The American Legion is calling on Congress to extend the $729,750 loan limit on Department of Veterans Affairs (VA)-guaranteed loans before the ceiling drops down to $625,500 on Jan. 1.
The House passed a three-year extension of the VA loan limit in high cost areas, but the Senate stripped it from the Veterans Jobs bill (H.R. 674) that President Obama signed on Nov. 21.
Veterans groups lobbied hard for the jobs legislation and it was a "genuine disappointment" that the loan limit extension was not included in the final bill, according to American Legion national commander Fang Wong.
Congress recently extended the $729,750 loan limit for Federal Housing Administration (FHA)-insured loans, but veterans groups contend FHA loans are not an adequate substitute. FHA requires a minimum 3.5% downpayment while 90% of VA loans are originated with no downpayment.
Veterans and active duty servicemembers living in high cost areas "shouldn't be forced to make higher downpayments," according to the American Legion.
In passing the Veterans jobs bill, Congress raised funding fees on VA loans to pay for the tax incentives employers receive for hiring veterans.
American Legion legislative director Tim Tetz pointed out that fee income will be reduced if the loan limit drops down to $625,500. "That may mean fewer veterans will apply for loans, and therefore put programs to hire more veterans in jeopardy," Tetz said.