The Business of Government Hour


About the show

The Business of Government Hour features a conversation about management with a government executive who is changing the way government does business. The executives discuss their careers and the management challenges facing their organizations. Past government executives include Administrators, Chief Financial Officers, Chief Information Officers, Chief Operating Officers, Commissioners, Controllers, Directors, and Undersecretaries.

The interviews

Join the IBM Center for a weekly conversation about management with a government executive who is changing the way government does business.

Keith Pedigo interview

Friday, April 1st, 2005 - 20:00
“You'll continue to see change. Our four change themes in the Loan Guaranty Program are automation, delegation, consolidation, and oversight. In the future, it’s safe to say that we’re continuing to move into the electronic age in the mortgage business.”
Radio show date: 
Sat, 04/02/2005
Intro text: 
Missions and Programs...

Missions and Programs

Complete transcript: 

March 3, 2005

Arlington, Virginia

Mr. Lawrence: Good morning and welcome to The Business of Government Hour. I'm Paul Lawrence, partner in charge of The IBM Center for The Business of Government. We created The Center in 1998 to encourage discussion and research into new approaches to improving government effectiveness. You can find out more The Center by visiting us on the web at

The Business of Government Radio Hour features a conversation about management with a government executive who is changing the way government does business. Our special guest this morning is Keith Pedigo, director, Loan Guaranty Service, at the Department of Veterans Affairs. Good morning, Keith.

Mr. Pedigo: Good morning, Paul.

Mr. Lawrence: And joining us in our conversation also from IBM is Maria Barrientos. Good morning, Maria.

Ms. Barrientos: Good morning, Paul.

Mr. Lawrence: Well, Keith, let us give our readers some contexts. Could we start by talking about the Department of Veterans Affairs and the services it provides?

Mr. Pedigo: The Department of Veterans Affairs, if it were in the private sector, would be number two on the Fortune 500. It is the second largest agency in government, second only to the Department of Defense. And as you probably know, the VA provides a broad array of benefits to veterans in three categories.

We have medical benefits. We administer the largest medical provider in the country, which is our Veterans Health Administration. We have 158 hospitals, about 854 community-based outpatient clinics, and 132 nursing homes that we administer.

We also have the Veterans Benefit Administration, which is an agency that administers five benefit programs to veterans. The Compensation and Pension Program, which provides pensions and compensation payments to disabled veterans; the VA Home Loan Program; we have an education program that provides money for veterans to go to college; Vocational Rehabilitation and Counseling Program; and an Insurance Program.

And what many people don't realize is that, we also have a third element that administers 120 national cemeteries, where veterans can be buried. So it's a very large organization, a diverse one and its mission is to serve veterans needs.

Mr. Lawrence: Okay, we are moving through the organization, could you tell us about Loan Guaranty Service? Where in the organization it fits, and then how do you think about its size in terms of its budget, the number of employees?

Mr. Pedigo: The loan guaranty program is part of the veterans benefits administration, which administers five benefits to veterans. The loan program is administered out of nine regional loan centers, and two small operations in San Juan, Puerto Rico, and Honolulu, Hawaii. Of course we have a headquarters office also. We have a total of about 800 employees nationwide that are involved in administering this program. We have an annual budget of about $600 million, and most of the money in that budget goes to pay for foreclosures that take place in our program.

We have additional programs that we administer, for example we have a specially adapted housing program that provides grants to seriously disabled veterans to allow them to adapt their homes to wheelchair use. And we have a Native American Direct Loan Program that provides direct loans to Native American veterans who want to buy, build, or improve a home on reservation land.

Ms. Barrientos: Moving on to what your role and your responsibilities are within loan guaranty, can you tell us a little bit about that?

Mr. Pedigo: Well, as the director of the Loan Guaranty Service, I am responsible primarily for the promulgation of procedures and policies for the program. I have a staff of about 101 people, most of them located in Washington D.C., in our head quarters, and our role is to craft the policy and the procedures that are used by the nine regional loan centers, who actually administer the benefit around the country.

