REALTORS from across the nation attend a briefing 
at the Department regarding the home loan program and discuss ways to 
make it work to the greatest benefit to veterans. NAR has produced a 
short video, ``VA Home Loans - 70 Years and Counting \2\'' to educate 
REALTORS on the program, and has worked to disseminate a video 
produced by the VA entitled, ``VA Home Loan Program: Why Should 
REALTORS Work with VA? \3\''
---------------------------------------------------------------------------
    \2\ http://www.realtor.org/videos/veterans-home-loans-70-years-and-
counting
    \3\ https://www.youtube.com/watch?v=O90LCcea--
Uo&list=PLA93A5833057D78B7
---------------------------------------------------------------------------

              Changes to the VA Home Loan Guaranty Program

    This Committee was successful in 2008 and 2012 in making a number 
of changes to the VA home loan guaranty, making this program even more 
useful for veterans. The National Association of REALTORS offers 
several other changes that could further enhance the program.
    Consider High Cost Loan Limits: The VA Home Loan guarantee program 
is unique. It is not simply a federal loan program - it is an 
entitlement promised to our military members in return for their 
service to our nation.
    A significant number of veterans live in urban areas. States with 
the largest veteran population are California, Texas, and my home state 
of Florida. These three states account for about 24 percent of the 
total veteran population. Both California and Florida include areas 
where the median prices of homes are well above the national average. 
The current loan limits simply cannot provide all veterans with the 
full range of access. Higher limits, which provided loans up to 125 
percent of local area median price, expired in 2014. NAR urges the 
Subcommittee to take action to give veterans the freedom to purchase a 
home where they choose to live. Veterans in high costs areas should not 
be penalized for geographic differences in the housing market.
    VA Fee Requirements: To ensure the veterans do not have to pay 
excessive fees in the home purchase transaction, VA rules limit the 
amount veterans can be charged for closing costs and even fees like 
termite and other inspections. While NAR fully supports VA's efforts to 
limit fees paid by veterans, our members report that veterans using the 
VA Home Loan Guaranty program have found themselves at a disadvantage 
when purchasing a home because of these rules. NAR believes that VA 
borrowers should be allowed to negotiate fees with sellers, just as 
non-VA borrows do, as a part of home purchase transactions.
    In some purchase transactions, special certifications and 
inspections stemming from VA policy guidance are required by lenders. 
Today, these certifications and inspections involve fees that must be 
paid by the seller, as VA limits the fees veterans can pay in a home 
purchase transaction. If the seller refuses, the veteran is denied the 
opportunity to purchase the home of his or her choice.
    Some sellers have refused to even accept offers from VA borrowers, 
due to the inability of VA buyers to pay certain customary buyer-paid 
fees. This issue is exacerbated by the current low inventory of homes. 
When there is a multiple bid situation on a home, veteran buyers are 
often at a disadvantage, because buyers do not want to have to abide by 
VA's rules. NAR believes that VA borrowers should be allowed to 
negotiate fees with sellers as a normal part of home purchase 
transactions.
    On November 7, 2014, the Department of Veterans Affairs issued new 
guidance that allows veterans to negotiate the payment of wood 
destroying insect inspection fees in select southern and western 
states. NAR and VA continue to work together to find ways to improve 
the loan process for Veterans. NAR has urged VA to allow buyers to 
negotiate the payment of certain fees, such as pest inspections. While 
pest inspection fee payments will not be allowed in all states, this 
policy change is a step in the right direction.
    REALTORS urge VA to create a level playing field, and provide 
veterans with the flexibility to negotiate all fees, so they aren't 
disadvantaged when trying to buy a home.
    Incentivize a Program for Renovation/Rehabilitation: NAR urges the 
US Department of Veterans Affairs (VA) to incentivize lenders to use 
existing authority to offer a Veterans Renovation Pilot Program similar 
to the Federal Housing Administration's (FHA) 203(k) Program. The pilot 
could be run through VA's Loan Guaranty Program, which allows a veteran 
to purchase, repair, alter, renovate, and improve a home under USC 
Title 38, section 3710. Like FHA's 203(k) Program, this pilot would 
promote homeownership and be an important tool for community and 
neighborhood revitalization and stabilization. The program would also 
be effective in areas with a large stock of older homes in need of 
renovation, just as the FHA program has been for years. Under the 
Veterans Renovation Pilot Program, veterans would use their guaranty to 
purchase single family homes in need of renovation and repair. 
Condominium units would also be eligible. The borrower gets just one 
mortgage loan, at a long-term fixed rate, to finance both the 
acquisition and the rehabilitation of the property. To provide funds 
for the rehabilitation, the mortgage amount is based on the projected 
value of the property with the work completed, taking into account the 
cost of the work. Renovations should be completed only by licensed and 
bonded contractors. This program has been very successful for FHA 
borrowers, and should be offered to veterans as well.

