View the full 50-minute conversation here.
The VA home loan program has its roots in the 1940s. Since then, more than 20 million veterans have used their hard-earned home loan benefits to secure the homes of their dreams. Still, many veterans are in the dark about how to use their benefits. Veterans United is here to help.
Sarah Hill and VA loan expert Chris Birk of Veterans United Home Loans recently chatted live with John Bell, the assistant director of loan policy and valuation for the VA Loan Guaranty Program, and Rick Davidson, CEO and president of Century 21 Real Estate LLC. Bell served in the Navy during Operation Restore Hope and the Gulf War. Davidson has led the world's largest residential real estate sales organization since 2010.
We discussed the importance of VA loans to veterans and their families, as well as how real estate agents can better serve military buyers.
If you would like to follow along via text, we have prepared a transcript below. Also, to see more, feel free to watch our most recent video with Rick Davidson of Century 21 here.
Here's a transcription of our conversation. See the full conversation here.
Sarah: Hello, and welcome to a special live event from Washington, D.C. I'm Sarah Hill from Veterans United Home Loans and we're speaking for the next hour about how veterans can use their VA benefit in order to purchase a home. We're joined by a panel of experts from all around the nation.
A very special guest in our hangout today is John Bell. He is the Assistant Director of the VA Home Loan program. Thank you so much for joining us.
John: Thank you, Sarah. It's great to be here.
Sarah: Appreciate you availing your time, and also, Chris Birk. He wrote The Book on VA Loans. Thanks for being here.
Chris: Thank you, Sarah.
Sarah: Other special guests that we have in our hangout today, Rick Davidson joining us. He is the President and CEO of Century 21. How you doing, Rick?
Rick: Terrific, Sarah. How are you?
Sarah: We're doing phenomenal. Appreciate you availing your time and talking to us today about achieving the dream of home ownership.
We also have retired Army Colonel David Sutherland. He's the co-founder and the Chairman of the Dixon Center for Military and Veterans Community Services at Easter Seals. Thanks so much for joining us, David.
Also, Shirley Morrison. She's the owner/broker of Century 21, Sweyer & Associates. That's in Jacksonville, North Carolina. How's the weather in Jacksonville?
Shirley: It is 74 degrees and sunny.
Sarah: Ah, you had to rub it in, didn’t you? I tell you what.
Sam Reeves. Sam is the senior real estate and home buying expert at Veterans United Home Loans. How you doing, Sam?
Sam: I'm great, Sarah. How are you guys?
Sarah: Great. Appreciate you being here. We also want to say hello to everyone on Google+, on Facebook, and Twitter, and YouTube as well. A reminder, you can be a part of this conversation right now by sharing with the hashtag #valoanlive, that's #valoanlive. We'll be answering your questions throughout the entirety of this broadcast, so we'd encourage you to share them and ask them for all of our panel of experts.
I'd like to start with you, Mr. Bell, talking a little bit. You have a background in real estate which really gives you a unique perspective when it comes to buyers and also sellers who want to use their VA benefit in order to purchase a house, sellers who might have some misconceptions about the VA home loan program. Are the misconceptions still out there in this year, 2013, and if so, what are some of those misconceptions?
John: I certainly think they're out there and we continue to try to educate as many veterans as we can, realtors, lenders, any of the users of our program, our external stakeholders, including our internal. We continue to try to get better, to squash those as much as we can, but I will tell you some of them. Right off the bat, appraisals take too long. That's the first thing we hear. I will say that in that regard, if you look at VA appraisals versus the rest of the industry, the one piece that we do lag in is our appraisal review process.
The reason is because we haven't given ourselves the tools or the resources to be able to compete as far as managing the work flow. We are correcting that this year, so we're very excited. We've got a contract that's out right now and we're looking to getting that corrected very soon. We're only talking about two or three days, business days here, but any, for me, any lag in time from the rest of the industry, we owe it to our veterans to make sure that we're not only competitive, but we also try to lead.
Sarah: About nine in ten, am I right in that number, about nine in ten VA borrowers purchase homes using the no money down option?
John: Right, about 84 percent I think is the exact number, so nine in ten, that's a good number.
Sarah: Lowest foreclosure rate as well, and what makes this program so safe? Can you explain it?