Ms. Barrientos: Very interesting things about your career, sir, you have been with VA loans for over 30 years, and you started as a loan examiner, now to an officer, and now is director of the Loan Guaranty Service. Can you tell us what the transition was like, and how you have applied your experience to your current position?

Mr. Pedigo: As you said, I did start as a loan examiner in the VA regional office in Chicago, and I spent about two and half years doing that work, and then I had the opportunity to come to Washington, to work on the policy staff. I made a decision at that point, to try to get exposed to as many aspects of the VA Home Loan Program as possible.

So over the course of the next 9 years, I worked in virtually every aspect of the VA program, and the knowledge and experience that I gained during those years has served as a springboard for me to take on positions of greater responsibility, which included being the loan guaranty officer for the VA program in the state of Illinois, and then for the last 18 years as the director of the program.

I think that in most people's careers they find that their earlier experience helps prepare them for the positions that they take later on, certainly that was the case for me. As the director of the program, it's very important for me to be familiar not only with VA policy, but also with the industry that we serve, and the VA program is, in effect, a government version of a large mortgage and real estate company. So, it's imperative that I remain abreast of what is going on in the mortgage and real estate sales industry, so I spend a great deal of my time trying to acquire knowledge of what is going on presently in those industries.

Ms. Barrientos: With 18 years in your role as director, under how many secretaries have you served?

Mr. Pedigo: The VA, the Department of Veterans Affairs between 1930 and 1989 was known as the Veterans Administration, and during that period of time the head of the agency was known as the Administrator of Veterans Affairs, and I served under six administrators. When we became cabinet level in 1989, since that point in time we've had four secretaries, so I guess I have served under six administrators and four secretaries.

Mr. Lawrence: As you think about those folks perhaps you would reflect for a minute about the different leadership styles they had, and any, you know, the qualities of an effective leader, anyone stand out in particular, and what were their styles like?

Mr. Pedigo: Well, we've had a wide variation in styles as you might imagine. We had some secretaries and administrators who were not hands-on leaders. They preferred to handle the big picture issues, to make appearances before Congress, and to deal with the White House, and other elements of the government structure. And then we've had some who have been very hands-on, who came in to their positions with a very strong background in veterans' issues.

I guess one of the best examples would be our former Secretary of Veterans Affairs, Tony Principi. Tony spent many years on the Senate Veterans Affairs Committee as the staff director, and at one time he was the director of the Congressional Affairs for the VA, and he served in the first Bush Administration as the deputy secretary of VA.

So when he came in as secretary, he had a vast amount of knowledge about Veterans Affairs, and he tended to be a very hands-on leader, who knew a lot about what was going on in the various parts of the VA.

I've also served under secretaries, who have been just the opposite of that. We recently got a new secretary confirmed by Congress, and that is Secretary Nicholson, and I think, Secretary Nicholson also comes to the VA with an extensive background in veterans' issues, so I expect that he is going to be a hands-on leader also.

Mr. Lawrence: Now, in your long career in the different positions, how has your management styles changed?

Mr. Pedigo: I have thought about that and I have never been one to sit down and analyze my own management style, but as I think about it presently, I think, I would be considered to be a hands-on manager. I have gone to great lengths over my career to acquire a lot of knowledge about the VA Home Loan program, as well as the industry that we deal with, and I spend a lot of my time each day talking with my staff to make sure that I keep abreast of the major issues. So I would say, hands-on manager not only early in my career, but still today.

Mr. Lawrence: Well, let me ask you about the couple of challenges that managers in general face, and I guess, as a hands-on manager you might in particular, one of the issues or challenges people have is, having enough spare time to think, and if you are hands-on, I imagine, there is lots to do as people will like you to help with, so how do you allocate time so that you'll have time to reflect in and stay abreast of the industry as you've indicated?

