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Report Methodology: Southern CA

File: 201806 MedianPricesofExistingDetachedHomesHistoricalData

Image # 1: representing the number of VA purchase trust deeds recorded vs. the total # of all transactions recorded which used any type of financing. Data excludes cash transactions with no financing, which tend to be investors at this price range. The goal is to compare VA transactions with other “similar” transactions and not include cash transactions which is an extreme comparison in the author’s opinion.

Source: Public records (aggregated by) Black Knight Data & Analytics

Image #2: represents both the overall median home price for the current month in the subject county vs. the median home price paid by a VA buyer utilizing their VA lona benefit. Same is also presented in image #6, comparing month to month.

Source: Public record data utilized by aggregating and computing macro data from : Black Knight Data & Analytics

Source: https://www.car.org/marketdata/data/housingdata

Source: Outside of CA, we use the Zillow Value data: Example: https://www.zillow.com/maricopa-county-az/home-values/ No sourcing is available to our knowledge. Core logic data seems to be a more accurate representation. We averaged the higher median price data from Core Logic and compared it to Zillow. On average Core Logic was 6.59% higher in our data sampling, so we multiply Zillow’s value by 1.0659.

Image #3: Median Incomes Non Veteran vs. Veteran source:

Source: U.S. Census Bureau, American Community Survey, 1-Year Estimates, 2016, Table S2101

Image #4: The Veterans Home Affordability ModelTM uses the median home prices that VA borrowers have recently paid in chart #2. Assuming a zero down payment by using your VA loan benefit and current market interest rates (from:https://www.nerdwallet.com/mortgages/mortgage-rates/va ), we compute the income required to qualify for a VA loan with a 2.15% Funding Fee at a standard debt ratio of 41% and average installment* and revolving debts**.

*Average installment debts source: Experian: https://www.forbes.com/sites/jimhenry/2018/03/07/budgeting-for-the-average-new-car- or-truck-start-thinking-500-a-month/#782c9d5f4b1e

**Average revolving debts source: CreditCards.com http://time.com/money/4213757/average-american-credit-card-debt/

Image #5: The Veterans Home Expanded Affordability ModelTM : uses the median home prices that VA borrowers have recently paid in chart #2. We present additional data reflecting a loan approval using expanded debt ratios of 60%. VA Loans approved at debt ratios exceeding 60% are also frequent. This is common when VA borrowers generally have good credit*** and are approved by industry standard, automated loan underwriting, with acceptable residual income**** levels required in VA loan underwriting.

***Good credit is defined as a credit profile that generates an “Approve/Eligible” automated underwriting decision from the FNMA Desktop Underwriting engine. Although high debt ratio approvals can be achieved with credit risk scores slightly over 620, it is more common to achieve loan approvals with expanded debt ratios when credit scores exceed 700.

****Residual Income is the amount of monthly income remaining when ALL housing expenses, housing maintenance expenses (estimated at 14cents / foot / month), payroll deductions and all other obligations are subtracted. The VA sets minimum residual income levels for each region in the country combined with number of household members.

Image # 6: representing overall median home prices for the state, the local county and the VA median price paid (in image #2) month to month:

Data utilized from: https://www.car.org/marketdata/data/countysalesactivity

Image #7: Annual median home prices (taken from the month of August each year) in the state and the reqion / county. Source: US Census: Median Price (existing single- family detached homes only)

Supplemental Report

Image # 8: represents the Veterans population in a region as a percentage of the total population in a region.

Data utilized from: https://www.census.gov/quickfacts/fact/table/losangelescountycalifornia/INC1102 16

Image #9: this image compares the percentage of Veteran VA purchase loan unit volume compared to total volume from Image # 1 divided by the Veteran population percentage in Image # 8. The result is a measure of local purchase activity by Veterans relative to their population: The Veteran’s Activity Factor

Image # 10: this image compares regional / county annual VA loan guaranty usage rates locally vs. nationally.

Source: records, aggregated from Black Knight Data & Analytics. National data from: The National Center for Veterans Analysis and Statistics (NCVAS) U.S. Veterans Eligibility Trends and Statistics, 2016: VA Benefits Utilization by Program – Veterans only: FY 2016; VA Loan Guaranty

Image # 11: this represents national affordability trends for Veterans using their VA loan to purchase a home. Given that incomes are generally higher in counties where property values are higher, we feel the national affordability trends displayed here are similar to local counties. We have yet to discover income distribution data exclusive to Veteran’s AND active military, specific to each county across the country. It is the income distribution data that is critical to calculating the percentage of a population that can afford a home – in this case Veterans. If and when we find this highly specific income distribution data, it will be very helpful for the “deepest dive” into local affordability statistics. Image #11 construction process:

A) We begin with median home prices. Source:

https://factfinder.census.gov/faces/tableservices/jsf/pages/productview.xhtml? src=CF; Data: 2016 American Community Survey 1-Year Estimates

B) We then add in interest rates (from June of each year): source:

http://www.freddiemac.com/pmms/pmms_archives.html

C) We compute the P&I, add taxes @ 1.15% plus insurance at 0.35%

D) We then add average installment debts of $515/mo. plus average revolving debts of $189/mo.

E) We sum the total obligations

F) We divide that by 0.41 to achieve the required monthly income

G) We multiply that times 12, to arrive at annual income requirement

H) We determine what % of veterans earn more or less than that annual income using income distribution statistics: Source

https://www.census.gov/data/tables/2017/demo/cps/hinc-06.html Table HINC-06. Income Distribution to $250,000 or More for Households: 2016

Image # 12 : this image reflects the VA loan Guaranty utilization – Annual Production figures:

sources: https://www.benefits.va.gov/HOMELOANS/Lender_Statistics.asp

Annual benefit reports:

https://www.benefits.va.gov/REPORTS/abr/2007_abr.pdf

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