John: We like to think that because of our discipline that our veterans have when going through the service and what they've been taught and how they've been raised helps in that commitment. We hear all the time where veterans buy $9 million homes and they use their benefit for $1 million because they want to use their VA home loan benefit. I think that it's a benefit that's earned. It's a benefit that they should and do qualify for and should be able to use it, so I think that has a lot to do with it.
The other piece that we would like to say is that our employees do a very good job in helping borrowers that face financial difficulties through that process, working with our servicers to try to minimize as many of those unfortunate situations that do arise.
Sarah: I want to bring in Rick Davidson. He is the President and CEO of Century 21. Rick, we so appreciate you joining us. How's the weather where you are?
Rick: It's cloudy and cold here in New Jersey.
Sarah: All right, sounds good. Let's talk a little bit. You lead the world's largest real estate organization on the planet and you joined Century 21 in 2010. You all have been receiving accolades lately about your real time marketing strategy. What are some of the ways that you are trying to connect with veterans, with other service members out there who want to use their VA benefit?
Rick: First of all, for all those military personnel and veterans who are watching today or hanging out, if you will, with us today, I just want to say thank you for your service and we are all indebted to you for our safety and security here in America. It's critically important that we are supporting in every way that we can veterans that are returning today and who are looking to assimilate back to a civilian culture.
The things that we've done specifically at Century 21, we've done a couple of significant things. One is, we have a long-time partnership with Easter Seals. Dave Sutherland is just an incredible individual running the Dixon Center for Military and Community Services and I'm sure that he will talk more about that organization, but as part of that, Century 21 conducted a veterans survey really to identify the perception that veterans had of home ownership and the roadblocks that they face when they're searching for a home.
In addition to that, in 2012, we launched a program called Recruiting America's Heroes, which provides returning veterans who are interested in a career in real estate an opportunity to come on board with some added benefits, if you will, that we would provide on a standard basis to those veterans who are looking to become real estate sales professionals, and also to those that would be looking to become real estate franchisees.
So there's a lot of things that we're doing as an organization that we've put into place that are here to support veterans who are returning.
Sarah: You had mentioned the Dixon Center, so let's go ahead and bring in retired Army Colonel David Sutherland, the co-founder and the Chairman of the Dixon Center for Military Veterans Community Services at Easter Seals. Talk a little bit, Mr. Sutherland, about what your organization does for veterans.
David: Good morning, and let me just start off by saying, in everything we do, we believe our veterans, military families and families of the fallen can thrive where they live. We believe in the power of communities and we believe in the strength of reintegration and therefore, what we do is bring innovative approaches that harness existing community-based supports to deliver profound results for our veterans, military families and families of the fallen, so they can thrive where they live.
We strengthen communities by building partnerships, sharing innovations and creating collective impacts, and with our friends at Century 21, the way we've gone about doing this is, they've been inclusive of the veterans. It's a recognition that we thrive where we live, and instead of creating new programs, it's being inclusive and then using the leadership of Rick Davidson and his team to really consolidate these local supports that exist.
Sarah: We mentioned that individuals can ask questions all throughout this broadcast. We have individuals asking questions right now, including one, John Bell, from Bonnie DeYeager, who's asking, can a veteran get a VA home loan more than once?
John: Actually, it's a great question. I just used mine for the fourth time, so the answer is yes, and thank goodness, because if you equate or if you look at the different loan programs out there, the VA can save veterans a considerable amount of money. I'll say, I didn't just use my VA home loan program for the fourth time because I work at the VA. I used it because it made financial sense for my family and I to use it, so I think 100% you should use it more than once, and the benefit's there for you to do that.
Sarah: One of the audience members that are watching right now are real estate agents and there is a message to be given to real estate agents. What would you tell agents when they are talking about potential buyers about using their VA benefit?
John: I would say this. Real estate agents play an important role in helping veterans get into homes, and we know this, but one of those roles should be that if they get in your car to go show them a property, ask are they a veteran and have they checked into their veteran benefit because if not, you could not save them money. Actually, they're losing money for you not asking that question, so I would say, ask the question. What could it hurt?
Sarah: If you're just watching, you're watching a live conversation from Washington, D.C. We are talking about achieving the dream of home ownership with John Bell, the Assistant Director of the VA home loan program. Also, Rick Davidson, the President and CEO of Century 21, a panel of experts from all around the nation, including Chris Birk who is the author of The Book on VA Loans, and you have some questions as well.
Chris: I did, John. I wanted to ask a little bit. This has been a truly historic year for the VA loan program. A record number of mortgage guarantees earlier this year, the 20 millionth VA home loan, and we're heading into the 70th anniversary. Why is this program so popular? What's driving the growth?