Mr. Pedigo: Well, many years ago I decided that, if I was going to live in the Washington area, I wasn't going to drive to the office. Now, I live about 25 miles from the office, and I chose to take public transportation, and over the years that has afforded me about an hour and ten minutes in the morning, and an hour and a half at night to sit and reflect, and do the kinds of things that I wouldn't ordinarily have time to do. So, I strongly encourage those who live in this area, who don't find that they have that amount of time to consider public transportation.

Mr. Lawrence: That's a good best practice. How about another thing, which is people often reflect on, you know, decision-making in the Washington D.C. area, and the speed by which it happens either too slow or too fast, how do you think about that?

Mr. Pedigo: I think, in general it's too slow, if you are an aggressive manager leader type, almost any speed is too slow, but particularly in Washington, where you have some large bureaucratic organizations there is a high level of frustration from time-to-time on getting timely decisions made. What I have found, however, is that over time you learn how to cut some of the corners and get things done much more quickly than you might ordinarily be able to do so. For example, in the procurement area, procurement has become a huge business in the Washington area especially in government. There are vehicles that you can use to affect a procurement much more quickly than if you follow the regular procurement route. A lot of people aren't aware of that. So there are ways to get things done faster in an environment that normally slows you down when you are trying to get things accomplished.

Mr. Lawrence: And these are some interesting insights. How is performance of loan programs measured; we'll ask Keith Pedigo of the Department of Veterans Affairs to tell us about this when our conversation about management continues on The Business of Government Hour.


Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence. This morning's conversation is with Keith Pedigo, director, Loan Guaranty Service, Department of Veterans Affairs, and joining us in our conversation is Maria Barrientos.

Ms. Barrientos: Keith, what are the major initiatives going on in Loan Guaranty right now?

Mr. Pedigo: Maria, I guess we have three major initiatives going on presently. The largest is what we call Loan Administration Redesign, and I know you are familiar with that because you are really the coordinator for that from the IBM side. Let me talk a little bit about the Loan Administration Redesign initiative.

First of all, Loan Administration is a part of the VA program that provides assistance to veterans, who are seriously delinquent on their loans. A lot of people think that the only thing that VA does is help veterans get a home, they don't realize that just as importantly we help veterans stay in their homes by providing assistance to them, if they encounter financial difficulty.

We've been helping veterans for 61 years who were in serious default on their loans, and for the last 35 years we have been using pretty much the same procedures. We decided about two years ago that it was time to take a fresh look at this operation, and see if there were some ways that we could improve customer service to veterans, and to the industry, and increase the cost efficiency of this function, and so we decided to do a formal Business Process Re-engineering initiative.

We knew that nobody in the world had more knowledge about this part of our program that we did at VA, but we also knew that we didn't have the skills to carry off a formal BPR process, so we made what turned out to be a very good decision and we hired some consultants who have that kind of experience to lead us through the process, and we were fortunate to be able get a company called Acquisition Solutions, and of course IBM, and as you know we have been involved in this process for two years now, and it actually was the classic type of Business Process Re-engineering initiative in that we followed all the steps.

We, first of all, sat down, and we mapped our current environment. We spent about two to three months doing that and we ended up with a very thick document that in detail shows how we were operating. We then invited in 20 companies from the private sector. We wanted to find out how they wanted us to change. These were the companies that did servicing, title companies, we invited Fannie Mae and Freddie Mac, which are big companies involved in the mortgage business, and they gave us their opinions on how we should reconfigure our operation.

We then took that market research and we sat down and created a to-be environment, once we decided though what we wanted to look like we then sat down and crafted some detailed guidelines on how we would operate in that new environment. And at that point, knowing exactly where we were going to go with this, we decided to design an automated system to overlay the new environment.

