History  of Veteran's Af fairs

VA has guaranteed over 18 million home loans to veterans to purchase or

construct a home, or refinance another home loan on more favorable

terms. The VA home loan program has made mortgage credit available to

many veterans whose loans otherwise would not have been made. In this

connection, although VA borrowers have been directly favored by the more

liberal terms on those loans, it is also likely that these terms have induced

a competitive liberalization of the terms on conventional mortgages, whose

recipients have benefited as well. As a result, the impact of the VA home

loan programs on the economy and on the mortgage market vastly

exceeds the actual volume of VA home loans.

Initial Objectives and Philosophy

The home loan guaranty program was originally conceived in 1944 as a

part of an attack on the harsh aftermath associated with wars. The overall

objectives of this attack were to diminish to the greatest possible extent the

economic and sociological problems of post war readjustments of millions

of men and women then serving in the Armed Forces.

The program was one of the major innovations and a most important part

of the original Servicemen's Readjustment Act of 1944, Public Law 78-346.

The first legal framework was set forth in Title III of that Act. In a way, the

loan guaranty program was advanced as an alternative device to a cash

bonus, because it would be vastly less expensive to the Government, and

because it would better serve the needs of veterans.

Credit was viewed as one of the cornerstones of a program to aid the

veteran in his/her effort to readjust to civilian life. In the opinion of the

supporters of the original legislation, the Government should provide the

means whereby the veteran could obtain favorable credit which would

permit him/her to shelter his/her family or begin a business or farming

venture. This concept arose because of the feeling that veterans, in view

of their service in the Armed Forces had missed an opportunity to establish

a credit rating which could be the basis of borrowing to acquire a home or

to establish a business. The establishment of the loan guaranty program

was an attempt to place the veteran on a par with his/her nonveteran

counterpart.

The loan guaranty program also provided an investment outlet for large

amounts of savings which existed in the economy at the end of World War

II. During the years of the war, normal investment outlets were restricted

because of the shift from the production of civilian goods to war production.

By imposition of price and production controls on many items, the normal

flow of consumer durable goods had been reduced. Thus, individual

savings reached record proportions, and large amounts of money became

available for investment purposes. Expectations at the time that there

would be a normal postwar depression shortly after termination of the war

made it seem important that planning be done to stimulate the redirection of

accumulated liquid capital into normal peacetime avenues.