John: I would say a couple of different things. One is the options for veterans out there to qualify for other loan programs have diminished, which of course had them looking towards our program. The other thing is, the outreach and the communication and the aggressive marketing campaigns that we've been doing with our lenders, with our realtor community, with our builders, to help spread the word. I think it's working as well, but I love the question, because the 630,000 is a tremendous number for us and it was a milestone that we hope to even duplicate this year and produce more.
The good thing that it does, though, is it also allows us to look internally and see, what are the things that we can do to make the VA more efficient? What are the things that we can do as far as automations are concerned to make sure that we deliver the benefit in a timely effective manner as well as, how do we work with the realtor community, the builder community, the lending community, better?
Sarah: You were talking about automation in terms of eligibility.
John: Yes, that's a proud achievement that we saw this year, that if you go back six years ago, the eligibility process was manual. It took about 14 business days to issue a COE on average. Right now, that time frame is down to less than 24 hours and 67% of the time, a COE is delivered automatically, without any human intervention, so we're very proud of that fact.
Chris: Yeah, Rick, I wanted to thank you and Century 21 for conducting such an important survey. One of the takeaways, John, was that veterans routinely are citing the need to save for a down payment as one of the obstacles on the road to home ownership, and for as much as you guys have done in terms of education and outreach, is it fair to say there's still a lot of veterans out there who don't really know about this benefit and this program?
John: I would say that's a fair statement. Our average veteran has $7,000 in reserves in the bank, so to look at that, you would see that it wouldn't take a whole lot of down payment money to come up with. Eighty-four percent of the veterans that used our program paid no down payment at all, and so I think that, yeah, it's a perception issue more than a policy issue.
Chris: I think that's why you're right, just asking the question of potential borrowers and buyers, did you serve in the military? Then they have no idea about this incredible program.
John: It's amazing the number of veterans that I talk to and Sarah, you alluded to this earlier, they just say, "Oh, I've already used my benefit 20 years ago, so I really wish that I had it again." I'd say, "You do have it again. Ask about it," and that's the issue, they just don't ask. We love that question and in fact, anybody that's listening to this, if they know a veteran, ask them if they're shopping for a home, have you asked about your benefit?
Sarah: Rick Davidson, what are some of the things that Century 21 is doing in order to connect with veterans and let them know about their VA benefit and the fact that it's available to help them purchase a home?
Rick: We have an expert on the panel who's actually on the ground in a marketplace that has a tremendous number of military personnel at Camp Lejeune and that's Shirley Morrison. I think she is actively in the market on a day-to-day basis connecting with these veterans and their families, and helping them to find a home and/or to sell a home, so I think she would probably be the best person to ask.
Sarah: Absolutely. Shirley Morrison.
Shirley: Thank you. Hi, everybody. What's real important to me is, when folks come out of the military, a lot of times they don't realize that they do have this benefit as you guys were saying, but they think they wait until they retire and that's when they can use it, but we try and reach out in the community, the young service members here, to say you can start now. You can use it again and again and you can use it on more than one home when it's time to move up. It's just a matter of educating, holding new homebuyer seminars so the public is aware of this benefit. In our marketplace, with over 90% VA loans, it's quite a bit for people to be able to get into a home with little or no money out of their pocket. It's amazing for them to start building the equity for their family.
Sarah: I also want to bring in Samantha Reeves. She is the Senior Real Estate Writer for Veterans United Home Loans. Sam, you have a question or comment for our panel?
Samantha: Yeah, absolutely. I was wondering what gaps would you like to see filled in agent education on the VA loan or what resources would be helpful for agents?
Sarah: Rick or Shirley or John?
Rick: I can certainly take a swing at that. Education is breathing in the real estate business for an agent that's on the ground. Things are changing on a day-to-day basis so anything that is specific to the changes that are taking place to ensure that our agents are up to speed on all of the current regulation and policy that governs veterans and borrowing and their benefits and the ability to be able to use them, I think, is critical.
We here at Century 21 are making the National Association of Realtors learning programs available to all of our system members, and in fact they have a certification program that is specific to working with military families and veterans, and I'm proud to say that more than half of the certified NAR professionals for this military certification are Century 21 professionals, so we certainly understand the need and what it takes in order to work with this important group of people.
