The American Dream: ‘Down the Drain’
It’s a little muggy on Caleb Churchill’s small patch of well-kept homestead down a dirt road in Hawaiian Paradise Park. But it’s nothing like the 130 degrees he endured tending boilers aboard U.S. Navy destroyers off the wartime coast of Vietnam and Korea.
Once he retired, Churchill, a disabled veteran who tries to hide his slight limp, dreamed of owning a little piece of Hawaii, close to Kapoho, where his brother, Winston, a real estate agent, moved to escape the hustle and bustle of the mainland.
But for Caleb Churchill, and many vets like him, the American Dream of home ownership almost washed down the drain, when he learned he couldn’t qualify for the Veterans Affairs loan he had counted on. A rule change in late 2011 prohibited VA loans for properties relying on rainwater catchment systems.
Churchill was forced to choose between finding a home in a more expensive neighborhood that’s on county water or getting some other source of financing. He ultimately settled on a private lender, a move he said costs him an additional $150 a month on his mortgage.
“It messed me up big time. The paperwork was going good and all of a sudden it came to a screeching halt,” Churchill said.
Had he bought the house in October 2011, the VA would have authorized it, he said. He was three months late. VA loans are preferable because homes can often be financed with little or no money down, and the buyer doesn’t have to pay inspection fees, mortgage insurance, closing costs and the like.
As more vets come home from overseas and look to settle down, the problem of financing homes, especially on Hawaii Island, where up to half of all properties are on catchment, is only going to get worse. Currently, there are more than 120,000 vets in the state, and 16,101 live on this island.
Churchill’s friend, Shep Kuester, also had to settle for a private lender when the VA turned him down. Kuester, who served 21 years as a corpsman on Navy submarines, and his wife, Janet, who served in the Navy Nurse Corps, also are disabled vets.
Do they feel the military owes them their loan privileges for their years of service?
“Not owed, but earned,” Kuester said. “Yes, we earned that privilege.”
The Kuesters said they ended up paying about $25,000 extra on a $300,000 home because they couldn’t get VA financing.
Both Churchill and Kuester said it’s too late for them to get a VA loan for their homes. But they worry about the latest group of service members coming home, many with disabilities. They would not have had an opportunity to save up for a down payment, and they probably won’t be able to afford houses that are on the island’s limited county water system.
Churchill volunteers at the Veterans of Foreign Wars service office in Hilo, trying to help his former comrades in arms adjust to civilian life.
“They served their country. They did their job, and they should be eligible for it,” Churchill said.
“They thought it was something they earned for their service, but then they get out, they don’t have the funds to do all that’s required,” Kuester said. “And their dream just goes down the drain.”
A host of elected officials, government agencies and lenders have been involved in the discussion over the past year and a half.
“Veterans from across Hawaii Island have asked for a solution to this stalement for years so they can take care of themselves and their families by purchasing a home,” said U.S. Rep. Tulsi Gabbard, an Iraq war vet and a Democrat who was elected to Congress in November. “These veterans who answered the call to serve when so few have deserve far better.”
But so far the VA has remained steadfast that it won’t budge on its 2011 rule, or grant waivers in Hawaii.
It’s frustrating for Hawaii County Mayor Billy Kenoi, who has tried to intercede on the vets’ behalf.
“We can’t understand why our vets who have given so much for so many continue to have to deal with this bureaucratic quagmire,” Kenoi told West Hawaii Today on Thursday.
The VA changed its rule, said Ret. Brig. Gen. Allison Hickey, undersecretary for benefits, because the Hawaii Department of Health couldn’t guarantee that water catchment systems provide safe drinking water. The VA wants to protect its property investments, as well as veterans’ health, she said in a May 8, 2012, letter to Kenoi.
“While VA recognizes that catchment systems are widely used in Hawaii, our (minimum property requirements) standards disallow catchment systems on properties that are collateral for VA-guaranteed home loans,” Hickey said in the letter. “VA’s MPRs exist to protect not only the government’s interest in the physical property, but also the health and safety of veterans and their families.”
Municipal water systems are tested regularly; catchment systems are not.
Hickey referred Kenoi to Gerald Kifer, VA supervisory appraiser in the VA Home Loan Program. A phone message from West Hawaii Today to that office on Thursday was forwarded to the Washington, D.C., office, which did not respond to questions by press time but indicated in an email the matter is a topic of recent discussion.
The state Department of Health has tried to get the VA to grant a waiver for Hawaii. Gary Gill, deputy director for environmental health, in an Aug. 23, 2012, letter to VA loan officer Raymond Chang, noted that all other federal mortgage agencies, including HUD, Fannie Mae, Freddie Mac and USDA Rural Development, approved waivers for properties with catchment systems in Hawaii.
“We understand that the VA in Hawaii had, up until October 2011, approved thousands of properties with catchment water systems over the past 20 years without any known incident related to their drinking water systems,” Gill said.
“They changed their policy, we didn’t change anything,” said Gill, who added that his agency is working with Gabbard and the VA.
Derrick Umemoto, president of Island Mortgage Source, has been putting forth a steady drumbeat of requests to state and federal officials, asking them to help change the VA’s stance on catchment. In a Jan. 25, 2012, letter to VA Secretary Eric Shinseki, Umemoto said catchment systems are customary and the only feasible source of water on much of the Big Island. He pointed out the county regularly approves subdivisions with catchment as the only water source.
“The VA’s objection to the private water catchment system because there is no government agency oversight of it once the system has passed county building codes and regulations and is operational defies the feasibility and practicality of the individual system,” Umemoto said.
“In not allowing these loans, the VA isn’t stopping or dissuading the veteran from buying or living in these areas; they are only depriving the veteran of their well-deserved benefit and hurting them by increasing the costs both at closing and in monthly payments,” he added.
Former state Reps. Bob Herkes and Jerry Chang, both Democrats and vets who themselves have relied on catchment systems, also wrote to Shinseki, urging him to change the policy.
“Catchment is so common and widely accepted that only the urban cores around Hilo and Kona are serviced by municipal water systems,” Herkes said in a Feb. 22, 2012, letter. “In fact, even the mayor of Hawaii Island lives in a home serviced by catchment.”
Hawaii County has supplemented homeowners’ private water catchment systems by providing a network of public water spigots around the island, so residents can draw water for drinking and cooking. In a 2004 environmental assessment, the county estimated expanding municipal water to the Puna District alone would cost upwards of $88 million in 1999 dollars.
Churchill has been busy on his 43,560-square-foot lot. He’s repainted the house a bright green with red and white trim, replacing the olive drab. Flowers and fruit trees abound on his property, and the lines are marked with tidy rows of palms. Dominating one wall inside the neat ranch house is a framed tattered U.S. flag from the USS Pennsylvania, a ship where his father served in an earlier time.
He isn’t afraid to drink his catchment water; in fact he prefers it. Because it’s not loaded with chemicals, it has a fresher, cleaner taste, he said. The water goes through three systems: a microfilter, UV system and charcoal filter.
“It’s safe to drink,” he said.
Still, he’s open to compromise, if the VA, for example, required homebuyers to bring their drinking water in from certified safe systems such as public spigots in order to qualify for the VA loan.
Kenoi just wants the debate to be over.
“We’re just puzzled why this hasn’t been resolved yet,” Kenoi said. “We’ll continue to advocate for and support our vets as much as we can.”