And so at the present time we have the new guidelines that have been published in the Federal Register for comment just two weeks ago. We are waiting for the public comments to come in, we are well on our way with developing the new automated system, and it's essentially a commercial off the shelf IT system that's being developed by Fidelity Financial, which is a very large company that serves 51 percent of the mortgage servicing industry.

We expect to have the regulations finalized and the IT system completed, sometime toward the end of this calendar year, and at that point, we will be operating in a new environment that will provide enormous improvement in service to veterans and to the industry, and we will be able to reduce the taxpayers outlay in supporting the loan guaranty program

Mr. Lawrence: Could you give us a sense about, you just said it would provide enormous improvement in service, could you give us a sense of some of those matrixes, is it faster cycle time or --

Mr. Pedigo: There will be faster cycle time, there will be a lot of improvements; for example, the IT system that we're going to have, which we are calling VALERI, the VA Loan Electronic Reporting Interface, is going to give us access to all the data bases of the servicers who handle VA loans. We've never had that before; we've always had to rely on getting hard copy information from these servicers, so we're going to be able to go into the system at any time, and see what level of servicing they're providing to a veteran, and if we don't believe that they're doing the appropriate things, we can step in and supplement that servicing.

So, by doing this we expect to see a reduction in the number of foreclosures, we also expect to see a reduction in the timelines of going to a foreclosure when foreclosure is necessary. We are projecting, rather conservatively that over 10 years, this initiative will save $301 million, and that's primarily through reduced foreclosure costs, because every time a veteran's loan goes to foreclosure, the VA place a claim to that lender amounting to about $22,000.

Ms. Barrientos: Moving on to the bigger program, can you tell us a little bit about how the VA Home Loan Guaranty program differs from HUD's Federal Housing Administration and their programs?

Mr. Pedigo: Certainly. Of course, the biggest difference is that we serve veterans and the FHA program serves the general public, but there are also some other differences. A big one is that you can get a VA loan without the necessity to make a down payment. That has been the centerpiece of the VA program since its inception in 1944. With the FHA program, a down payment is required, and that down payment varies from about 2 percent up to 5 percent.

Interestingly, over the last several years, 91 percent of the loans that VA makes are made without a down payment. Another difference between the two programs is that the VA program is not required to be actuarially sound. When it was set up in 1944, Congress intended that each year appropriations would be necessary to support the program. The FHA program, on the other hand, is required by law to be actuarially sound. So as a result if you get an FHA loan you have to pay a premium to the FHA and that premium can vary over time based on how much they need to collect in order to assure that the program doesn't have to go to Congress for appropriations.

Another difference is that the VA gets directly involved in providing assistance to veterans, who are delinquent on their loans. The FHA relies on lenders to provide that service. And I guess the final difference is that the VA offers lenders a partial guaranty against loss. When lenders make a VA loan they know that there's a potential for them to lose some money even though in most cases they're made whole by the partial guaranty.

Under the FHA program, because it is an insurance program when an FHA borrower goes to foreclosure the lender is made whole. So those are the basic differences between the programs. There are a lot of similarities also and both are very large government programs and both offer insurance or guaranties against loss.

Mr. Lawrence: In preparing for our conversation this morning, I knew the VA Home Loan program was very popular, but I found out that 60 percent of veterans are using the loans for different things like, purchasing homes as you indicated, but also home improvements and refinancing. I'm curious with so many different loan instruments out there now, in this day and age, why do you think is there such interest in this program?

Mr. Pedigo: Paul, I think there are several reasons, the biggest of which is that it is a no down payment program. And while it's true that there've been some other no down payment programs that have come on the scene in recent years, primarily supported by Fannie Mae and Freddie Mac. These are very small programs, and they're focused on a particular group in the population. Usually there are income requirements or income limitations in that you can't make above a certain amount to take advantage of these programs. The VA program is by far the largest no down payment program.

