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Gay Dallas couple faces veterans home loan problems

Dec. 10, 2013 - 04:46PM   |  
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Just days away from closing on a new house, a Dallas couple has discovered the Veterans Affairs Department won’t guarantee their new home loan because it doesn’t count the income of a non-veteran spouse for same-sex married couples in states that don’t recognize such marriages.

That came as a shock to former Army Sgt. Earl Rector and his non-veteran spouse, Alan Rodriguez, after they sold a house on Nov. 16, got married in Seattle on Nov. 22 and on Nov. 27, sold their house and signed a contract for a new one.

Their plans were built around the belief they would get a veterans home loan, based on Rector’s military service from 1992 to 1999.

“We found out yesterday that VA told our lender that they would not guarantee the loan,” Rector said Tuesday. That notice came eight days before closing, and “after we were preapproved weeks ago,” he said.

The lender is dealing with VA in trying to get the loan on track, and Rector and Rodriguez are looking for help in understanding how VA benefits can vary from state to state for gay couples.

If the couple is unable to buy the home, they may face a breach of contract penalty.

“The seller is an attorney, which could make our lives difficult. Our financing bank is doing everything they can, but the VA approval process has been ambiguous and now appears impossibly complex and arbitrary,” Rector said.

Rector and Rodriguez are not the first same-sex couple to face this problem. The Senate Veterans’ Affairs Committee is considering legislation that would order VA to change its rules so that such cases do not depend on the definition of a married couple within a particular state, but that measure is unlikely to pass in time to help them.

Additionally, Sen. Mark Udall, D-Colo., asked the Obama administration to change its income-counting rules after a Colorado couple faced a similar problem. VA officials have been studying options for changing a variety of definitions used for married couples, but it has not announced changes to its home loan process.

Rector said he never expected to have problems with the veterans loan, viewing it as better than other options. VA loans may have a lower interest rate and monthly private mortgage insurance payments are not required, he said, adding that they also reduce closing costs.

“In our case, being denied a VA loan results in about a $400 per month increase in our payment,” he said, noting the couple is still trying to calculate the financial penalty they face. “We are now unable to meet our closing date, which creates substantial legal risk to us both.

“We were under the impression that VA, being a federal agency, would follow the same rules as the Defense Department on this matter and recognize same-sex marriages regardless of the state of residency,” Rector said. “If the IRS recognizes our marriage regardless of state of residency, why would VA act differently?”

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