Welcome to FHA+, Gate House’s monthly intel brief from our team of housing and mortgage industry experts. Each month we provide timely insight, information, and analysis regarding the Federal Housing Administration as well as the entire housing and housing finance ecosystem. Each edition begins with our “Think Piece,” followed by our “Three Questions,” then “Inside Voices,” and the “Gate House Index.” In this month’s Think Piece (p.1), Gate House Senior Advisor Michael Frueh, former Executive Director of the VA Home Loan program and Acting Under Secretary for Benefits at the U.S. Department of Veterans Affairs, shares his thoughts on the modern-day VA Home Loan program. In Three Questions (p.5), Gate House Partner Michael Marshall provides his thoughts on the so-called “buyers’ market” that has been evidenced in recent housing market data. And in Inside Voices (p.8), we share what we are hearing around the industry and policy circles. Once again, please enjoy this complimentary copy of FHA+. — Brian Montgomery, Gate House Strategies Chairman and former HUD Deputy Secretary and FHA commissioner.
THINK PIECE
Not Your Father’s VA Home Loan
by Michael Frueh
For generations, the VA Home Loan program has been one of the most successful – and sometimes most misunderstood – benefits earned through military service. Too often, it is still described using outdated assumptions: limited eligibility, rigid underwriting, single-use, borrowing limits, or a niche product useful only in certain markets.
The reality is very different. Today’s VA Home Loan is a modern, flexible, and resilient housing finance program that has evolved dramatically over the past 30 years to better meet the needs of modern-day Veterans, Service members, survivors, lenders, and the broader mortgage market.
In many ways, this is not your father’s VA Home Loan.
When the VA Home Loan was created in 1944 as part of the GI Bill, its mission was clear: help returning World War II Veterans reintegrate into civilian life by making homeownership achievable. The program succeeded beyond anyone’s expectations, helping build the post-war middle class and fueling decades of economic growth. Since Captain Miles Myers used the first VA Home Loan to purchase his home in Washington DC in 1944, more than 29 million Veterans, Service members, and survivors have used their earned benefit to provide their families a stable home.
But the housing finance system of the mid-20th century bears little resemblance to today’s environment. VA has steadily modernized the Home Loan program to keep pace with changes in demographics, credit markets, technology, and military service itself.
One of the most significant recent changes came in 2020, when Congress eliminated loan limits for Veterans with full entitlement. For decades, loan limits shaped how the benefit could be used, particularly in high-cost housing markets, often steering otherwise qualified Veterans to conventional products. When I joined VA, Veterans in many high-cost areas were effectively priced out of using their benefit to purchase a home without a down payment or private mortgage insurance.
Today, eligible Veterans can purchase homes at market prices without a down payment, regardless of loan size, so long as they qualify with the lender. This change alone fundamentally reshaped the program’s relevance in higher cost urban and suburban markets. Once the limits were removed, lenders across the nation were able to rapidly increase their VA loan production, without any corresponding degradation in credit performance.
VA’s underwriting philosophy has always been different than conventional lending. VA places less emphasis on credit scores than conventional and FHA loans, instead focusing on residual income - how much money a Veteran has left each month, after major expenses, to support a mortgage. This model recognizes the realities of military pay, family size, and cost of living, and the outcomes have proven its effectiveness. VA loans also do not require loan-level price adjustments or mortgage insurance premiums, lowering the cost of borrowing to eligible Veterans.
Over time, that approach has been refined and strengthened. Over the past 30 years, VA has continuously worked with lenders and servicers to remove government-imposed barriers (such as time-consuming Certificates of Eligibility) and added automatic underwriting authority while expanding the credit box and preserving the core principle that sustainable Veteran homeownership can be achieved at scale and with fiscal prudence.
During the housing crisis following 2008, borrowers with VA home loans outperformed what were thought to be the most secure loans, with conventional financing. During COVID, VA quickly implemented forbearance and loss-mitigation options that helped hundreds of thousands of Veterans retain their homes or avoid foreclosure.
These were not accidental outcomes. They reflect decades of policy refinement, data-driven oversight, and a clear mission: to “maximize opportunities for Veterans and Service members to obtain, retain, and adapt homes by providing a viable and fiscally responsible benefit program in recognition of their service to the nation.”
Thirty years ago, VA loans were paper-intensive, slow, and often misunderstood by lenders, REALTORs, and Veteran borrowers. That is no longer the case.
Today, VA has modernized appraisal systems, introduced automated income verification, expanded electronic eligibility, integrated default operations with servicers, and aligned more closely with industry technology platforms. Lenders and servicers today can originate and service VA loans at scale, efficiently and competitively, alongside FHA and conventional products.
At a time of housing affordability challenges, rising interest rates, and economic uncertainty, the VA Home Loan program stands out as one of the strongest tools available to support Veteran financial stability. Updating the old narrative that VA loans are complex, slow, or risky is essential for Veterans, policymakers, lenders, servicers, and industry participants.
