Institutions and Geographic Concentration in VA Mortgage Lending

Kerry Spitzer
Baystate Health

Lauren Lambie-Hanson
Federal Reserve Bank of Philadelphia

Disclaimer:
The views expressed here are those of the authors and not necessarily those of the Federal Reserve Bank of Philadelphia, the Federal Reserve System, or Baystate Health.

The U.S. Department of Veterans Affairs (VA) home loan guaranty program lowers the cost of homeownership for veterans and their families by removing the barriers of a downpayment and private mortgage insurance. Even with the recent growth in the program and the attractive terms, many veteran homeowners have not used it. As a consequence, some areas of the country with large numbers of veterans have disproportionately few VA loan originations, even after controlling for area housing market conditions. We explore the role of institutions in explaining the disproportionate concentration of loan originations in county-level Home Mortgage Disclosure Act (HMDA) data, and we test whether the presence of military installations, VA facilities, and veterans service organization (VSO) posts within each county contributes to lending patterns. We find that close proximity to a military site is a strong positive predictor of county-level rates of VA mortgage lending, even after controlling for the number of veterans and servicemembers living in the area.