VA GUARANTEED LOAN PROGRAM · Conforming Loan Limit $417,000 Loan Limit 25% $104,250 Maximum...

VA GUARANTEED

LOAN PROGRAM

Lender Training

Today’s Topics

• Benefits

• Eligibility, Entitlement & Restoration

• Funding Fee and Exemption

• Underwriting Considerations

• Closing the Deal & Showing the Math

• After Closing

Benefits

Benefits for Veterans

• No down payment

• Negotiable interest rates

• No monthly MIP/MI/PMI

• Choice of loan types

• Limit of closing costs

• Assumable

• No pre-payment penalty

• Financial counseling and loan servicing

Housing Assistance Programs

• Assist with down payment or closing costs

• If approved by the State, County or

Municipality, they are automatically

approved by VA

Benefits for Lenders

• VA loans outperform

– Fewer delinquencies

• VA – 2.21% 90 days or more

• Prime mortgages – 2.97%

– Fewer defaults

– 25% guaranty mitigates risk

Delinquency Comparison

Eligibility, Entitlement

& Restoration

Eligible Loan Purposes

• Purchase or Construct

• Refinance a VA loan (IRRRL)

• Refinance a non-VA loan

– Rate and Term

– Cash-Out

• Energy Efficiency Improvements

• Simultaneously purchase & improve a home

Who is Eligible?

• Active Duty

• NOAA

• PHS

• Selected Reserves

• National Guard

• Surviving spouse

• POW/MIA spouse

General Rule ( Includes NOAA/PHS)

• Active Duty

• Character of Service

– Honorable

– Under Honorable Conditions

– General

Length of Service (Active Duty)

• 24 Continuous Months –OR-

• 90 Days (if currently serving)

• Entry prior to 9/7/80 (E) or 10/16/80 (O)

– 90 Continuous Days (Wartime)

– 181 Continuous Days (Peacetime)

Eligibility (Reserves/National Guard)

• Six years of creditable service

– Not necessarily continuous

– Active duty for training ineligible

– Honorable discharge

Exceptions

• Active Duty

– Discharge for service-connected disability

– Full period ordered to active duty

• Reserve/National Guard

– U.S.C. Title 10

Surviving Spouses

• Receiving Dependency Indemnity

Compensation

• Unremarried –OR—

• Remarried after age 57

Proof of Service

• DD-214 (discharged veterans)

• Points Statement (Reserves/National Guard)

• Statement of Service (service members)

Certificate of Eligibility (COE)

• Lender or Veteran may apply

– Online

• VIP

• eBenefits

– By mail

Basic & Bonus Entitlement

• Basic Entitlement: $36,000

– $36,000 ÷ 25% = $144,000

• Bonus Entitlement: $68,250

– Only available for loans > $144,000

• Total Entitlement

– $36,000 + $68,250 = $104,250

– $104,250 ÷ 25% = $417,000 *

* Maximum guaranty is 25% of the county conforming loan limit

Prior Paid-in-Full Loan

Ask the veteran, “Do you still own

this property?”

##-##-#-#######

Basic “Normal” Restoration

• Not automatic

• Requirements

– Payoff of the loan

– Disposal of the property

Active Loan

Veteran may have enough remaining

entitlement for a new VA loan.

Bonus entitlement is only available on loans over $144,000

Conforming Loan Limit $417,000

Loan Limit 25% $104,250

Maximum Entitlement $104,250

(Entitlement Charged) $ 58,625

Remaining Entitlement $ 45,625

Max Loan with No Down:

$45,625 ÷ 25% = $182,500 *

Calculating Remaining Entitlement

* If proposed loan amount is between $144,001 and $182,500,

no restoration is needed. Proceed with this COE.

Special Restorations

• Cash-Out Refinance

– Prior VA loan on property

– “Recycles” entitlement

– Shown in COE conditions

• One-Time Restoration

– VA loan paid in full

– Property still owned

– Shown in COE conditions

Funding Fee &

Exemptions

Funding Fee

Veteran Type Down Payment First-time Use Subsequent Use

Regular

Military

None

5% or more

10% or more

2.15%

1.5%

1.25%

3.3% *

1.5%

1.25%

Reserves

or

National Guard

None

5% or more

10% or more

2.4%

1.75%

1.5%

3.3% *

1.75%

1.5%

* Interest Rate Reduction Refinance Loan (IRRRL) = .50%

Loan Origination Reference Guide, page 52

Funding Fee Exempt*

• Receiving VA disability compensation

• Entitled to VA disability compensation

• Rated eligible pre-discharge

• Surviving spouse

*Exemption status should show on COE or IRRRL status screen in most cases.

Property Eligibility

Eligible Properties

• Existing Construction

• Manufactured

• Approved Condos

• Multi-unit

• Proposed construction

• Under construction

• New construction

Ineligible Properties

• Very poor condition

• Flood hazard area (no flood insurance)

• Airport Noise Zone 3

• Unapproved condominium developments

• “Not eligible for government financing”

Lender Appraisal Processing Program

• Staff Appraisal Reviewer

– Issues Notice of Value

– Underwrites Loan

• “Automatic” Authority

LP-Denver

Fee Appraisers

• Not Employees of VA

• Private Contractors

• Licensed by the State

• Determine Market Value

LP-Denver

LP-Denver

Reminder

• VA guarantees the loan, not the condition of

the property!