Chris: John, the last time that we had a chance to sit down and talk with the VA, appraisals were a common question and it's a place where realtors can make such an incredible difference in the lives of veterans is being able to spot problematic properties or steer veterans toward properties that they are pretty sure will make it through that process. Can you talk a little bit in general about the VA appraisal process, and maybe some of the misconceptions that might stop realtors from recommending veterans pursue this track?
John: Sure. One of the tenets of the program are our minimum property requirements, so at the VA, we take very seriously a veteran and their family moving into a property that's safe, sound and sanitary. In saying that, we also take great pride in our fee panel, because it's been very successful over quite a number of years, but I will say, one of the issues we saw two years ago was that all of the retirements of appraisers and the new education requirements and those kind of things, we had to make a concerted effort to beef that panel up.
We continue to have that recruitment program every month, and we monitor it. I will say to realtors, if you know a good appraiser, have them apply for the board. We would love to have them on the panel and we take it very seriously, and I think it's true in almost every market that we need good people doing good things.
Sarah: David Sutherland, I understand that you want to follow up on a comment from Rich Davidson.
David: I do. Let me follow up on Rick's comment, because the question was asked, what can agents do, and Rick hit it right on as far as educating and understanding the processes, but also understand the product, and the product is the veteran, the military family, the individuals understanding our culture. I fought for my family, my neighbor and my community, and I come home to my family, my neighbor, my community. I may not come home to a government organization and therefore, understanding the culture of the bonds that exist on the battlefield when we come back to those communities is really part of understanding that we may not ask for assistance, and therefore, may not be open.
What happens on the battlefield, the bonds that exist, when we come home they're ripped apart, and recognizing that and that we wanted things to kind of be streamlined because that's what we're used to. Connecting in a meaningful way, listening to the veterans and understanding if you've met a veteran, you've met a veteran, and they have unique needs and each one is different and so, just like your other clients, we're not that much different, but we've gone through experiences that we look to connect with leaders in meaningful ways in our communities.
Sarah: Rick Davidson, you want to follow up on that?
Rick: Yeah, I would, and thank you, Dave, for pointing that out. One of the things that we do that's most important in our business on a day-to-day basis is really understanding the expectations of our customer and getting to know them, know what it means to them, what it means to be in a home, what the type of home that they're looking for. The fact that they're going to raise families there and build memories is critically important in understanding. The person themselves is an important part of that process.
What we found in our survey that we did with military service members who were returning from duty, that home ownership was one of the most important things that they were considering as they were coming home; to Dave's point earlier, about these military service members thrive where they live, certainly our survey indicated that. Among the top reasons that they saw as being a desire to own a residence, one was, of course, for financial security and I applaud them for understanding the value of home ownership and what it means from a long-term investment perspective, but also it was a place that made them feel safer, a place that made them feel more connected to the community.
Again, that goes back to Dave's point that the relationships that these vets have developed on the battlefield, they're bringing that mentality back to their local communities and what we found in our survey was certainly indicative of that.
John: Can I add …
John: I completely agree with both of you, and thank you so much for bringing that up, because it's so true. From the VA's perspective, it's just as important to get the veteran into the benefit as it is to keep them in it, and when you're talking about veterans and asking for help, they have a hard time in doing that. We have eight regional loan centers including Hawaii, that have staff personnel that are there to help them navigate through with our servicers if they run into issues that they can't resolve themselves on their loans. So I just wanted to throw that out there, that if you know a veteran and they're running into issues when they're in the benefit, that it behooves all of us to let them know that there is help.
Sarah: Shirley Morrison, you wanted to follow up on that. Do you have a question or comment for John Bell?
Shirley: With Colonel Sutherland, I think, and what Rick said too, as far as understanding the veterans when they come home, it is so key and it's key for us to have the mentality that we are there to help them. We have several retired and war vets that are actually real estate brokers here and so it also brings that home to us, to realize the help, that we're there to help them. For me, I see that as a very, very important factor to get these people in their homes and understand where they're coming from.
Sarah: A reminder, you're watching a conversation live about achieving the dream of home ownership for veterans. We have individuals in our hangout in the real estate agency. We have the Assistant Director of the VA Home Loan program, John Bell, here with us as well, answering questions including this one that comes from Jay Morocco asking about credit requirements. Jay wants to know, is there a score limit to qualify; last I heard, it was 620, Jay is asking.
