Presentation on theme: "VA Guaranteed Home Loans"— Presentation transcript:
1VA Guaranteed Home Loans Roanoke VA RegionalLoan CenterCompliments of Roanoke and Cleveland RLC
2Contact InformationNational VA website:Roanoke VA website:Toll Free: (800)This is a little play on words;Contact & Information – information on how to contact us, but also, you can obtain information through these sites and at this phone numberThe Lender’s Handbook – Definitive source for information on VA loans
3Types Of VA Loans Purchase or construct a home Purchase a VA/HUD approved condo or townhousePurchase farm propertyPurchase a home and improve at the same timeManufactured home on permanent foundationInterest Rate Reduction Refinance Loans (IRRRL)Cashout RefinancesEnergy Efficient ImprovementGive details of each of the aboveEEM details in Chapter 7, section 3up to $3,000 based on documented costsup to $6,000, analysis determines increased PITI offset by likely reduction in utility costsmore than $6,000 to the extent that cost is supported by equal increase in value.Up to 4 unitsFarm property appraised for residential valueOthers – Includes purchase MH and land and affix to permanent foundation; simultaneously purchase and improve…, others…..
4WHAT A VA LOAN CAN DO Ensures Equal Opportunity to Veterans No Down Payment ProgramNegotiable Fixed Interest RateStreamlined Processing for LendersRight to Prepay without PenaltyAssumable MortgageLimitations on Closing CostsForbearance Extended to VA Homeowners Experiencing Temporary Financial Difficulty
5Dispelling The Myths Appraisals take forever! Too much red tape! Too much paperwork!VA takes too long!
6Do You Remember The Past ? Find a HomeApply to LenderFor LoanApply for COELender OrdersAppraisal by PhoneVA Mails GuarantyTo LenderProcessing TimeSix to Eight Weeks!Appraisal Received by VA,Reviewed and CRV IssuedVA Reviews Each Package(30 to 40 Documents!!)Lender Packages Loan andSends to VA for ApprovalSAY A FEW WORDS ABOUT EACH PICTURE AS YOU CLICK AND IT MOVES ACROSS THE SCREENVA Approves or DisapprovesLoan and Notifies LenderLender SendsLoan Package to VALender Closes Loan
7Where We Are Today… Find Home Go to Lender Determines eligibility electronically using ACEGo to LenderUses AUS to get decision in minutesOrders Appraisal thru TASSelf ExplanatoryLender Closes LoanObtains Loan Guaranty Electronically14-21 Days
8What Changed? How we got from there.. …..To Here Consolidation 45 Regional Offices administered VA’s Home Loan Program; now 9 Regional Loan Centers & the Eligibility CenterThe Portal, TAS, FFPS, WBLS, webELI, othersLenders have the PowerWe review a minimum of 10% of closed loans to ensure compliance with VA’s Guidelines & StandardsConsolidationAutomationDelegationOversight
9How Long Does The Average VA Loan Sit On a Government Employee’s Desk? 0 days15 days30 days45 daysForeverThe reason for this, in addition to the consolidation and automation that I previously talked about, is that most VA loans are processed by what we call the “Automatic” procedure.
10Automatic Procedure Lender.. Originates Processes Underwrites Income & Credit packages and the AppraisalCloses loan without sending anything to VALender guarantees loan online through a system called WebLGY
11Loans That Must Be Submitted As Prior Approval Joint LoansVets in receipt of non-service connected pensionVets rated incompetent by VAInterest Rate Reduction Loans when refinancing a delinquent loan************************************Of course, Prior approval lenders must submit loans for Prior approval.Automatic lender’s underwriter may submit loan for Prior approval when the believe it warrants merit and should be approved.
12Prior Approval Lender.. Originates Processes Submits loan to VA for underwritingCloses after VA issues commitment, usually in 3-5 days
14Who Is Eligible For A VA Home Loan? Honorably discharged veterans who served:2 years on active duty6 years in the Reserve/National guardPOW’s held in captivity for 90 days of more90 days of wartime duty when called up or ordered under U.S.C. Title 10 (this US code must appear on DD214).181 days of peacetime duty called up under U.S.C. Title 10Some unmarried surviving spousesReserves/Guard member eligible with 6 years of service, or, if activated under title 10Unmarried surviving spouse; spouse’s death must have occurred while in military on active duty or related to something that happened to them while they were on active dutyOther – Public health service, certain merchant seaman, etc.14
1590 Days Wartime World War II – (9/16/40 - 07/25/47) Korean Conflict – (06/27/50 - 1/31/55)Vietnam – (08/05/ /07/75)Persian Gulf - 08/02/90 …
16181 Days Peacetime Post WWII - 7/26/47 - 6/26/50 Post Korean - 2/1/55 - 8/4/64Post Vietnam - 5/8/75 - 8/1/90
172 Year Requirement Enlisted person - After September 7, 1980 Officer – After October 16, 1981(90 days applies to Persian Gulf wartime service called up under U.S.C. Title 10)
18Reserve & National Guard 6 Years Total Service unless activated under Title 10
19VETERANS INFORMATION PORTAL (VIP) Veterans Information Portal – Where Lenders Access:ACETASWBLSOther…(TAS, e-appraisal.etc.)