So that has made it very attractive to veterans, as well as to the mortgage and real estate industry. I think that's illustrated by the fact that since the inception of the program we have guarantied 18 million loans totaling just short of a trillion dollars. I think, another reason that the program has been so attractive is that, you know, lenders are willing to participate. They want to be involved in a program that provides assistance to veterans and particularly when the government's going to back them, and keep them from losing money in most instances.

If you look at the home ownership rates between the VA programs -- I should say between veterans and the general population, what you find is that the home ownership rate for veterans is 78 percent. For the general population, the home ownership rate is 68 percent. We think that that differential exists in large part because more veterans have been able to use this program.

Ms. Barrientos: You're talking about the performance of the program in terms of the percentage of veterans that use the program. But I'm wondering how do you measure performance internally for loan guaranty?

Mr. Pedigo: We have a wide array of performance measures. Some are designed to measure the external entities that we do business with. Some are designed to measure the performance of our own employees. We do use customer satisfaction surveys. We have a survey instrument for veterans and one for lending institutions, and we generally try to administer those once a year to get feedback from those entities on how well they think we're doing in providing service to them. And we use that feedback to identify the gaps in our performance and try to close those gaps.

In terms of internal oversight, we have what we call a statistical quality control program and we have divided our program into eight functional areas for the purpose of this statistical oversight. And every month our field officers are required to do a random sampling of work that has been performed in those eight particular areas in order to determine whether the employees involved have done that work correctly. Now, this helps them identify the areas where they need to focus greater attention on.

And we have a number of timeliness measures that we use, you know, providing timely performance to veterans and to the industry that we deal with is very important. So we track on an ongoing basis how long it takes us to perform various functions. Those are just a few of the oversight mechanisms that we use to judge the level of our performance.

Mr. Lawrence: Interesting. What are the management challenges of consolidating processes and functions, we'll ask Keith Pedigo, the Department of Veterans Affairs, to tell us about this when our conversation about management continues on The Business of Government Hour.


Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence. This morning's conversation is with Keith Pedigo, director, Loan Guaranty Service, the Department of Veterans Affairs, and joining us in our conversation is Maria Barrientos.

Well, Keith, in that first segment, you talked about the processing centers that the loan Guaranty uses, and I'm curious, there used to be many more, and there's been a consolidation. Could you tell us about the challenge of going through and consolidating and how that was thought about?

Mr. Pedigo: Yes, I'll be happy to. We operated up until 1998 with 45 regional offices. At that time, we decided that we needed to sit down and take a look at our operational structure, because we thought that there were some efficiencies that we could realize if we consolidated operations.

So we put a team together, and we asked them to reconfigure our operational elements in our field offices, and the plan that they came up with was the one that would result in us moving to nine regional loan centers and the process we followed in executing that plan was first to make sure that we had the support of the top leadership in our agency. I think in any change initiative it's absolutely imperative that you don't start until you know that you have support from the top down.

We actually decided that we would sell this initiative using a business case approach, knowing that change for change's sake would probably not sell well. So, we put together a good business case, and a very comprehensive plan on how this change initiative would work. We then made sure that we touched the right bases. We first talked with our employees, because they were going to be significantly impacted, because we were going from 45 offices to nine.

Once we were sure that they understood where we were going, we needed to make sure that the Veterans Service organizations were aware of what we were doing -- organizations like the America Legion, the Disabled American Veterans, the Veterans of Foreign Wars, and many others who support veterans' interests. We talked with them, we explained the plan, we assured them that this was not going to result in a diminution in service to veterans, but instead in an increase in service, and we got their buy-in.

Another one of the important stakeholders that we had to touch base with were the members of Congress, and so we went up to the Hill, and we briefed the various veterans committees on what our plan was and we got their buy-in.

And then there was the industry that we deal with, the mortgage bankers, the realtors, the homebuilders; these are all entities that we deal with on a daily basis in the loan program. And their interest was in making sure that this new configuration was going to be something that they could work with. So we touched those bases, and at that point we were ready to begin executing the plan, and what we found was that because we touched those particular bases as we went forward we encountered a very limited amount of resistance as we were executing this major consolidation initiative.