John: It's a great question and we were talking about this a little earlier. Actually, I get this question asked every day. The VA does not have a policy restriction on credit score. You will not find that in our policy manual and there's a reason for that. It's because the VA program was built around the whole package. We want you to look at the debt ratio, the reserves, the credit score, the LTV, the loan to value, sorry. The whole package, all the characteristics of that loan package to make a decision, but lenders do reserve the right to manage their own risk. Right now, it only helps us to talk about what those risks can mean, and one of those, we call them credit overlays, and one of those overlays is a credit score, and right now, 620 seems to be kind of what that score range is right now.
So it's not that the VA is requiring that. It's that lenders manage their risk of what they discern as the type of loan that they will make.
Sarah: You mentioned a really telling comment earlier when you were talking about not telling a veteran about … the VA home loan is costing them money, so let's talk a little bit about average savings and what kind of average savings can a veteran expect with a VA home loan.
John: On an average loan of about $200,000, our research has told us that you can save around $200 a month depending on the type of program that you have and how much money that you're putting down, so if you're going into a no-down-payment loan, instead of having to put 10% down, you have savings there, but if you just look at an apple to an apple comparison of the same loan, you can save about $200 a month using a VA benefit on a $200,000 loan.
Chris: Yeah, the ability to not pay private mortgage insurance is such an incredible savings. I think it was $19 billion last year that all the veterans who got VA loans last year will save over the life of a loan.
Sarah: How do VA home loans perform in the current marketplace?
John: You mentioned foreclosure rate earlier, so VA has had the lowest foreclosure rate in 22 quarters and they have had the lowest serious delinquency rate 15 out of the last 18 quarters. What does that mean? That means that once a veteran gets into a loan, the performance of that veteran, the performance of that loan is better, so there's a lot of factors into that. We talked about one earlier which was the veteran profile, as it may.
The other is the fact that we pride ourselves on making sure that we work with servicers to come up with ways that we can help veterans. It's funny, if you look at the VA program as a whole, you go back 20 years, the same help that you see now with HARP and HAMP and those kind of things, VA has been doing that for a long time, and it's because we wanted to help as many veterans as we could.
Sarah: Help as many veterans … you were also mentioning outreach as well and some of the new initiatives. This is one of them. You're interacting with individuals face to face in real time, having a real time conversation about their VA home loan benefit, so talk about some of the outreach initiatives that you're working on.
John: Great, because that's one of my favorite subjects, so we looked at our program. We said, "What are the things that we can do to touch veterans? What are the things that we can help, not only lenders, but we can help veterans and realtors and builders out there provide more information about the program?" What we really try to do is, do more Google hangouts like this. We tried social media such as Facebook and Twitter, answering questions. We've really tried to go out and join with NAR and the National Association of Homebuilders and go to those specific events.
One thing you may not know, and we would be glad to do is, if you're a realtor and you would like a VA person to come and talk to your staff, we do that as well. Granted, there are costs involved to travel and those kind of things, but we really try. Whether or not it's a webinar, whether or not it is people going out to those individual offices, we're there to help break the barriers and really solve some of these misconceptions about the program.
Sarah: As Mike Frueh says?
Chris: Yeah, the director of the program loves to say this is not your grandfather's VA and I think we still see that among realtors nationwide, that these misconceptions are very deeply rooted and we're still trying to chip away at them, week in, week out. They're tough to break down.
John: Without a doubt. We just talked about one of the misconceptions earlier, but there are tons more that we haven't talked …
Sarah: For instance?
John: For instance, interest rates on VA loans are higher. I hear that as well and it's just not true. If you compare VA loan with FHA loan with a conventional loan, you're not going to find a lot of difference and sometimes you find that a VA/FHA loan are actually lower rates than their conventional counterparts. You hear that all … oh, how long it takes to process a loan, from a VA loan, and the statistics just don't match that.
If you look at the average number of days in the industry, it's around 32 business days that it takes to close a loan right now. So even if you throw in your 14 business day turnaround time on VA appraisals, you're still well within the required time frame to close a VA loan, and there has been zero evidence that I have seen where a VA loan is any different to process than any other loan type out there.
Sarah: We mentioned that there are individuals right now who are asking questions. We want to make sure we get to as many of them as we can. If we don't have time during this broadcast, we will certainly follow up and make sure that you have your questions answered. This next one comes from Maria Flores, asking about a widow, individuals who have lost a service member in the line of duty. Are they eligible to use their VA benefit and Marla Flores, certainly our thoughts are with you, and sorry to hear about your loss.
