Lawmakers mull making VA home loans transferable to vets’ families

Lawmakers and Veterans Affairs officials are considering plans to allow veterans to share unused home loan benefits with immediate family members or other descendants, as a way to bring the loans in line with other veterans benefits and make up for past racial discrimination within the program.

The proposal, sponsored by Rep. James Clyburn, D-S.C., has received preliminary backing from Capitol Hill Democrats and department leaders but faces an uncertain future with Republicans set to hold the majority in the House next year.

But supporters for the measure say the move could provide life-changing help to minority families still dealing with the lingering effects of institutional racism as well as improve the benefit for all veterans.

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“Discriminatory policies and practices have had generational impact and can be seen as a large contributor to the racial wealth gap in the United States,” House Veterans’ Affairs Committee Chairman Mark Takano, D-Calif., said during a hearing on the issue last week.

“Not only does this [proposal] provide a path to address past wrongs and allow access to the VA home loan guarantee program, it looks forward and answers the call of [veterans advocates] to make an unused benefit transferable to descendants of veterans into the future.”

The VA Home Loan program is one of the best known and most used veterans benefits. In fiscal 2021, department officials guaranteed more than 1.44 million loans valued at roughly $447 billion, a record high and up 15% from the previous year.

Loans granted through the program are backed by the federal government and allow borrowers to finance a home with no down payment, no mortgage insurance and relaxed credit requirements.

The loans are open to veterans, active duty service members, and certain surviving spouses. However, unlike the Post-9/11 GI Bill, the benefit cannot be transferred to dependents.

Clyburn’s proposal — dubbed the VA Housing Loan Forever Act — would allow veterans who do not use the benefit to share it with family members, and allow descendants of veterans who were eligible for the benefit but did not use it before death to take advantage of the program.

That would be particularly helpful to grandchildren and other descendants of Black veterans who were denied access to the program throughout the middle of the 20th century.

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Mitria Spotser, a consultant with the Center for Responsible Lending, said that past research estimates as many as 2 million veterans may have been cheated out of their benefits from 1944 to 1977 because of discriminatory practices, both by federal officials and local laws that barred minority veterans from buying a home.

“These policies prevented Black veterans from achieving the full economic mobility potential provided by these comprehensive federal benefits and affected the accumulation of wealth by Black families over generations,” Clybrun told the committee. “Because in the United States, home ownership is the primary tool for wealth accumulation.”

A Brookings Institution study released last summer found the median household worth of a white American in their late fifties was $251,000 more than the median Black American of the same age. A large part of that disparity is due to “wealth gaps compounded over time.”

Veterans Affairs officials said they support the intent behind the bill but said technical changes would need to be made to the measure to make it workable.

For example, even though veterans can use the loan program for multiple home purchases, department officials proposed limiting the benefit for descendants to first-time homebuyers only, to better reflect the intent of the program.

Takano said he hopes to make the issue a priority in the next Congress. However, he’ll no longer hold the chairmanship after Republicans take over. The man likely to replace him as leader of the committee — ranking member Rep. Mike Bost, R-Ill. — said he has concerns about the idea.

“This is a worthy goal, but I question if this bill is a correct way to address it,” he told the committee at the hearing. “I am skeptical if the VA can implement the provisions of it.

“The records of thousands of veterans before 1970 simply don’t exist anymore … how will the VA and claimants know if their parents or grandparents or great-grandparents used the VA Home Loan?”

Boat also said he has concerns that adding more individuals into the program could further slow down loan approval, a major complaint of the current benefit.

The new session of Congress is set to begin Jan. 3.

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