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: [email protected]
Thank You
We strive for excellence!
Please let us know how we did!