John: There are certainly survivor's benefits. I would just say this, that if you have a question about eligibility, just contact your regional loan center and we will hopefully provide that information where you can get that information for you on this broadcast, but call and ask. We'll be happy to guide you through that process.
Sarah: This also comes from Josh Chuck. He says, "Where or who handles VA loan foreclosures?"
John: The individual servicers handle foreclosures and are responsible for servicing the loan, so the servicers would service the loan from A to Z. Whether or not that would be through the … if you're making your payment on time or if you go to seriously delinquent, and then further on, hopefully not, but if you go to the foreclosure stage, that would be the servicer.
What the VA does is they work with … they're kind of the ambassador. They're kind of the go-between between the veteran and the servicer to help the servicer mitigate those circumstances and see if there is a way to help the veteran.
Sarah: Also, Shirley Johnson has an additional question as well. She is Shirley Morrison, owner/broker. Go ahead, Shirley, your question or comment for John Bell.
Shirley: Can you explain to the viewers what a VA compromised sale is?
John: I will do my best. A VA compromised sale is basically not a lot different than a short sale. It's just kind of what the VA calls it. I do hear, from agents, horror stories from different servicers about not only the VA program, but any program when it comes to the short sales. Again, the great thing that I like about the program is, we actually have people within our regional loan centers that are there to help guide you through those processes and hopefully, you're taking advantage of those.
Sarah: Shirley, did you want to follow up on that?
Shirley: We are and I know a lot of the public, they're not aware of that, of the compromise and whether or not they have to pay back, so a short sale and does a short sale automatically become a VA compromise, so that's part of the education process for us, to help with the viewers and the veteran purchasers. Normally in our marketplace, we do find the VA rates are lower and our VA loans can close very easily within three to four weeks.
John: That's great to hear. Puts a smile on my face.
Sarah: This question is for Rick Davidson, President/CEO of Century 21. This is from Jennifer Brown. She is moving cross country and she asks about, what are the best options on buying a home out of state before they get to that state? Do you have any advice that you would like to give Jennifer Brown who is a veteran military family on purchasing a home, what they should do prior to going to that state?
Rick: You bet, absolutely, and Jennifer, thank you for the question. I would go to century21.com. You can search specifically for an office and/or an agent in the particular market where you're looking to relocate. As an organization, we have 7,100 offices in 73 countries and territories around the world with around 2,700 of those offices located right here in the U.S., so chances are that Century 21 has an office that can serve your needs.
There's a lot of ways to look for real estate today. There are what I would call consolidator type of websites, aggregator sites, if you will, that pull data from the MLS and list every property that is for sale, and then there are specific brand sites where you can really dig down and get some additional detailed information on not only the property itself, but also on the community, some of the demographics within that market area, so utilizing technology today really makes the process a whole lot easier than it did in the past.
Sarah: John Bell, you all are using technology a lot when it comes to eligibility, when it comes to appraisals, and automation.
John: We're going through a transition and it's difficult whenever you do that, but it's a necessary … there's a light at the end of the tunnel for us, so right now, we're going through how do we automate our program enough where it helps for us to understand what policy changes need to take place. If we make a policy change, do we make the right change? How quickly we come up with that answer helps veterans more, so the other thing is, how do we score our lenders? How do we make sure our lenders are performing the way they should? How do we score our appraisers? What are those discussions like between those entities so that at the end of the day, we make sure that the VA loan is performing as efficiently as possible?
Sarah: A reminder, you can contribute to this conversation right now by sharing with the hashtag on your favorite social platform at #valoanlive, that's #valoanlive. We have lots of individuals with lots of questions coming in. Our apologies. We won't be able to get to all of them, but Monica Chandler does ask a little bit about, why are borrowers using a VA loan subject … why are they subject to credit scores? Monica wants to know, why are borrowers using a VA loan subject to credit scores?
John: We talked a little bit about that earlier where there's not a credit score requirement as far as VA is concerned, but you might see, depending on the lender, that they have those credit overlays that we talked about where they may see that. Now, I will say that that score changes from lender to lender, it's a lender overlay. It's very difficult for me to say whether or not that would be a 600, a 620, 640, but we've seen where that's kind of averaging out in that 620 range.