One final thing that we decided to do that turned out to be quite fortunate was that we chose to phase this in over a 4-year period. Instead of making the shift at one time we moved operations over a period of time, and that turned out to be less disruptive and more acceptable to all the stakeholders.

Ms. Barrientos: Now, you talked about earlier about the Loan Administration Redesign initiative and taking that together with the consultation with the regional offices in '98, can you tell us a little bit about your -- the lessons learned from that experience. I mean you mentioned some of them, but I was just wondering of some others. And your experience in, you know, dealing with significant change in government, because those are two major initiatives.

Mr. Pedigo: I would say some of the lessons learned actually were learned right up front, and were based on some of the things that I just talked about, for example, getting top-down support before you start a major initiative. I was involved in some major change initiatives prior to the one that we started in 1998, where we failed to get the support of the top leadership of our agency, and as a result when the going got tough, when we started getting resistance from the various stakeholders, we found that it was much more difficult to get the support of our political leadership.

But by getting that support initially for this change initiative we found that when the resistance came they were willing to jump in and support us and help us get through those particular problems. Developing that business case, that's extremely important. Many think that you can change just for the sake of change. If you do that with a major change you're probably not going to be successful. If you develop a business case for making that change, however, generally you're going to experience a lot more success. The plan that you develop to implement that business case must be comprehensive. It must be a sound plan, it has to be logical, and it has to be supportable.

And the budget, obviously, you can't embark upon a major change initiative unless you have the money right upfront to accomplish it. So getting the budget money lined up is extremely important.

And communication, I can't stress enough how important it is to communicate your plan to all of those who're going to be impacted, particularly your outside stakeholders. We communicated early, we communicated often in this initiative, and I think, as a result we were able to get through it reasonably problem-free.

And finally, I think, the biggest lesson we learned was you have to maintain a modicum of flexibility. When you start out with a comprehensive plan there is a tendency to think that when you finish the product is going to look exactly like the original plan. That's not going to be the case, and you need to be willing to budge, to deviate from your plan to some extent. You don't want to prostitute the essence of your plan, but you need to have some level of flexibility if you're going to be successful.

Ms. Barrientos: The Loan Administration Redesign effort that you're undergoing right now is, like I said before, is a major initiative that's going to affect not just the industry, but the staff around the country.

You talked about the lessons learned from the consolidation to the nine regional offices, and I was wondering, how do you feel that adopting some of these lessons learned into the Loan Administration Redesign will help the process, and how the redesign will affect your employees, your internal-external stakeholders in VA in general in the long run?

Mr. Pedigo: I think, in the long run the impact on employees is going to be very positive. We know that it's going to be positive on veterans and on the mortgage industry. Presently, we're probably 80 percent completed with the Loan Administration Redesign project, and I think, there's some consternation in our field offices about whether or not we're going to be able to complete this and have some semblance of the plan that we started out with.

So, right now we're in the process of trying to assure them that we're going to finish with the end of this year, and that what they're going to get is pretty similar to what we started with in our plan. As far as the impact on veterans, we're absolutely certain that this will be a huge improvement. Even though what we've done over the years has been positive and we've managed to help a lot of veterans avoid foreclosure. We're projecting that we will be able to assist significantly more veterans in avoiding foreclosure once this initiative is put in place.

And we've had very strong support from the industry on this. One of the things that we have found out is that the industry wants government programs to operate as much like the rest of the industry as possible. In the mortgage industry, the ideal situation is for a mortgage to be viewed as a commodity, where every mortgage is the same. Whenever a lending institution has to make a deviation in order to accommodate a government program, it costs them money.

So, because they know that in the end of this Loan Administration Redesign project, VA servicing and the system that we use will be almost identical to what they use in the industry. They're willing to support us very strongly in this initiative.

