Statement of Karen Kreutziger Powell, CEO of Flat Branch Home Loans, on VA Home Lending Before the Committee on Veterans’ Affairs Subcommittee on Economic Opportunity

WASHINGTON, D.C. (June 12, 2024) – Karen Kreutziger Powell, CEO of Flat Branch Home Loans, testified today at a hearing on pending legislation before the Committee on Veterans’ Affairs Subcommittee on Economic Opportunity.

Hearing details can be found here. Click here for Powell's written statement.

Chairman Van Orden, Ranking Member Levin, and members of the Subcommittee, thank you for the opportunity to testify today on behalf of the MBA.

My name is Karen Kreutziger Powell. I serve as the Chief Executive Officer at Flat Branch Home Loans, an independent, residential mortgage lender, headquartered in Missouri and licensed in 38 states.

I have extensive experience originating, securitizing, and servicing VA Home Loan Program mortgages and am honored to appear before this panel.

MBA appreciates the focus of today’s hearing on proposed legislation aimed at authorizing a permanent partial claim program. This program is designed to give our nation’s heroes loss mitigation options comparable to those in other federal housing programs.

The VA Home Loan Program is a significant benefit earned by Veterans through their sacrifice and service. MBA recognizes the need to make this program more accessible, operationally efficient, flexible, and competitive.

This is particularly crucial during times of individual crisis for Veterans and their families, and it’s important this benefit is not diminished. That’s why I want to emphasize MBA’s strong concern that the VA Funding Fee should not be used for expenses unrelated to the home loan program.

MBA has worked closely with Committee staff on the topic of partial claims – and we are pleased to offer recommendations aimed at improving the proposed legislation. The VA may require additional resources from Congress to implement these suggested program improvements.

MBA welcomes legislation that authorizes a permanent partial claim for the VA Home Loan Program. A partial claim is a standard, simple, and time-tested foreclosure prevention solution available to borrowers in other federal housing programs but one that is missing from the VA’s loss mitigation toolkit.

It allows a borrower who has resolved a financial hardship to move missed payments to the back of the loan, without interest, following a period of forbearance. This helps borrowers get back on track with regular mortgage payments – or pursue a modification for a more affordable payment.

Despite the introduction of the VA’s newest loss mitigation program, known as VASP, MBA believes Veteran homeowners facing temporary financial hardship deserve access to partial claims to reinstate their loans and remain in their homes.

Access to both these solutions will provide struggling borrowers with a more durable set of loss mitigation options to preserve affordable homeownership.

We are, however, concerned that certain provisions of the current bill text, such as the repayment plan, could adversely affect Veteran homeowners, mortgage servicers, and the VA.

As drafted, this legislation adds hurdles that may negatively impact borrower benefits. These changes might be motivated by a desire to generate revenue through interest income, but VA will recoup the initial outlay most of the time, as a partial claim requires repayment at payoff, refinance, or maturity of the first lien mortgage. No other government program requires repayment with interest, and we urge amendments to the bill to achieve parity with other federal housing programs.

MBA appreciates your consideration of these recommendations. Our association and its members will continue to work with the agency, this committee, and other key stakeholders to ensure Veterans and their families have access to more affordable, sustainable homeownership opportunities.  

The final topic I want to highlight today concerns the settlement agreement of the National Association of Realtors to resolve various class action lawsuits alleging antitrust violations. If approved, changes could impact decisions by sellers to cover buyer agent commission fees. VA’s regulations prohibit Veterans from paying fees or commissions to real estate agents in relation to a VA home loan.

This prohibition puts Veteran borrowers at a severe disadvantage, as they are prohibited from compensating real estate agents who guide them through the home-buying process. MBA is pleased that the VA has taken temporary measures to address the problem. We urge the VA to permanently amend its regulations.

Once again, MBA appreciates the opportunity to comment on the issues impacting the VA Home Loan Program – and the specific legislation before the Subcommittee today. We value our partnership with Congress and the VA to help Veterans utilize their earned benefit to achieve homeownership.

MBA looks forward to continuing to work with the Subcommittee to forge practical solutions and provide the VA with the necessary resources to implement changes and improve the Home Loan Program.

I look forward to answering any questions you may have on this or any of the proposed legislation.