From my first day at VA working for the Executive Director for the VA Home Loan program, Keith Pedigo, to spending years leading the VA Home Loan program and later serving as Acting Under Secretary for Benefits while Jeff London and John Bell ran the program, to today under Patrick Zondervan, I have seen firsthand how much this program has changed, and how much it continues to matter.
The VA Home Loan is no longer a relic of a bygone era. It is a modern, adaptable, and battle-tested mortgage program, refined through decades of real-world use and continuous improvement.
In short, this is not your father’s VA Home Loan - and that is exactly why it works.
Mike Frueh is a Senior Advisor at Gate House Strategies and previously served as Executive Director of the VA Home Loan program and Acting Under Secretary for Benefits at the U.S. Department of Veterans Affairs.
For more information, contact: FHAplus@gatehousedc.com.
THREE QUESTIONS
Michael Marshall on the “Buyers’ Market” amidst Affordable Housing Challenges
Marshall, a Founding Partner of Gate House Strategies, shares thoughts on the recent reports that the U.S. has entered a “buyers’ market” in residential real estate. Prior to Gate House, Marshall served in leadership roles at HUD, including Acting Assistant Secretary for Policy Development and Research (PD&R), Chief of Staff to the Deputy Secretary, and Senior Advisor at FHA.
Question: Redfin reported in November that there were approximately 37 percent more home sellers than buyers in the U.S. housing market. Is that good news for the market and does that mean we don’t have to worry about a housing shortage anymore?
Marshall: A number of real estate data points – including the rise in sales below listing price and increased seller concessions, in addition to the greater number of sellers than buyers – are signaling we have moved into a buyers’ market. For households who can afford to be in this market, that’s good news. But the reason and circumstances for the excess of sellers over buyers is important here, which is that more buyers than sellers have pulled back amidst reduced market activity overall – due to significant cost barriers that include higher mortgage rates, insurance, and home prices, compared to the recent past. The more important point may be that the total number of home sales has declined to levels not seen for more than a decade.
In the current market, the low number of active buyers is an indication of the challenges or hesitancy of potential buyers. The transition to a buyers’ market, that is, is a cyclical change in the real estate market. Buyers tend to have more flexibility to wait for a change in the cycle than sellers, some of whom are motivated by non-economic factors like a job change.
The housing shortage, particularly for more affordable homes, is a structural issue that has developed over many years. Even though there are more sellers than buyers in today’s market, the supply of homes for sale per household in many areas and nationwide has dropped and is trending further down.
So unfortunately, more sellers than buyers does not mean that the housing shortage has been resolved.
If and when the cycle turns, we could quickly see the number of buyers outstrip the number of sellers and the housing supply shortage will have persisted throughout. To address the housing shortage, we will need an expansion of the affordable housing stock.
Question: If we have more sellers than buyers, housing affordability should improve, right?
Marshall: On balance I think that's right – at the margins and in the short term. More sellers than buyers should put downward pressure on home prices, but home prices are sticky. In fact, nationwide home price appreciation has slowed but continues – an indication that supply is constrained even when home sellers outnumber buyers. Home price declines appear to be limited to local markets that have been overbuilt or have a higher concentration of investor properties. If mortgage rates continue to trend down, you’ll see more buyers enter this market, muting price declines and lifting home price appreciation. If rates go even lower than expected, we could see more of the existing home supply unlock from current owners whose mortgage rates have been too attractive to consider moving.
Also, home prices are obviously important, but there are a variety of factors driving housing affordability. There are the persistent issues of higher mortgage rates and rising insurance costs, to be sure. But in a larger sense, you’ve got to be looking at the wage and income components of the economy. Wages have not been keeping up with the higher prices that people are facing over the past few years. You’re talking about housing costs and frankly almost everything else that’s been up. It’s a macro-economy thing. So, addressing affordability requires a multi-faceted approach and it requires a macroeconomic environment that is favorable.
Question: So what should policymakers be most focused on right now?
Marshall: The most helpful mechanisms would be on the supply side. Supply simply must increase to create a long-term, structural change in housing affordability. Notwithstanding the need for reasonable mortgage rates, insurance, and input costs for construction, I’d say the key question is: How do we encourage communities to make changes and remove barriers that will generate new construction and bolster the supply of affordable housing? We don't want the federal government telling communities what to do. But generally speaking, the biggest affordability problems are in the most restrictive communities, in terms of legacy zoning and regulation. At the policy intersection of federal, state and local governments, we must find ways that address those issues head on.
As always, the private sector has the biggest role in finding solutions. It is the engine of innovation, and I believe it’s at the cusp of delivering more affordable options – we’re seeing it because many of these companies come to us for advice. For example, I believe AI can play a positive role in housing supply and productivity will be the key across the entire economy – that’s the coin of the realm. The economy has defied many analysts’ expectations because of AI, because of the CapEx spending on AI, and, thankfully, we are starting to see productivity pick up in the wake of all of the investment in technology. If this continues, the Fed will be able to cut more because higher productivity can translate to wage growth that's not inflationary. And Fed rate cuts may be more beneficial to shorter term home construction financing than long term mortgage rates.