20Obtaining A COE VA Form 26-1880 Proof of service documentation (DD214, active duty statement of service or Reserve/National Guard points statement)If veteran had previous VA home that was sold, a copy of the HUD-1 Settlement Statement, Request for a Certificate of Eligibility available on website:Proof of service:DD 214Statement of ServiceNGB 22 or NGB 23Restoration Documents (1880, HUD 1, proof of service)“One Time Restoration” without disposal of property.To get proof of service docs:20
21Automated Certificates Of Eligibility (ACE) An automated system used by lenders to obtain an online certificate of eligibilityAccessed through the VIP
22Those who use a favorite, shortcut, or an old link may have trouble accessing the Portal or its applications (TAS, ACE).You need to type the website “vip.vba.va.gov” into the address bar to access the portal.
28ACE Facts For use by lenders and mortgage brokers No application for certificate of eligibility neededVet’s SSN & Name all that’s required to use ACE systemTypical successful ACE candidate is a first time user of VA program, discharged after 1980 and served on active duty for 2 years
29ACE Facts (cont.)ACE certificates of eligibility no longer printed on green or gold safety paper.ACE certificates printed from computer on white paper.Authorization number distinguishes authenticity
30ACE Can’t Make All Determinations Reserves/National GuardPrior VA loan foreclosureInsufficient time/discharge typeUnmarried surviving spouse
32VA Eligibility CenterWinston Salem Eligibility Center P.O. Box Winston Salem, NCVA Form “Request for a Certificate of Eligibility”Status of LARefer to EC handout32
33What Does A Certificate Of Eligibility (COE) Mean To You? GNMA, FNMA and FHLMC require government loans to have a minimum of 25% guaranty coverageBasic entitlement – under old law, allows for up to $36,000 for loans not to exceed $144,000Certificate of eligibility tells the lender, broker or real estate agent how much entitlement a veteran has
34What Does A Certificate Of Eligibility Mean To You (cont.)? A veteran who previously used the VA home loan program would need to sell the home and transfer title to obtain the full basic and bonus entitlement back (restoration of entitlement)A veteran can obtain a certificate of eligibility over and over, provided they have adequate entitlement
35Appraised Value or Purchase Price Maximum VA Loan AmountLimited to the lesser of:Appraised Value or Purchase Price+VA Funding FeeEnergy Efficient Improvements
36Maximum VA Loan Amounts Maximum VA loan is the lesser of the appraised value or the purchase priceVA loan is based on available entitlementSecondary market requirements for GNMA, FNMA and FHLMC require at least a 25% guarantyOf course, Prior approval lenders must submit loans for Prior approval.Automatic lender’s underwriter may submit loan for Prior approval when the believe it warrants merit and should be approved.
37Maximum VA Loan Amounts VA’s maximum guaranty on a $417,000 loan is $104,250, or $417,000 x 25% = $104,250****WE’VE RAISED THE ROOF****Example: The COE issued to you shows $36,000 basic entitlement. This amount can be increased to an amount equal to 25% of the Freddie Mac conforming loan limit which is $417,000 across the country – exception for those counties with a temporary increase.Alexandria, VA, for example, is one county with a temporary increase of $768,750 for a home over $144,000.Entitlement = $192,187.5 ($36,000 basic + $156,187.5 bonus)….$192,187.5 x 4 = $768,750.If you qualify for a home costing $768,750, the lender that you are approved through would receive a 25% guaranty.Of course, Prior approval lenders must submit loans for Prior approval.Automatic lender’s underwriter may submit loan for Prior approval when the believe it warrants merit and should be approved.
