By Cristy Lytal
From left: Johnson Jung, Yuanqing Cao, Caroline Stevens and Terri Pohl (Photo courtesy of Johnson Jung)
What is the current need for a state-level veterans’ home loan program in California? This was the critical issue addressed by USC Price School of Public Policy students Yuanqing Cao, Johnson Jung, Terri Pohl and Caroline Stevens during their Master of Public Policy practicum project in 2014.
The practicum gave them the opportunity to work as consultants for the California Senate Advisory Commission on Cost Control in State Government. Two of the students, Jung and Stevens, continued to work on the project several months after their graduation.
The resulting report, titled CalVet Home Loans Program: An Independent Program Evaluation, “is currently serving as a roadmap for the much needed reorganization plan of the CalVet Home Loans program,” said Melissa Kludjian, executive director of the Senate Advisory Commission on Cost Control in State Government.
The commission intends to publish the report on the State Senate website and distribute it to State Senate offices.
“Our Commission and the Senate as a whole are extremely impressed by the team’s ability to provide us with a comprehensive cost-benefit analysis review that is on the same level as a professional audit and business consultation firm’s work product,” she added.
Currently, the CalVet Home Loans program uses bond proceeds to purchase residential properties and sell them to veterans. The program provides the veterans with up to 100 percent of the financing for these purchases, typically in the form of 30-year mortgages with below-market interest rates and requiring only five percent down payment.
Despite these attractive terms, CalVet isn’t in high demand, the study found. The students’ report revealed that CalVet is targeting a small population: the 265,000 or 18 percent of California veterans below the age of 55 who do not already own their homes. Furthermore, CalVet is currently providing loans to an even smaller population – about two percent of California veterans – at a cost to the program of approximately $10 million in the 2012-13 fiscal year.
One possible reason for the lack of demand could be that California’s veteran population is declining and expected to drop by 23 percent in the next 10 years, mostly due to veterans moving out of state.
Another reason could be that many California veterans opt to participate in a federal program, which offers a guaranty of backing for up to 50 percent of a loan originated and serviced by a third-party lender. In exchange for this guaranty, lenders provide veterans with lower interest rates, fewer fees, a down payment waiver and a comprehensive review of the borrower’s application beyond credit scores. With the federal program meeting the needs of many veterans, only three other states have home loan programs similar to CalVet.
The team presented these findings in Sacramento before the full Senate Advisory Commission.
“One of the big outcomes is that funding for the program is actually being reallocated,” said Stevens, who currently works as a research analyst for the San Diego Regional Association of Governments. “So it is probably going to go towards the more multi-family and transitional housing that we suggested. It makes you feel that this was worth all of the hours.”
Jung agreed. “The commission was very invested in the project,” he said. “And because of the nature of the commission, there were a lot of perspectives from different industries that really helped us look at the issue from different angles. It was a great experience.”
The project also gave Jung an opportunity to apply the GIS skills that he was learning in the graduate certificate program in GIS at the USC Spatial Sciences Institute. After graduation, the experience helped him secure his current job as a GIS technician for the Kern County Department of Agriculture.
“There were a lot of things that we learned in class and talked about in class that we were able to apply,” he said. “But at the same time, it pushed us to look at data we had never really worked with before and tackle new issues that we hadn’t necessarily seen before. And it was especially rewarding because we took this whole project from beginning to finish as really a student-led endeavor with everyone on the team. By the time that we finished, we could be really proud that this was something we created ourselves.”
Stevens added that “just learning to work with a team with so many different talents and points of view was really valuable.”
According to Professor Gary Painter, who served as the faculty adviser for the CalVet project, these professional experiences not only help develop the abilities of master’s students on the cusp of launching their careers, but their reports help inform the decision making of their clients.
“It just demonstrates the quality of the work that our students do,” Painter said, “and the practical value that our students are able to provide to the broader policy community.”