VA User Fees Part of Budget Battle

Overshadowed in importance by temporarily stalled House-Senate conference negotiations on the thorny issues of cutting Social Security and defense spending, increases in “user” costs of VA mortgages nevertheless are part of the politically sensitive problem of making meaningful cuts in the overblown U.S. budget.

The Reagan-backed proposal to increase housing finance “user” fees has raised hackles on top leaders of the Mortgage Bankers Assn. and the National Assn. of Home Builders. They contend, as articulated by Ronald F. Poe in speaking for MBA, that the Reagan move to increase the 1% fee charged to veterans by the VA for home loan guaranties would be both unfair and discriminatory against the veterans whom the VA mortgage program was designed to help to become homeowners.

“The VA home mortgage program has been one of the major benefits that our nation has given to millions of veterans for many years,” said Poe, a New York City mortgage banker and officer of the MBA. He added that he completely agrees with NAHB President John Koelemij that the proposed increase in user fees on home loans guaranteed by the VA would “simply represent a new tax on veterans and damage their chances of ever becoming homeowners.”

Prevent Home Purchases

Poe estimated that the first proposed increase of the VA fee from 1% to 2% in fiscal 1986 would prevent at least 200,000 veterans from buying homes and that further planned increases in the fee to 3.8% by 1990 would make homeownership impossible for 800,000 veterans.

The National Council of Savings Institutions also is lobbying strongly against the increase in the cost of getting a VA mortgage but the National Assn. of Realtors is not pursuing opposition after initially joining it.

Capitol Hill watchers are quick to point out that the major problem confronting Congress--and this budget conference group in particular--is to agree on cutbacks on spending for national defense and Social Security. Both are extremely sensitive issues for both Republicans and Democrats.

The conferees could possibly resume talks when Congress ends its short recess on Monday, or the entire budget-cutting issue could be sent back to the House and Senate for more adjustments or recasting.

The Senate has approved an increase in the VA mortgage user fee and Sen. Pete V. Domenici (R-N.M.) has been saddled with supporting the Reagan viewpoint. On the other hand, Rep. William H. Gray III (D-Pa) has been in the forefront of the House effort to knock out the increase in VA fees for mortgages. Sen. Alphonse D’Amato (R-N.Y.) broke GOP ranks and opposed any increase in the VA user fee.

Reward for Veterans

In letters mailed to each member of the House and Senate, NAHB President Koelemij and MBA President Robert Spiller said the VA home loan guarantee program was never meant to be self-sustaining but was established as a rewarding program “in return for a veteran’s service to his nation.” No user fee was charged by the United States on VA home loans until 1982. The Reagan people want the VA fee to be increased to 3.8% because that’s what now is being charged for FHA mortgage insurance.

Supporters of low-cost VA mortgages are also urging Congress to knock out a Senate-passed proposal that would levy a user fee on the secondary market operations of the Federal National Mortgage Assn. and the Federal Home Loan Mortgage Corp., both of which have strong roles in supplying mortgage money for all home buyers. Such a fee would constitute a tax of home buyers, NAHB and MBA argue.

Whose viewpoint will prevail on the proposed increase of the VA user fee? Time alone will provide an answer but it does seem unlikely that the flag-waving Reagan people will eventually be willing to be called the gang that voted to hurt GIs wanting to buy homes.