38Partial Entitlement Remaining Entitlement Scenario Veteran purchases a home in 1995 for $100,000VA guarantees 25% of loan or $25,000Loan is still open and being paid onAssuming the conforming loan limit is $417,000.If the conforming loan limit is higher – ex. bonus as shown on previous screen would be more.Remaining Entitlement:$36,000 basic entitlement- 25,000 used$11,000 remaining basic+68,250 bonus entitlement$79,250 total entitlement leftx$317,000 maximum loan toobtain 25%guaranty
39VA Appraisals What’s changed at VA regarding appraisals?!!! 40% increase in number of appraisers in all statesAll appraisers must be e-commerce compliantAppraisers are expected to communicate with all partiesLender Appraisal Processing Program (92%)Timeliness issues aggressively monitoredFunding Fee is only cost that can be added to the loanCurrent rates (see handout):Purchase – 2.15% (2.4%-for reservists)Subsequent Use – 3.3% for all veterans5% down payment – 1.5% (1.75% for reservists)10% down payment – 1.25% (1.5% for reservists)IRRRLs - .5%FFPSDebt Checks Referred to earlier.
40Minimum Property Standards Bottom Line: NO “FIXER UPPERS!” VA AppraisalsMinimum Property StandardsSafe – meets local/county safety codes (electrical, structural and location)Sanitary – well, septic and sanitary sewer pass local/county inspectionSound – meets local/county structural building codesBottom Line: NO “FIXER UPPERS!”Funding Fee is only cost that can be added to the loanCurrent rates (see handout):Purchase – 2.15% (2.4%-for reservists)Subsequent Use – 3.3% for all veterans5% down payment – 1.5% (1.75% for reservists)10% down payment – 1.25% (1.5% for reservists)IRRRLs - .5%FFPSDebt Checks Referred to earlier.
41Basic Rule Of VA Loans Regarding Owner Occupancy Generally, must occupy within 60 daysExceptions –IRRRLs – do not have to occupySpouse of veteran can satisfy occupancyIf veteran is on active duty, must occupy within 12 monthsIRRRL must certify previously occupiedIf by virtue of active duty military service, unable to occupy the property, the occupancy requirement is met if the house is occupied by the service person’s legal spouseOccupany generally required within 60 daysExceptions and other details, Lender’s Handbook, Chapter 3, Section 5
42VA FUNDING FEE Funding fee can be added to the based loan amount Funding fee amount varies depending on loan type, down payment, and whether or not veteran had VA loan previouslyFunding fee is paid online atSome borrowers are exemptFunding Fee is only cost that can be added to the loanCurrent rates (see handout):Purchase – 2.15% (2.4%-for reservists)Subsequent Use – 3.3% for all veterans5% down payment – 1.5% (1.75% for reservists)10% down payment – 1.25% (1.5% for reservists)IRRRLs - .5%FFPSDebt Checks Referred to earlier.
43Veterans Exempt From Funding Fee Veteran receiving 10% disability compensation from VAVeteran receiving military pension from VA, in lieu of compensationSurviving spouse of a veteran who died as a result of active duty injuries*******************************
44VA Funding Fees Basics Please refer to your handbook. Loan TypeActive Duty Funding Fee %Reservist/National Guard Funding Fee %Purchase2.15%2.40%Subsequent Use3.30%CashoutSubsequent3.3%2.4%Misnamed (CAIVRS checks for federal debt), we use it:Verifies VA incomeConfirms when loan must come in for Prior approval such as incompetent vet or vet in receipt of non-service connected pensionConfirms if vet exempt from FF because of disability (usually 10% min. rating)VB Act of 2004 in 12/04 made possible exemption for pre-discharge ratings
45UNDERWRITING Underwriter’s Objective: Determine that the veteran is a satisfactory credit risk, and has theincome to qualify for the loan
46INCOME Stable and Reliable Anticipated to continue Sufficient in amountReportable/VerifiableIdentify and verify income to meet: - mortgage payment - other shelter expenses - debts and obligations - family living expenses
47Income Income must be “verifiable” Prefer a 2 year history, but consideration given for at least 12 months on the jobVeteran can obtain VA loan immediately out of the military if employment is related to military technical experienceExplain significant gaps in employmentConsider income of spouse who is contractually obligated on loan or in a community property state.
48Verification Standard: Alternative: VA Form , Verification of Employment, orPay stubsAlternative:Telephone verificationPay stubs (30 days)W 2s for 2 yearsVerbal VOE = need date of verification, the name title and telephone number of the person with whom employment was verified.Alternative documentation can only be used if the lender concludes that income is stable, reliable, and anticipated to continue.Feedback certification on AUS loans state what’s needed.
