WASHINGTON, D.C. - Today U.S. Senator Daniel K. Akaka (D-HI), Chairman of the Veterans' Affairs Committee, introduced legislation to improve veterans' ability to refinance their mortgages.   

"In light of today's housing and home loan crises, the further refinancing options in this bill will help more veterans make ends meet and escape foreclosures," said Akaka.

The current maximum VA guaranty for all loans in excess of $144,000, except regular refinance loans, is equal to 25 percent of the Freddie Mac conforming loan limit for a single family home, adjusted for the year involved.  Presently this is $104,250 ($156,375 for Alaska, Hawaii, Guam and U.S. Virgin Islands).  This means lenders making loans covered by a VA guaranty up to $417,000 ($625,500 in Alaska, Hawaii, Guam, and U.S. Virgin Islands) will receive at least a 25 percent guaranty.

However, only $36,000 of a VA home loan guaranty can be used when the loan is being used to refinance a home loan, meaning that VA will not provide backing for a refinance loan in excess of $144,000.  Additionally, present law limits regular refinance loans to 90 percent of the reasonable value of the dwelling, meaning that veterans without at least 10 percent equity cannot refinance their existing loan into a VA guaranteed home loan. 

Chairman Akaka's bill would address these two issues as follows:

• Increase the refinance cap: under Akaka's bill, the maximum guaranty for refinance loans would move to the same level as conventional loans - a 25 percent limit for a single family home.  This would nearly triple the current standard cap, and make the cap four-and-a-half times higher for Alaska, Hawaii, Guam, and the U.S. Virgin Islands.
• Cut the equity requirement in half: the bill would also reduce the 10 percent equity requirement to 5 percent, enabling VA to provide regular refinance loans for up to 95 percent of the reasonable value of the dwelling. 

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