Chris: Yeah, and I'm … just add two things to that, Monica. One is that I think part of it is, the VA doesn't actually make home loans. They basically insure them, and so lenders are assuming the risk in most cases. The second piece is that in the grand scheme of credit scores, this 620 is a pretty incredibly low score people get for credit scores for FHA loans and conventional loans. To be able to purchase a home with a 620 score is pretty remarkable.
Sarah: Rick Davidson, you have a follow up question. I see you there.
Rick: Yeah, I just wanted to make a comment actually on the … there was a question about where to find foreclosures and I think the answer was that servicers directly kind of manage the flow of foreclosures, and I just wanted to clarify what that meant for the viewers out there, what a servicer is.
A servicer works for the lender. When a lender has to compromise a purchaser's property or an owner's property and either work through a short sale or foreclose on that asset, they turn the asset over to a servicer in the marketplace who then works with the local real estate professionals in order to sell the property, so they're kind of the … I won't call them the middle man necessarily, but they're like an asset manager. They're the one who is responsible for capturing that home and then seeing the disposition of that home in the marketplace, so the best way to find a foreclosure is to connect with a local real estate professional.
Talk to the person in your local marketplace who understands the nuances of the local market, what the opportunities are, can have a list of foreclosures that are available based upon all of their knowledge in the local market, and then that will afford you the best opportunity to go after a foreclosed property or a property that is going through a short sale.
I do want to mention, however, that the distressed side of our business is significantly less a portion of our business today than it has been in the recent past. I think during the trough, if you will, of the real estate recession, distressed properties, being those properties that were on their way into foreclosure or in foreclosure specifically made up approximately 30% of the overall market. Today that figure is down to around 12% of the overall marketplace, so those opportunities to buy a foreclosure are fewer and farther between.
In addition to that, as an individual buyer, you've got to really have patience and stick-to-it-iveness to go after one of these distressed properties, and the reason for that is, you will be in direct competition with investors who are searching those same types of properties who have cash availability and literally can walk in and plop cash down and buy the property without any contingency at all. So it's a tough process to go through, one that you have to be prepared for, one that you really need to have a great real estate agent that you can engage and who understands the nuances of that aspect of the marketplace.
Sarah: Mr. Bell, is there anything you'd like to add to that?
John: No, it's exactly … especially on the process of buying foreclosures and those kind of things, and I do hear where when a VA, when a veteran goes up against a cash buyer, that's not an apple to an orange in a lot of cases. There's not a lot we can do from a policy perspective, when that transaction happens. It's just basically setting the expectation up front, and hopefully working with our realtor community to understand what that communication should be and where that education should lie at the beginning of the process.
Sarah: We also have some viewers asking about programs for struggling homeowners. What are some of the programs out there for struggling homeowners, resources that the VA has in order to help them?
John: As I stated earlier, HAMP and HARP and those programs that you hear in the newspapers, VA has been helping our veterans with those type of programs for a long time, though they weren't called that. We do everything we can to work with a servicer to try to mitigate the problem. What is the real issue? If you're going through that … I cannot stress enough … please call your regional loan center. Your regional loan center can help you, guide you through that process.
Sarah: Samantha Reeves of Veterans United Home Loans, you have a question or comment for John Bell, the Assistant Director of the VA Home Loan program.
Samantha: Yes, I think this could go to Rick or John, really any of the participants. I'm wanting to know, what can agents do to set themselves apart from other agents and show that they're military friendly, versed in the VA loan? Any tips or suggestions for agents on that?
Sarah: We can have both of you answer. John, if you want to take that. You have a background in real estate.
John: I think Rick alluded to it earlier with NAR, the military program. That's very good. We work with NAR on that program and I think a lot of us worked to make that program what it is. I think, first and foremost, going through that would help. The other thing is, honestly, talk to your lender about VA loans. If I'm a realtor and I'm trying to get as much business as possible, there are a ton of veterans out there. We throw out statistics all the time, but only 1.8 million active loans. There's 22 million veterans.
There's a lot of ability for veterans to take out more VA loans, so if I'm going after that marketplace, I would align myself with people who specialize in those loans. Then, like we said, ask the question. Are you a veteran? Have you asked about your VA loan? Have you gotten qualified for that? I think those are some steps that I would first … go down that path first.
Sarah: Okay, Rick Davidson?
