The CFPB has issued a report, “Mortgages to First-time Homebuying Servicemembers,” that focuses on mortgage loans made from 2006 to 2016 to first-time homebuyers who are serving in the military or are veterans. In its press release, the Bureau states that the report represents “the first time researchers have been able 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 is part of the Bureau’s series of quarterly reports on consumer credit trends that uses a “longitudinal, nationally-representative sample of approximately five million de-identified credit reports from one of the three nationwide consumer reporting agencies.” To distinguish credit reports for servicemembers from those of non-servicemembers, the consumer reporting agency providing the data matched credit records in the sample to the Department of Defense’s Servicemembers Civil Relief Act database.
The report’s key findings include:
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The share of first-time homebuying servicemembers using loans partially guaranteed by the U.S. Department of Veterans Affairs (VA Loans) increased from 30 percent before 2007 to 63 percent in 2009. Among non-servicemember first-time homebuyers there was a parallel increase in the use of FHA and Department of Agriculture mortgage loans. However, in contrast to non-servicemembers whose reliance on FHA/USDA mortgages declined after 2009, servicemembers continued to increased their reliance on VA loans, with VA Loans comprising 78 percent of servicemember loans in 016.
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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 mortgage loans between 2006 and 2009. Conventional (i.e. non-government-guaranteed) mortgage loans represented about 60 percent of loans among first-time homebuying servicemembers in 2006 and 2007, but declined to 13 percent by 2016. In comparison, the share of conventional loans among non-servicemembers fell from almost 90 percent before 2008 to 41 percent in 2009, then increased back to 60 percent in 2016. The combined share of FHA and USDA mortgages to these borrowers increased and then decreased accordingly.
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The median VA Loan amount for first-time homebuying servicemembers increased from $156,000 in 2006 to $212,000 in 2016, closely tracking the median value of conventional home loans taken out by non-servicemembers. In contrast, the median loan amounts for servicemembers who used conventional or FHA/USDA mortgages during this period were lower and increased more slowly.
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Delinquency rates for nonprime servicemember borrowers with VA Loans peaked in 2007 at approximately 7 percent and fell to about 3 percent by 2016. Delinquency rates between 2006 and 2008 among nonprime borrowers were significantly higher for FHA/USDA loans to non-servicemembers and for conventional loans to both servicemembers and non-servicemembers. Conventional loans to nonprime borrowers, for both servicemembers and non-servicemembers, had delinquency rates greater than 13 percent in 2006 but were below two percent by 2016. After 2009, conventional loans to all nonprime borrowers generally had lower delinquency rates than both VA Loan to nonprime servicemembers and FHA/USDA loans to nonprime non-servicemembers.
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