VA Home Loan Program Marked by Strong Underwriting, but Appraisers Raise Concerns

WASHINGTON (April 4, 2017) – Challenges facing real estate appraisers servicing the Veterans Affairs were under Congress’s microscope this week as the National Association of Realtors® and other industry leaders took to Capitol Hill to hail the continued success of the VA Home Loan Guaranty Program.

Michelle Bradley, a state-certified general real property appraiser from Pennsylvania and Immediate Past Chair of NAR’s Real Property Valuation Committee, testified before the House Veterans Affairs Committee Subcommittee on Economic Opportunity. Bradley told Members of the Committee that while good appraisals are key to maintaining a strong VA Home Loan Guarantee Program, regulatory burdens are getting in the way.

“America’s veterans have been well-served for years by VA’s appraisal system, and professionals in the business should be proud of their good work,” Bradley said. “Unfortunately, that system is under tremendous pressure today.”

The VA Home Loan Guaranty Program has served veterans and active duty service members for over 70 years by encouraging private lenders to offer favorable terms on home loans and allowing buyers to utilize a zero-down payment option.

According to NAR’s 2016 Veterans and Active Military Home Buyers and Sellers Profile, 18 percent of all recent homebuyers were veterans. Among those buyers, over half used a VA loan to finance their home purchase.

A professional appraisal is key to giving everyone involved in the transaction a clear understanding of the purchase and ensuring that buyers ultimately pay a fair price for their home. Citing NAR’s recent Appraiser Trends Survey, however, Bradley pointed out a number of impediments to continuing the current level of service.

“What we’ve found is that, among appraisers, there’s a real reluctance to work with the VA,” Bradley said. “Generally, appraisers are dissatisfied with the level of compensation they’re receiving for their work. It’s also harder than ever for trainees to enter the field, not just within the VA system but across the industry, which only adds to the perception of an appraiser shortage. This overall regulatory burden is a significant issue, and we have to turn things around.”

Bradley sounded a positive note on an element of the VA system known as the “Reconsideration of Value.” When a VA appraiser finds that the market value of a property is lower than the sale price, the VA’s process calls for them to stop work and notify the lender’s point of contact. Also known as the “Tidewater Initiative,” Bradley said that this operating procedure is unique to VA transactions and designed to protect the buyer.

She noted, however, that the process often isn’t transparent to the buyer or their agent. To improve the program, Bradley reminded the committee that a clear understanding between appraisers, real estate agents and the agents’ clients is not only allowable, but should in fact should be encouraged.

Despite the challenges facing the industry, Bradley sounded an optimistic tone about the road ahead.

“What we have today isn’t perfect, but it’s an important part of ensuring veterans and active-service members are protected when using a VA home loan,” Bradley said. “NAR looks forward to working with the VA and Members of Congress to improve this system in the years to come.”

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.2 million members involved in all aspects of the residential and commercial real estate industries.

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