So, policymakers can help a lot if they can figure out how to get out of the way, how to accommodate new manufacturing solutions, and at the very least how not to thwart ingenuity.
INSIDE VOICES
What we’re hearing around Washington and the industry
Davos: At the World Economic Forum in Davos, President Trump pulled U.S. housing policy onto the global stage, doubling down on a slate of affordability proposals. He highlighted the newly signed executive order targeting large institutional investors in the single-family market, framing homeownership as a bulwark against America becoming “a nation of renters,” while also pressing Congress to cap credit card interest rates. At the same time, he signaled clear resistance to any policy that would meaningfully push home prices lower and erode household equity. With affordability, equity, capital flows, and politics all colliding, there are a lot of moving parts, and all signs point to another eventful year ahead.
HUD Oversight Hearing: At the January 21 oversight hearing, HUD Secretary Scott Turner used his opening remarks to emphasize deregulation, fiscal discipline, and a renewed focus on traditional homeownership, highlighting red-tape reduction and stronger internal controls as early priorities under the Trump administration. Lawmakers pressed him on staffing cuts, civil rights enforcement, and HUD’s role in carrying out the administration’s investor-restriction order. Despite the crosscurrents, the hearing underscored that HUD—and especially FHA—will remain central players in supporting both the rental market and access to homeownership in the year ahead.
FHA Foreclosures: On January 29, FHA issued INFO 2026-04 and ML 2026-03, ‘Updates to Bidding at Foreclosure and Post-Foreclosure Sales’ with a focus on foreclosure bidding instructions, CWCOT utilization, and post-foreclosure sales procedures. The guidance clarifies how servicers and lenders must handle bids to ensure compliance and proper asset disposition. The changes directly affect servicing workflows and claim risk management. Lenders and servicers should review their bidding processes to align with the new requirements.
Ginnie Mae: The 2025 Ginnie Mae annual report underscores its role as the backbone of the government mortgage market, with over $2.8 trillion in outstanding MBS. The report highlights Ginnie Mae’s outsized countercyclical importance. The takeaway is clear: Ginnie Mae remains indispensable to affordable housing finance, but its scale makes issuer strength, warehouse liquidity, and federal backstops more consequential than ever.
VA Fees: A political fight is unfolding over VA mortgage fee hikes as a “pay-for” to fund expanded veterans’ benefits. A proposed amendment to H.R. 6047 would boost VA funding fees by roughly +30 bps to ~2.45% for first-use VA loans and +100 bps to ~4.3% for subsequent use. This is intended to offset increases in veteran family benefits. The proposal has triggered pushback, arguing it shifts the cost onto those using their earned homeownership benefit amid affordability pressures. The measure is still in committee markup and hasn’t become law, with debates ongoing on whether this funding mechanism can survive the broader spending package.
Machine Learning: AI is emerging as a quiet game-changer in areas such as condo underwriting, by machine-reading engineering reports, reserve studies, and association disclosures to flag litigation risk, deferred maintenance, and structural issues often buried in dense documents. Natural language models can scan hundreds of pages to surface indicators like reserve shortfalls, special assessments, concrete or façade concerns, and pending lawsuits, cutting review times from weeks to minutes. Early lender and vendor pilots suggest this approach could speed condo approvals while improving consistency and defensibility, especially as agency scrutiny around building safety intensifies.
THE GATE HOUSE INDEX
The Gate House Index and analysis is designed to provide insight into the status of FHA’s business at a moment in time and over a period of time, as well as other pertinent data points we’re following.
This month, we look at the VA’s presence in the market and the “buyer’s market” phenomenon discussed above.
VA volume and share have increased since the early 2000's and stayed high even through the high volumes of the pandemic:
National home price growth has moderated from pandemic-era peaks but remains positive.
YoY home prices were up across most of the country as of Q3 2025.
FHFA HPI® Four-Quarter Appreciations (as of 2025Q3)
Home sales rose in line with household growth between the GFC and the pandemic, but then diverged, as home sales fell back to levels last seen in 2013.
Most homes are now selling at prices below the list price. The share of home sales below list price is seasonal and trending up toward pre-pandemic levels as of late 2025.
The time required to sell a home is also seasonal and is trending up as of late 2025.
The number of homes actively listed for sale remains low relative to the number of U.S. households:
This Month In History
The first mortgage-backed security (MBS) was issued in February 1970. Ginnie Mae guaranteed the timely payment of principal and interest to investors of the MBS that was issued by Bank of America and backed by FHA- and VA-insured mortgage loans — creating the scalable, standardized, securitization model that underpins today’s U.S. secondary mortgage market and attracts global investment in U.S. mortgage loans.
FHA+ is published monthly by Gate House Strategies, a Washington, DC area-based advisory firm focused within the financial services, mortgage lending and servicing, community development, and public housing sectors. Contact us at FHAplus@gatehousedc.com
