Capital Market Turmoil Finally Hits Virginia Homebuyer Loan Programs

The Virginia Housing Development Authority has finally been affected by the prolonged turmoil in the capital markets.  Due to liquidity issues in the marketplace the VHDA has been unable to secure financing and will therefore have to cutback or eliminate altogether several of their Single Family Homeownership Loan Programs.  Here is the complete list of changes and the effective dates sent out in the newsletter by VAR.

Flexible Alternative Loan Programs
All VHDA Flexible Alternative Loan Programs will be suspended and no new reservations accepted after March 31, 2008.
VHDA will continue to assess the market and will consider re-activation of this program when long term resources are again available.

Step Rate Program
VHDA's Step Rate Program (including FHA,VA,RHS and Conventional) will be suspended effective April 1, 2008. This change applies to VHDA SPARC Step Rate loans also. The Step Rate program represents only a small portion of VHDA's overall loan production, however, the increasing payment structure presents a greater risk to borrowers and VHDA in this uncertain market.

Conventional Insured Loans
VHDA Conventional Insured loans will now be limited to a maximum 97 percent loan to value.
All reservations made prior to April 1, 2008 will be honored with VHDA's standard reservation and commitment lock-in policy.

FHA, VA, Rural Housing Fixed Rate Loans
VHDA FHA, VA Rural Housing and FHA Plus fixed rate programs will remain unchanged.
These program changes have been approved by VHDA's Board of Commissions. VHDA has vowed to continue to assess market conditions and will make program modifications when appropriate. Its goal is to make every effort to keep its most critical products available to assist low to moderate income borrowers.

The state hung on for a long time given how quickly all the other programs geared toward the first time buyers were cut back or eliminated by the other private and governmental institutions.

But in the end another lost source of financing will not bode well for the marketplace and will adversely affect prices and inventories here in Virginia.