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Residential Department: Q&A: Michael Frueh, U.S. Department of Veterans Affairs: February 2015


Q&A: Michael Frueh, U.S. Department of Veterans Affairs

Michael Frueh, director, loan guaranty service, U.S. Department of Veterans Affairs

According to Michael Frueh, director of the U.S. Department of Veteran Affairs (VA) loan guaranty service, the VA receives about 850,000 requests per year for certificates of eligibility from veterans and active service members who wish to purchase a home through the VA home loan program. These requests are handled automatically through the VA website,

Automation like this has made the VA home loan program much easier for veterans to use in the past decade. During the past two years alone, the VA guaranteed over 1 million loans, a rate of almost 1,500 loans per day. The VA currently has over 2 million active loans, with a total value of almost $400 billion. If that’s not impressive enough, these are loans that default less often than any other loan product, including conventional mortgages with 20 percent down.

We recently spoke with Frueh to learn more about VA loans, the lenders who close them and recent developments in this industry niche.

What should lenders know about VA loans today?

A lot of people have the perception of the VA that I call “My father’s VA,” where things worked a certain way. I’ve heard a lot from Realtors in the past who [used to] say, “Don’t go VA. The application takes too long. Approval takes too long. Appraisals take too long.”

We worked very hard in the last five to 10 years to make all of that go away. We’re making it a lot easier for lenders, Realtors and veterans to go through the process, so eligibility is virtually instantaneous and appraisals are ordered automatically, and we’re getting our appraisals back as fast as normal industry [applications].

Can veterans get a VA loan from any lender?

In general, any veteran can go to any lending institution to get a VA guaranteed loan. When the program started 70 years ago in 1944, every [lender] had to go to VA with a loan package and VA would underwrite it. That’s not feasible to do in the type of volume we have today, so we have lenders with automatic authority, [which] means the bank is either a supervised bank — supervised by another federal institution like the OCC [Office of the Comptroller of the Currency], the Federal Reserve or the NCUA [National Credit Union Administration] — or they apply to become a lender with automatic authority and we examine them for a little while.

Does the VA provide oversight of these lenders?

We have an extensive oversight operation to make sure lenders, servicers and everyone else we rely on in the mortgage industry to help us deliver our benefit is doing it the way that we want. We have nine field offices around the country [that] conduct targeted reviews of a percentage of every loan that’s underwritten by someone that’s not VA. That review is geared to make sure veterans aren’t overcharged, [that] underwriting decisions look sound, and that lenders and other service providers are delivering the benefit in the manner that we require through legislation, law and policy.

What kind of interest rates do veterans get in a VA loan?

We blow the doors off all of our counterparts in the industry. We had last year, on average, an interest rate almost half a point less than conventional loans for all of our loans. And we do not set that interest rate. That’s negotiated between the borrower and the lender.

Our loans foreclose tremendously less than any other loan in the industry. Our loans go into default relatively better than anything in the industry. As a result, veterans get a better interest rate.

Why are VA loan default rates so low?

We interact with every servicer of every single VA guaranteed loan every single month. I get an update from several hundred different institutions that service loans. That update is minimal if someone is current; it’s very comprehensive if it’s delinquent. And then we serve as the veteran’s advocate. We act as middlemen between veterans and servicers to help them resolve their delinquency.

I also think the character of veteran borrowers helps make them a very good credit risk. They’re people who have already chosen to serve their country and fulfill their obligation to the nation, so they’re already people who are prone to repay an obligation, such as a mortgage debt. 

Michael Frueh was appointed director of the loan guaranty service for the U.S. Department of Veterans Affairs in February 2012. He is responsible for helping veterans obtain mortgages to purchase homes, retain their homes if they experience financial difficulties and adapt homes to help severely disabled veterans live as independently as possible in the homes of their choice. He runs the $400 billion national loan program from Washington, D.C.


Will McDermott is managing editor for Ask a Lender. Reach him at or (800) 297-6061.

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