Notice of Value

“Neither VA nor the lender can guarantee that

the home will be satisfactory to you in all

respects…. A thorough inspection of the

property…may help minimize any problems

that could arise after loan closing.”

Minimum Property Requirements (MPRs)

• Safe

• Sanitary

• Structurally Sound

Tidewater Initiative / Reconsiderations

• Appraiser contacts Lender POC

• Requests additional information

• Lender provides “comps”

– 48 hours

– Grid format

• Reconsideration of Value

LP-Denver

Energy Efficient Mortgages (EEMs)

• Up to $3,000 (receipts)

• $3,001 to $6,000 (energy offset)

• Over $6,000 (value must support)

Occupancy

Occupancy

• Purchases and Regular Refinance

– Within 60 days (some exceptions)

– Spouse may meet requirement

– Dependent child of active duty member

• IRRRLs/Streamline Refinance

– Previous occupancy meets requirement

Underwriting

VA Guidelines

• VA Lender’s Handbook, VA Pamphlet 26-7

• Underwriting similar to FHA and

Conventional loans

• Most loans do not need VA approval

• Loans should be made to qualified veterans

Loans Requiring Prior Approval

• Incompetent Vet

• Non-Service-Connected Pension

• Veteran/Veteran

• Veteran/Non-Veteran

LP-Denver

Community Property

• Arizona

• California

• Idaho

• Louisiana

• Nevada

• New Mexico

• Washington

• Wisconsin

Common Law

• CO, ID, MT, UT

• URLA marked “Married”

• Live together

• Hold themselves out as married

• Free to marry

Giving Credit Where Credit is Due

• Verifications

– Employment

– Debts

– Assets

• CAIVRS

• Credit History

• Child Care

• Manual versus AUS

• Loan Analysis

– Residual exceeds

guideline

– Debt-to-Income

– > 41%

– Compensating factors

Employment/Income Verification

• Stability and Reliability

• Continuance

• Sufficiency

Income Stability / Reliability

• Two-Year History

– Education counts

– Position improvement

• Employment < 12 Months

– Requires U/W LOX

– Employer’s evaluation

– Training / Education

• Overtime / Part-Time

• Bonuses/Commissions

Civilian Employment Income

• Verification of Employment

– Automated service

– VA Form 26-8497

– Phone verification

• Pay stub

– 30 days / YTD

– Not required with automated verification

• W-2s

Military Employment Income

• Active Duty

– Leave and Earning Statement (LES)

– ETS > 12 months

– BAS/BAH

– Clothing allowances/bonuses

– Other military pay

• Reserve / National Guard

– DFAS drill pay tables

Rental Income

• Currently Occupied

– Mortgage offset

– Lease or consider rental market

• Other Rentals

– Schedule E (2 years)

– Lease / Rental market

– Management experience

– Cash reserves: 3-6 months PITI

Credit History

• Collections / Disputed Accounts

– > 1 year

– Medical

– Not required to be paid

• Judgments / Federal Debts

– Paid or Payment Arrangements

• Judgment Liens

Credit History

• Bankruptcy

– Chapter 7 - Disregard if > 2 years

– Chapter 13 - Discharge or Trustee approval

• Foreclosure

– 2 years

• Short Sales – VA Neutral

– Effort to repay vs. evade a debt

– Consider overall creditworthiness

Closing the Deal

& Showing the Math

HUD-1 FEES

• 1% Origination Fee

• Credit for unallowable fees >1%

• GFE

• Origination Statement

• Title Fees & Credits

Unallowable Fees

• Real Estate Broker Fee

• Administrative Fee

• Underwriting Fee

• Doc Prep Fee

• Tax Service Fee

• Settlement/Closing Fee

• Loan Broker Fee

• e-Doc Fee

• Title Review Fee

• Wire/Courier Fees*

Seller Concessions

• Prepaid interest

• Escrows for taxes and

insurance

• Hazard insurance

premium

• Discount points

• Funding fee

• Debts

• Etc.

Limited to 4%

After Closing

Funding Fee Entry

• Avoid late fees by entering payment within

15 days of closing.

• Even if veteran is exempt, entry must be

made in FFPS.

– Closing date, down payment, etc., populates

WebLGY record for LGC

Why Am I Being Audited?

• 10% randomly selected

• Probationary reviews

• Triggered audits

– Guaranty > 60 days post-closing

– Residual below guideline

– Debt-to-Income ratio > 41%

No More Paper!

• Upload directly to WebLGY

– Audit files

– Deficiency responses

• View mini reports

Questions?

Contact Us

• Phone: 888-349-7541

– Underwriting, Option 2

– Appraisal Section, Option 1

– 8:00 a.m. to 4:00 p.m. (MST) Monday - Friday

• FAX: 303-914-5666

• E-mail: LGYemail@va.gov

Thank You

We strive for excellence!

Please let us know how we did!