WASHINGTON–A new report says it is the first to provide a description and analysis of servicemembers’ mortgage choices and mortgage performance, both during
and after the housing crisis of the last decade.
The report was released by the Consumer Financial Protection Bureau and focused- on mortgages made to first-time homebuyers who are currently serving in the armed forces or are veterans. When buying a house, servicemembers have the option of taking out a home loan that is partially guaranteed by the U.S. Department of Veterans Affairs, noted the CFPB, explaining VA-guaranteed home loans differ from other mortgages in several ways, including allowing a purchase with no down payment and without mortgage insurance. Servicemembers may also choose other mortgage products, including conventional loans or loans by a different government agency.
The Findings
The report spans the years leading up to and after the housing crisis. Among the key findings:
- The share of first-time homebuying servicemembers using VA mortgages increased from 30% before 2007 to 63% in 2009. Among non-servicemember first-time homebuyers there was a parallel increase in the use of FHA and USDA mortgages, the CFPB said. However, whereas non-servicemembers’ reliance on FHA/USDA mortgages declined after 2009, servicemembers’ reliance on VA loans continued to increase. In 2016, 78% of servicemember loans were VA loans.
- The greater share of VA loans among servicemembers was part of a larger shift among consumers (both servicemembers and non-servicemembers) away from conventional to government-guaranteed mortgages between 2006 and 2009, according to the CFPB findings. Conventional mortgages—that is, non-government-guaranteed mortgages—were about 60% of loans among first-time homebuying servicemembers in 2006 and 2007, but this share declined to 13% by 2016, the CFPB said. “By comparison, the conventional loan share among non-servicemembers fell from almost 90% before 2008 to 41% in 2009, then increased back to 60% in 2016. The combined share of FHA and USDA mortgages to these borrowers increased and then decreased accordingly.”
- The median loan amount for first-time homebuying servicemembers with a VA loan increased in nominal dollars from $156,000 in 2006 to $212,000 in 2016, closely tracking the median value of conventional home loans taken out by non-servicemembers, according to the report. By contrast, the CFPB noted the median loan amounts in nominal dollars for servicemembers who used conventional or FHA/USDA mortgages during this period were lower in value compared to VA loans and increased at a slower pace, growing from $130,000 in 2006 to $150,000 in 2016.
How to Get Report
The Quarterly Consumer Credit Trends report, “Mortgages to First-time Homebuying Servicemembers,” can be found here.