By Aaron Glantz, Center for Investigative Reporting
Publish date: May 16, 2013
The California Department of Veterans Affairs employed 87 staff members to run the loan program, spending $10.6 million on overhead to originate $10.5 million in loans, according to the state Department of Finance.
During a recent visit to the agency’s headquarters in Sacramento, the home loan call center was largely silent. Critics, including Democratic Assembly Speaker John A. Pérez, say the program is an anachronism and the money should be redeployed to meet other veteran needs.
Agency officials say they know they need to do better and have used the economic downturn to revamp the program, originally launched in 1921 to help World War I veterans buy homes and farms. The overhead costs, they said, include servicing on the approximately 8,000 loans made in the past three decades.
“We are now staged and poised and ready to go as the housing market comes back,” said Theresa Gunn, the newly appointed deputy secretary in charge of the program.
Part of the issue in recent years has been the low interest rates available on the open market, which often made the program’s rates unattractive.
In October 2011, when it was possible to get a private home loan with an interest rate approaching 2 percent, the state offered loans to veterans at 5.5 percent. That gap apparently outweighed the program’s benefits, which include the ability to buy a house with little or no money down.
The agency lowered its interest rate this month to 3.9 percent. Gunn predicted the number of loans issued would grow this year but, when pressed, would not give an estimate, saying, “I’m not in a position right now to share something with you.”
The agency is budgeted for $13 million in overhead costs this fiscal year and so far has granted 59 home loans, valued at $5.5 million.
Since 1998, the nonpartisan Legislative Analyst’s Office has recommended that the agency phase out the program. In a report that year, the analyst’s office said use of the program, which that year made 1,600 loans, was likely to “continue to dwindle” as credit-worthy veterans turned to the private sector and other government programs.
“Veterans do have other growing needs,” the report said.
Today, the state Department of Veterans Affairs has $230 million in uninsured borrowing authority from a bond measure that voters passed in 2000, along with $900 million more from a 2008 initiative that the agency hasn’t yet touched.
Pérez has proposed reallocating $600 million of the agency’s bond funding to build affordable housing for homeless veterans. On April 30, a bill to put that change before voters in 2014 passed unanimously out of its first legislative committee, backed by a host of veterans groups, trade unions and law enforcement.
Gunn said the California Department of Veterans Affairs is not opposed to the bill and would welcome the reappropriation of some of its unused funding to build affordable housing.
California has about 16,000 homeless veterans, according to the federal Department of Housing and Urban Development. Los Angeles, with about 6,400 homeless vets, has the most in the nation.
“We want to do something to eliminate the suffering right now,” said Michael Blecker, executive director of Swords to Plowshares, a veterans service organization in San Francisco, where the most recent HUD-mandated homeless count identified 344 veterans in shelters and 430 on the streets.
In interviews, homeless veterans said the tight rental market has made private landlords so choosy that it’s nearly impossible to find housing – even after vets have found work and gotten off drugs.
“I have back child support and horrible credit,” said John Robinson, a Marine Corps veteran.
Robinson makes minimum wage working for a subcontractor of SamTrans, the transportation agency serving San Mateo County. But he continues to live at a SoMa drug rehab center run by the Salvation Army – his home for the past 21 months – because he can’t find private housing.
“If a veteran has a place to start, then he has a chance,” he said.
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