Magazine article Mortgage Banking

Congress Cuts VA Loan Limits

Magazine article Mortgage Banking

Congress Cuts VA Loan Limits

Article excerpt

Washington, D.C.-based Urban Institute housing experts Laurie Goodman and Jun Zhu crunched the numbers after Congress made last-minute cuts to the loan limits for mortgages guaranteed by the Department of Veterans Affairs (VA). They wrote a research note about the impact of the change titled: "The 2015 slash to VA loan limits will have little impact on veterans, even in hardest-hit D.C. suburbs."

What they found was the very high-end housing markets that will see the deepest cuts to their VA loan limits tend to have modest VA lending activity at that top price range anyway, so the impact will be modest.

The changes took effect Jan. 1, 2015. Now the VA loan limits will conform to the Fannie Mae and Freddie Mac loan limits.

Until the recent cuts in VA loan limits, VA was authorized to guarantee loans of more than $1 million in some high-cost counties of California and Massachusetts. And VA was authorized to guarantee loans of up to $978,750 in New York City before the recent change. With the legislative change, VA loan limits will have a maximum for single-family homes of $625,500--the same as for Fannie and Freddie loans in the lower 48 states.

In the Washington, D.C., area, the maximum VA loan limits will decline from $692,500 to $625,500.

Goodman and Zhu used 2013 Home Mortgage Disclosure Act (HMDA) data to determine where the heaviest volume was done using VA home loans. From that research, they found that "in most areas with a large decrease in the VA loan limit, like New York City and high-cost areas of California and Massachusetts, VA mortgages constitute a very small percentage of total new mortgages (4. …

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