                               Conclusion

    I thank the Subcommittee for this opportunity to share the views of 
NAR regarding veterans housing. The NATIONAL ASSOCIATION OF REALTORS 
strongly supports housing opportunities for our nation's veterans and 
active duty military professionals. It is our hope that the 
Subcommittee will support our recommendations for enhancing and 
improving the VA home loan guaranty program, so it may be a real 
benefit to those who have so bravely served our country.

                                 
                    Prepared Statement of Mike Frueh
    Good afternoon Chairman Wenstrup, Ranking Member Takano, and other 
Members of the Subcommittee. Thank you for the opportunity to appear 
before you today to discuss the status and accomplishments of the 
Department of Veterans Affairs (VA) Home Loan Guaranty Program, to 
include the Specially Adapted Housing Program.

Overview

    The mission of VA's Home Loan Program is to maximize opportunities 
for Veterans and Servicemembers to obtain, retain, and adapt homes by 
providing a viable and fiscally responsible benefit in recognition of 
their service to the Nation. We empower Veterans with information and 
access to innovative, quality products and services by engaging our 
industry partners and helping them deliver high-quality benefits to 
Veterans in an efficient and effective manner. Through these strong 
partnerships, our focus on Veterans, and our continuous drive to 
innovatively enhance operations and performance, we have built a high-
performing program that has provided nearly 22 million loans totaling 
over $1.7 trillion over the last 70-plus years.

Program Data and Accomplishments

    Recent efforts increasing Veteran access to and stakeholder 
knowledge of the program have contributed to a number of beneficial 
outcomes for Veterans. Interest rates for VA loans remain lower than 
those of conventional and Federal Housing Administration (FHA) loans, 
and VA captured approximately ten percent of the mortgage market in FY 
2015, guaranteeing a record of more than 631,000 loans. VA has provided 
more loan guaranties over the past six fiscal years (2.9 million) than 
it did in the ten years prior (2.5 million).
    Despite the worst housing-market crash since the Great Depression, 
VA has worked with private-sector loan servicers to help over 500,000 
Veterans and their families retain their homes or avoid foreclosure 
since 2009. This equates to the United States taxpayer avoiding over 
$16.3 billion in foreclosure claim payments. Last year alone, VA saved 
a record 90,000 Veterans from foreclosure, which equates to a savings 
of $2.8 billion in avoided claim payments. Further, VA's foreclosure 
inventory rate (the percentage of loans in foreclosure) has been better 
than conventional prime mortgage loans for 25 of the last 30 quarters 
according to the Mortgage Bankers Association's National Delinquency 
Survey data.
    VA has seen significant increases in Veterans using the Specially 
Adapted Housing (SAH) program in recent years as well. The SAH program 
is designed to ensure eligible seriously disabled Veterans have the 
ability to improve independent living through the purchase and/or 
construction of an adapted home, or the modification of an existing 
home to meet their needs. In FY 2015, we approved more than 1,800 
grants, totaling $96 million, which represents an increase of 
approximately 44 percent over FY 2014 and an increase of approximately 
65 percent over FY 2013. Additionally, FY 2015's approvals include a 
best-ever 13 grants for Veterans living outside of the U.S. Recent 
statutory expansions in the SAH program, coupled with military 
drawdowns and VA's success in reducing disability compensation claims 
processing time, have contributed to the overall increase in SAH-
eligible Veterans. VA's success in helping these Veterans reach grant-
approval is largely due to the streamlined policies and procedures that 
VA implemented in February 2014.
    VA has also sought to increase awareness and usage of the Native 
American Direct Loan (NADL) Program by reinvigorating outreach efforts 
to Native American Veterans and Tribal governments. The NADL Program 
allows VA to provide direct loan financing to Veterans seeking to live 
on Federal Trust lands. In order for VA to provide financing, a 
memorandum of understanding (MOU) must first be signed between the 
Tribal government and VA. During FY 2015, VA held 44 outreach events 
with over 80 tribes, and recorded nearly 1,100 individual phone or 
email communications with various Tribal governments. This work 
translated into eight new MOUs and 18 new loans in FY 2015, bringing 
the program-to-date totals to 93 MOUs and 989 loans originated.

