First-time servicemember homebuyers have increasingly turned to Department of Veterans Affairs (VA) mortgages since 2008, according to a new analysis from the Consumer Financial Protection Bureau (CFPB). “With fewer conventional products immediately following the financial crisis, active-duty and veteran homebuyers relied heavily on VA programs,” said Tom Cronin, Managing Director at The Collingwood Group. “Even as underwriting standards have eased, conventional and other government-backed mortgage options have seen declining use from first-time servicemember homebuyers, while the VA’s market share continues to grow.”
The CFPB’s report, Mortgages to First-Time Homebuying Servicemembers, offers new insights into servicemembers’ mortgage choices over the past decade.
Leading up to and during the financial crisis, the share of first-time servicemember homebuyers with VA loans more than doubled, from 30% in 2006 to 63% in 2009. From 2009 to 2016, the VA’s share of these homebuyers increased again, to 78% of market share. VA homebuyers benefit from the agency’s individual programs, which offer purchase loans with no down payment or mortgage insurance requirements.
“VA programs offer unique mortgage products, specifically tailored to the veteran profile,” said Cronin. “First-time homebuyers clearly recognize this advantage even over comparable first-time homebuying programs, such as those offered by the Federal Housing Administration (FHA).”
In the report, the CFPB acknowledges that part of the trend is explained by a “larger shift among consumers (both servicemembers and non-servicemembers) away from convention to government-guaranteed mortgages between 2006 and 2009.”
The data also provides a more defined picture of the first-time servicemember. The median loan amount grew from $156,000 in 2006 to $212,000 in 2016, which the CFPB said largely aligned with median loan values over the same period with non-servicemembers. The median loan value for servicemembers with FHA or United States Department of Agriculture (USDA) mortgages, however, grew more slowly, from $130,000 in 2006 to $150,000 in 2016.
It appears that servicemembers with VA loans performed better than government-backed and conventional borrowers. VA delinquency rates ranged from 0.3% to 1.3% from 2006 to 2016, compared to FHA/USDA non-servicemember delinquency rates, which ranged from 0.6% to 2.3%. Conventional delinquency rates, representing both servicemembers and non-servicemembers, sat at 1.4% to 2.4% over the same period.
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