The House of Representatives recently passed a bill allowing veterans and military personnel to qualify for no-down payment mortgages matching the current Fannie Mae and Freddie Mac conforming limits. Analysts said that the legislation (S. 2486) - which officials expect to boost the Department of Veterans Administration's VA program - could drive volume in some high-cost regions but would only slightly impact Ginnie Mae issuance.

The VA bill - which the Senate previously approved - lets veterans apply for loans of up to $333,700. The VA loan limit is now $240,000. The House vote clears the measure for a presidential signature.

"It could modestly increase VA lending in high cost areas of the country, which would be a plus for GNMA market share," said Art Frank, head of mortgage research at Nomura Securities. "However, VA loans represent only about 30% of Ginnie Mae's volume, so the impact will likely be modest on Ginnie Mae's market share. "

Ted Foster, vice president of MBS at Ginnie Mae, said that with the current loan limits in place, the VA could not cater to veteran move up buyers. He added that raising the loan limit would really work well with the VA's current hybrid ARM program in qualifying more veterans for loans.

In terms of the department's hybrid program, it started offering 3/1 ARMs in October of last year. Additionally, the secretary of the VA also has the authority to allow the department to offer 5/1 and 7/1 hybrid ARMs as well.

Copyright 2004 Thomson Media Inc. All Rights Reserved.

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