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DOMA Impact on Loans

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Posted On: 08/28/2013

Question:

In June, the Supreme Court ruled against the Defense of Marriage Act. How will FHA and VA loans be impacted?

Answer:

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Passed in 1996, the Defense of Marriage Act stated that as a matter of policy, the federal government would only recognize marriages between a man and a woman. As a result, the benefits of more than 1,000 laws favoring married couples were not available to same-sex couples, couples lawfully married within the states that recognized such unions.

The Supreme Court decision for United States v. Windsor ruled that DOMA is unconstitutional.

In terms of loans insured by the Federal Housing Authority and the Department of Veterans Affairs, the impact of the recent DOMA decision differs.

The DOMA decision should cause no changes with FHA financing. As HUD told my blog OurBroker.com last year, a rule called “Equal Access to Housing Regardless of Sexual Orientation or Gender Identity” became effective in March 2012. It prohibits lenders from considering sexual orientation and gender identity of loan applicants when processing applications. Discrimination against applicants based on marital status was a prohibited even before the Equal Access rule.

“Because an applicant’s marital status is irrelevant when it comes to FHA loans, whether a state recognizes same-sex marriage should not affect a lender’s loan decisions,” the HUD stated.

The situation with VA mortgages is different and will likely change after the June 2013 Supreme Court ruling.

The VA told my blog in 2012 that “federal law controls VA policy in this area.”

In the previous code, “The definitions of ‘surviving spouse’ and ‘spouse’ require that the individual must be a ‘person of the opposite sex.’”

However, the VA stated that it “can guarantee a loan made to a single Veteran, a Veteran and spouse, or a Veteran and another person who is not his or her spouse. The VA guarantee, which is protection for the lender, is applied to the whole loan when the borrower is a single vet or a Veteran and spouse.”

Given the Windsor decision, the federal definition for “spouse” will likely change. As a result, VA loans will become equally available to all qualifying vets and military households.

For details and specifics, check with lenders for new VA standards, which should be outlined this summer.

Peter G. Miller is the author of The Common-Sense Mortgage and a veteran real estate columnist. Have a question? Please write to peter@ctwfeatures.com.

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