Mr. Lawrence: It's an interesting point about the similarity between the instruments. What is the future hold for loan guaranty programs at VA, we'll ask Keith Pedigo, the Department of Veterans Affairs to tell us about this when our conversation about management continues on The Business of Government Hour.


Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence. This morning's conversation is with Keith Pedigo, director, Loan Guaranty Service, the Department of Veterans Affairs, and joining us in our conversation is Maria Barrientos.

Ms. Barrientos: Keith, we were just talking about some of the major initiatives going on in VA at the current time, but I was just wondering, how do you vision VA, and specifically Loan Guaranty Service within the next 5 to 10 years, how will it change over time?

Mr. Pedigo: I can say one thing for sure and that is that you will continue to see change. When you're working in a program that serves a vibrant part of the private sector as we do then you're bound to change. So the mortgage, finance, and real estate industry will basically determine how we will change.

I think it's probably safe to say that the change that will take place in the future will continue to be under the four broad change themes that we've outlined in the loan guaranty program over the last seven years. And those change themes are automation, delegation, consolidation, and oversight.

And we're going to continue to automate in order to reduce cost of operations and provide better service. We're going to continue to delegate processing authority to the private sector whenever that is feasible in order to improve the timeliness of service to veterans. We're going to continue to be vigilant for additional opportunities to consolidate operations when it will result in better service and greater cost efficiencies. And the fourth element, oversight, we're going to continue to try to improve our oversight structure to make sure that the integrity of the program is maintained.

In looking down the road at how the program will look for veterans, I think, it's safe to say that we're going to continue to move in to the electronic age in the mortgage business. This is what I call, "the couch potatoes' dream." Veterans in the near future, and I mean, probably to some extent today and certainly within the next two to three years will probably be able to go from the point of deciding they want to get a VA loan to closing that loan without even leaving their home if they choose to do so, all through the wonders of electronics.

Today as most people know you can go online and you can look for a home. You can even take a virtual tour of many of those homes online. You can go into every room, you can see every wall, you can see the floors, you can see the furnace, you don't even need to leave your house. You can also go to a lending institution and they can go online and get a VA certificate of eligibility for you. In a couple of years we expect to give that access to veterans.

So, you'll be able to get your eligibility determined without leaving your house. You'll be able to apply for the loan online; you can do that with many lenders today. Lenders, in most cases, will approve your loan online using sophisticated automated underwriting systems; the decision on the approval will come within a minute or two.

Automated valuation models that do the appraisal on properties have already been developed and are going to be sophisticated enough in the next couple of years to probably be used for VA loans. It'll not be necessary to leave your house to close a loan in the future, because laws have been passed that permit legal documents to be executed electronically.

So really, it's not a stretch to say that at some point in the not too distant future veterans will be able to utilize this electronic process to get their loan and if they desire it's probably going to be possible to close that loan within one to five days of signing the contract of purchase.

Ms. Barrientos: In other words, also recent legislation that was passed in Congress that increased the amount that a loan could be afforded to a veteran. Can you talk a little bit about that and how that will affect the loan guaranty program, and, you know, any other major challenges that you see for the program in the next coming years?

Mr. Pedigo: Yes, I think, you're referring to Public Law 108-454, which was signed by President Bush on December 10, 2004. This bill does a number of things, but I'll just focus on the most important part of that legislation. And that's a provision that changes the way that the VA structures the guaranty. In the past whenever the guaranty was increased Congress had to act, they had to actually increase the guaranty and that worked reasonably well over time.

The problem with that structure, however, is that when property values were increasing rather rapidly, the guaranty amount did not always increase sufficiently to take care of that increased cost. As a result since the VA Guaranty determines how much of a loan a veteran can get, veterans found themselves unable to purchase the home of their choice using their VA benefit, in many of the high-cost areas of the country.