Process and Technological Enhancements

    VA has worked to provide world-class customer service to a recent 
influx of Veteran borrowers by enhancing and implementing new 
technology and nationalizing or streamlining key work products and 
processes. One such nationalized process is the Home Loan Program's 
certificate of eligibility (COE) workload. The COE verifies to the 
lender that a Veteran is eligible for a VA-guaranteed loan. While the 
percent of COEs issued electronically and in a matter of seconds rose 
to a record 67 percent in FY 2015, some COEs cannot be processed 
automatically by the system and require manual intervention. In order 
to increase VA's efficiency in processing those requests, VA began 
distributing those COE requests across staff at VA's nine regional Home 
Loan Program offices. In May 2015, VA's inventory of pending home loan 
COEs was over 15,000, with an average processing time of 26 business 
days. By August 2015, that inventory declined to fewer than 4,000, with 
an average processing time of two business days. Currently, there are 
approximately 2,000 pending COEs, with an average processing time of 
two business days.
    VA also recently implemented two initiatives that provide key 
program and industry benchmarking data necessary for enhanced 
monitoring of loan, lender, and appraiser performance. As part of the 
first phase of an initiative to develop and implement a risk-based loan 
review environment, VA's Full File Loan Review (FFLR) initiative is 
enhancing our electronic collection of over 300 data points from loan 
closing documents and our ability to standardize and analyze that data.
    Additionally, in order to ensure quality and timeliness of 
appraisals, VA implemented the Automated Valuation Model/Appraisal 
Management System (AVM/AMS), which aggregates appraisal data on VA 
loans as well as other loan types in the marketplace. The AVM/AMS tool 
uses an automated, rules-based approach to identify areas of risk, and 
provides VA with an appraisal risk score and comprehensive and detailed 
data for each appraisal in one report. This tool provides VA and its 
lending partners with significant time savings in appraisal reviews and 
issuance of the notice of value, an important benefit given the 
program's recent upward trend in loan volume.

Outreach and Program Education

    In recent years, VA has focused outreach and education efforts on 
homebuyer literacy, general program and benefit information, the NADL 
Program, and foreclosure avoidance. In order to deliver information 
directly and further the interests of Veteran beneficiaries, VA 
participates in many interagency workgroups and private-sector 
collaborations and attends numerous mortgage industry events each year. 
VA also develops and delivers numerous informational products such as 
brochures, posters, and personal online testimonial videos from 
Veterans who have taken advantage of the assistance VA provides in 
avoiding foreclosure and in adapting a home through the SAH grant 
program. In response to a rapidly changing mortgage industry and the 
need for lenders to obtain real-time answers to pressing questions 
about program policy changes, VA has developed a number of live, 
interactive training broadcasts that we later make available to those 
unable to attend the live broadcasts.
    VA takes a more individualized approach to outreach under the SAH 
Program. Due to the complex and individual nature of each grant, it is 
imperative for VA's SAH agents to consistently, frequently, and 
personally communicate with Veterans throughout the entire process. 
Each individual Veteran's disability and housing situation is unique, 
and as such requires personalized case management from VA's SAH Agents. 
While the standard outreach methods, such as letters, are used in 
notifying the Veteran of his/her eligibility, the SAH staff adds 
personalized outreach from that point forward. Initial program 
interviews with Veterans are conducted in-person within 30 business 
days of eligibility determination, and personal agent-to-Veteran 
contact occurs at least every 30 business days throughout the SAH 
process. A typical SAH case involves numerous communications and in-
person meetings to best understand and communicate the Veteran's unique 
needs and to help the Veteran navigate the home adaptation process 
through to completion. VA also conducts yearly outreach to all Veterans 
who are known to be eligible for the SAH program.