Rick: Yeah, I would add to that, certainly educate yourself about the VA and VA loan process, but more importantly, learn the culture. Colonel Sutherland talked about it earlier. Really understand who it is that you're dealing with. You're talking about people with tremendous integrity, courage and loyalty. Also, as the husband of a former Army captain, I certainly understand the importance of knowing rank. I think that it's important when you're talking with military personnel that you understand their rank, that you understand how different ranks are viewed across the different service lines, and their pay scales, basic allowances, the basic allowance housing.
Really understand more about veterans, understand more about their families, understand more about VA home loans and VA programs and make a connection with the military community. I would also just suggest Colonel Sutherland probably has quite a bit to offer in response to that question as well.
Sarah: Colonel Sutherland?
David: Yeah, thanks, I appreciate it. You've hit a lot of this. Understand that we're very good at moving. My wife and I moved 16 times in 29 years. What we look for is that connection locally, but at the same time, when it comes to us, we're used to winning and we want to be part of a winning team, and that personal connection with an individual who's got energy and enthusiasm, but is going to get to know us on a personal level. Every need and opportunity has to be looked at in a continuum and if every need and opportunity has to be looked at in a continuum, then it has to be looked at in a holistic approach of their quality of life, which is education, meaningful employment and access to wellness services.
So it's not just encouraging them to look at the VA as far as the home loans, but also take advantage of their other benefits and connecting them. You have roots in the communities. If you can connect them to those same roots, that's going to enable their transition much faster. A thousand service members a day are getting out of the military, 1,000 a day, average 350, between 250,000 and 350,000 a year. They're transitioning with many more concerns and so they want to connect with somebody that's not going to say, so how do you feel about what you did on the battlefield, but rather how can I enable you and your family to thrive where you're going to live?
That's in our community, our shared community, and again, what this generation of veterans are going to do, just like every generation of veterans in the future, is change the world for the positive, and they're going to be an active member of your community if you connect with them in a meaningful way, and enable them in that transition.
Sarah: Well said, Colonel Sutherland. Parting words, let's go around the room here, starting with you, Shirley Johnson. Shirley Morrison, Shirley.
Shirley: This was very interesting. I really appreciate the other panelists. Being from a military community with Camp Lejeune, it means a lot to hear him say what he says, and Rick, so we are very much making sure that our brokers are educated and that we understand transitions from our vets, and I appreciate that.
Sarah: Samantha Reeves of Veterans United Home Loans.
Samantha: Hi, yeah, I'd just like to thank everyone for the opportunity to ask questions. I completely agree that education is really important for agents. The more that they know, the more they can put themselves out as an expert on the VA loan and I definitely want to help with that.
Sarah: Rick Davidson, President and CEO of Century 21.
Rick: Thank you, Sarah, and I want to thank all of the other panelists and the viewers today. This is a terrific opportunity. We have to remember that we have a tremendous debt that needs to be paid to these returning veterans and their families and the families of the fallen, and the incredible work that Colonel Sutherland is doing and Easter Seals is doing, and the work that we're participating in here at Century 21 means a lot to us as an organization because our business is in the local community. Our business is working with these veterans as they return home and to help them and their families to find a home and to establish a sense of being and to reconnect to a civilian world.
So we're working hard to ensure that our agents, our brokers, are up to speed with the programs that are available in the veterans' space, and we're driving home the importance of really understanding and knowing who these vets are and what's most important to them and their families.
Sarah: Chris Birk, the author of The Book on VA Loans.
Chris: I just want to say that this program offers realtors, real estate agents, so much opportunity. Loan volume for VA loans has tripled over the last six years. There's such a hunger for home ownership among military families and returning service members, and just please, as John said, just ask those simple questions and start that conversation.
Sarah: All right. Last parting words, John Bell, the Assistant Director of the VA Home Loan program.
John: I just want to thank you and the panelists and the viewers for the time to talk about one of my favorite subjects and that's VA home loans, so to reiterate what I said before, just ask. Are you a veteran? Then, if you're a veteran, ask about using your home loan benefit. What could it cost you? We never talk about market share in the VA. We never talk about how do we beat others in the marketplace, but what we do talk about is how do we deliver the benefit to as many veterans as possible? So as long as we're doing that, we're doing our jobs.
Sarah: All right, we know those questions are still coming in right now. We will answer them as soon as we can. A reminder, the conversation continues on social media. You can share with the hashtag #valoanlive.
I'm Sarah Hill from Veterans United Home Loans and would invite you, if you would like more information about how to use your VA benefit in order to purchase a home, go to benefits.va.gov/homeloans.
Have a great afternoon.
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