In this legislation, Congress now has indexed the VA Guaranty amount to what's known as the Conventional Conforming Loan Limit. The Conventional Conforming Loan Limit is set each year based on the average cost of housing for the previous 12 months, and so on January 1 of each year that limit goes up. In the future the VA loan limit will also go up and it will always be the equivalent of the Conventional Conforming Loan Limit.

Presently, veterans can get a loan without a down payment for up to $359,650 and that's a huge boost to veterans in high-cost areas. We estimate that there were at least eight metropolitan statistical areas around the country where the previous VA loan amount was not sufficient to allow veterans to buy the home of their choice. Twenty-two percent of our veterans lived in those eight metropolitan statistical areas. So for them this will be a huge boost in the use of this benefit.

Mr. Lawrence: Keith, in our conversation today you described some significant change projects that you've taken, you've worked you way through, you've either led or been part of. Other government executives are faced with a sort of similar task, what advice would you give them when they work through these projects to streamline or consolidate or lead change in their own departments?

Mr. Pedigo: I remember, few days ago, seeing a T-shirt that said, "Growing old is not for sissies," and I think, you could probably say that embarking upon major change is not for sissies. It's a difficult process, but the rewards can be significant, and I would encourage anyone who believes that they can improve their government operation to consider a major change initiative, and in doing so I would advice people to follow some of the things that I mentioned earlier.

You know make sure you have a good solid vision for how you want your program to change. Make sure that you change based on a business need and not just for the sake of change. Make sure you develop a comprehensive plan. Make sure that you touch base with all of your stakeholders, and most importantly, with your employees, and to the extent possible try to develop a plan to accommodate any employees who might be displaced by the change.

And most importantly, you know, throughout the process communicate to everyone involved about the progress you're making and about the positive impact that this change will have on them, and I think, if you follow those steps you'll find that a daunting change effort turns out to be a very positive experience for you. And almost always it turns out to be a positive experience for the customers that you serve.

Mr. Lawrence: Keith, you spent your whole career as a public servant making sure that veterans receive the benefits that they're entitled to. In reflecting on that, what advice would you give to someone, perhaps a young person interested in a career in public service?

Mr. Pedigo: I would strongly encourage anyone, any young person to consider a career in public service. I must admit that when I was in college I did not envision that I would end up working for the government but I just kind of fell in into this job after I got out of the military. And it was the best thing that's happened to me in terms of a career, because, by being able to work with the government you can pursue some of the highest missions that we have in this country.

I can speak specifically about the VA; our mission is to serve veterans. Many veterans, you know, who have been seriously injured, some who've lost their lives and we served the needs of the families and this is the highest mission that you can possibly have, and by being the director of the loan guaranty program for the last 18 years, I've been able to make a lot of positive changes that hopefully will position the home loan program to serve veterans for at least another 61 years.

There are other government programs that also have high purposes, and it's very rewarding to be able to get up in the morning and know that at the end of the day you will have done some good for some segment of the American population. I would strongly encourage everyone to consider a career in federal service.

Mr. Lawrence: Okay, Keith, I'm afraid that'll have to be our last question, we're out of time. Maria and I want to thank you for squeezing us in your very busy schedule in joining us this morning.

Mr. Pedigo: Thank you very much, and I would just encourage all listeners if they want to know more about the VA home loan program, or any part of the VA to go to our website, it's

Mr. Lawrence: Thank you, Keith. This has been The Business of Government Hour, featuring a conversation with Keith Pedigo, director of the Loan Guaranty Service of the Department of Veterans Affairs.

Be sure and visit us on the web at, there you can learn more about our programs and research and get a transcript of today's conversation. Once again that's

For The Business of Government Hour, I'm Paul Lawrence. Thank you for listening.

Keith Pedigo interview
“You'll continue to see change. Our four change themes in the Loan Guaranty Program are automation, delegation, consolidation, and oversight. In the future, it’s safe to say that we’re continuing to move into the electronic age in the mortgage business.”

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