Inter-Agency Collaboration

    VA and the Department of Agriculture (USDA) have forged a new 
partnership to create efficiency in managing foreclosed property 
assets. Since 2003, and as a result of an OMB A-76 study, VA's business 
model has been one in which a private-sector contractor is hired to 
perform all functions required to manage, market, and sell the 
properties VA acquires from lenders as a result of foreclosure. After 
numerous discussions between USDA and VA, the two agencies found that 
this privatized business model would dramatically increase the 
efficiency with which USDA disposed of its acquired properties and 
drastically lower costs incurred for each property sold.
    In fall 2015, VA and USDA established a pilot program under which 
VA leverages its private-sector contract to manage, market, and sell 
USDA's foreclosed property inventory. Since sales under the program 
have only recently begun, significant performance data is not yet 
available; however, the joint value proposition analysis prepared in 
advance of the inter-agency agreement projects that the program will 
generate annual taxpayer savings of over $9 million. VA looks forward 
to continuing work with USDA to realize this projected success.

Upcoming Activities and Enhancements

    In the coming year, VA will be working hard to provide Veterans 
with continued exceptional service. In 2016, VA will continue its focus 
on nationalizing and standardizing processes to ensure the program is 
operating in an efficient and effective manner. One such focus is an 
initiative to reduce hold-times and increase first-call resolution 
rates for calls coming in to the Home Loan Program. By moving to one 
telephone number for all Home Loan Program offices, standardizing 
automated call scripts, and nationalizing the incoming call queue, VA 
expects Veteran and lender hold times will be reduced and callers will 
be able to obtain the information or response desired on their first 
call attempt.
    Additionally, VA will enhance Veterans' experience with the SAH 
grant process by producing a revised Handbook for Design, which 
Veterans, contractors, and compliance inspectors will use as a helpful 
resource throughout the grant and construction process. VA will release 
a new online training module for SAH agents so that they can continue 
to provide accurate program information and high levels of customer 
service to SAH grantees. The program will also continue its focus on 
identifying new ways to handle challenging and problematic SAH cases, 
such as those involving severe structural defects resulting from poor 
workmanship or contractor negligence.
    VA will develop a risk-based review process for appraisals and 
appraisers, and for its post-closing loan review program. Risk-based 
reviews, facilitated by the AVM/AMS and FFLR technology, and developed 
using statistical methods, will allow VA to identify risk indicators in 
its loan and appraisal data and target high-risk cases for review. From 
an oversight perspective, VA will enhance its ability to monitor key 
program stakeholders and provide them with more detailed performance 
feedback.
    Further, VA's new SAH Assistive Technology (SAHAT) grant program 
will be poised to award its first grants in April 2016, providing 
funding to individuals and entities for the purpose of developing 
assistive technologies related to housing. We look forward to receiving 
a number of qualifying proposals/applications from interested parties 
in early 2016, and we are eager to see how the new and innovative 
technologies could enhance Veterans' abilities to live independently in 
barrier-free environments.
    Finally, VA will re-compete the private fee-for-service contract 
that provides the VA Loan Electronic Reporting Interface (VALERI) in FY 
2016. VALERI is a software-as-a-service solution, deployed in 2008, 
that allows VA to monitor status on every VA-guaranteed loan, level and 
distribute work overnight, service and process foreclosure claims 
electronically, and monitor private-sector loan servicers' performance 
and compliance with VA policy and regulations. Although this technology 
has enabled VA to realize significant success in helping Veterans and 
their families retain their homes or avoid foreclosure, it requires a 
refresh. VA will be working diligently to identify different 
contractual and technological solutions to ensure VA's loan servicing 
technology is modernized and Veterans continue to receive the best 
service possible.

Legislative Matters

    VA looks forward to continued discussions with the Subcommittee on 
how Veterans can be served by collaborative administration of VA's SAH 
and Vocational Rehabilitation and Employment programs. As the 
Subcommittee identified last year, legislation would be required to 
effectuate the coordinated administration. VA testified to a specific 
section of draft bill H.R. 2344 before this Subcommittee, which 
proposed that housing modifications required under a vocational 
rehabilitation program may be provided under the SAH Program. VA 
supported the purpose of the bill, but outlined in written testimony 
some concerns with the bill as drafted. VA appreciates the 
Subcommittee's interest in helping identify ways in which we can work 
together to serve Veterans through streamlined benefit programs, and we 
stand ready to provide any additional technical assistance requested of 
us in the coming year.

Conclusion

    Mr. Chairman, the coming months at VA will be busy and challenging, 
but I know we will continue to provide our Nation's Veterans with 
efficient, effective, and meaningful programs centered on meeting their 
homeownership, home retention, and home adaptation needs. Thank you for 
your continued support of our programs and for this opportunity to 
speak today. This concludes my testimony, and I welcome any questions 
that you or other Members of the Subcommittee may have.

                                 [all]
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