49Other Types of Verifications Faxed & Internet VerificationsEmployment Verification ServicesLeave & Earning Statement (LES) for Active Duty Service (available at “my pay”Income tax returns (self employment) & YTD P&L and balance sheetOther……Faxed & Internet (must be able to determine “authenticity”); fax must contain “banner” information; internet must contain “URL”Employment verification services – “The work number for everyone” (TALX); these must be approved by VALES online at will bring it up.Self employed, generally less than 2 years, not stable/reliable (can’t use) unless previous related employment and seller’s (of business) financial records. Consider economic outlook. Is there a steady or significant decline in earnings over the period analyzed?Other = leases
50Income less than 12 months… Generally not considered stable and reliableCarefully consider: ~ Employer’s evaluation of probability of continued employment ~ Special training/education/skills requiredIf using this income… … you must explain why!!!Consider skilled positions: nurse, medical technician, lawyer, computer systems, analyst, etc.Income may be considered to offset debts of months duration. Determine amounts to be used based on factors such as: - employers probability of continued employment - length of employment (ex. 10 months vs. 6 months) Include explanation with loan submission.Consider recent history of frequent changes in employment Analyze the reasons for the changes Favorable: Career advancement in same line of work Unfavorable: No apparent betterment to applicant One line of work to anotherIncome from Overtime, Part-time, Second jobs and bonuses: Must be stable, reliable, and has continued (and is verified) for at least two years. Also must be regular, predictable, and likely to continue For example, 2nd job: Is it compatible with hours of duty and work conditions of primary job? How long has the applicant been employed under such arrangement? This income, if verified at least 12 months, may be used to offset debts. Include explanation.
51Overtime, Part Time and Bonus Income Generally not considered stable and reliable unless 2 year historyVerification for at least 12 months – income may be used to offset debts of 10 to 24 monthsIncome from Overtime, Part-time, Second jobs and bonuses: Must be stable, reliable, and has continued (and is verified) for at least two years. Also must be regular, predictable, and likely to continue For example, 2nd job: Is it compatible with hours of duty and work conditions of primary job? How long has the applicant been employed under such arrangement? This income, if verified at least 12 months, may be used to offset debts of 10 to 24 months.
52Credit History 3-File Merged (MCR) Residential Mortgage Credit Report (RMCR)Verify Rent/Mortgage historyInclude a written explanation for any debt that is not rated: For example, childcare expenses.VOR/VOM history often best indicator of whether applicant will make timely mortgage payments in the future.
54Automated Underwriting Systems (AUS) Most major lenders approvedto use AUS systemsTypical VA “Accept” is in the 640 credit score range
55Automated Underwriting Systems Approved By VA Desktop UnderwriterLoan ProspectorCountrywide’s CLUESChase’s ZIPPYPMI/AURA For VA Loans
56AUS “Accept” For VA Loans In the 640 mid-credit score range“Accept” gives credit clearance with waiver of certain derogatory issuesAUS “Accept” does not mean loan is clear to closeVeteran must still meet debt ratio and residual income factors
57AUS Refer or Manual Underwrite: What We Consider For Approval Review individual trade lines – derogatories in last 12 months?Collection accounts – minor or major?Charge offs – how much and how long ago?Federal debt – cannot close with open, unpaid Federal debtJudgments – cannot close with open, unpaid judgmentsAbsence of credit historyShould be no lates in most recent 12 monthsCollection accounts do not necessarily have to be paid as a condition of loan approval. Recent payment of collections does not alter unsatisfactory payment historyJudgments must be paid in full or subject to a repayment plan with a history or timely payments.Federal debts should be paid or in repayment plan 12 + monthsAn absence of credit history is not a reason for disapproval.For non-traditional credit, develop evidence of timely payment of non-installment obligations. This should not be used to offset derogatory credit. (Usually 12 months history required)If the applicant(s) are determined satisfactory credit risks in spite of derogatory credit, include an explanation for the basis of this determination.
58Bankruptcy ~ Chapter 7Discharged 2 + years ago if bankruptcy was caused by borrower’s financial mismanagementDischarged 12 months ago - must be due to circumstances beyond borrower’s controlMust have documentationMust have re-established credit in most recent 12 monthsFor months:May be possible if due to reasons beyond the control of the applicant(s) and if good credit has been re-established. (example: medical reasons, not divorce)Divorce is not viewed to be beyond the control of the borrower.For business failure, ensure that it was not due to applicant’s misconduct.Bankruptcy in most recent 12 months, it’s not going to be possible to determine good credit risk.
59Bankruptcy ~ Chapter 13 & Consumer Credit Counseling This indicates an effort to pay and may be viewed as evidence of acceptable credit if:12 month payment history, no latesAcknowledgment of trustee or agencyFor Consumer Credit Counseling:If the applicant(s) have good prior credit and are participating in CCC, then such participation is considered to be a neutral factor, or even a positive factor, in determining credit worthiness. Do not treat this as a negative item if the veteran entered into a CCC plan before reaching the point of having bad credit.
60Foreclosures Develop facts and circumstances Same waiting periods as Chapter 7 BankruptcyPrior VA Loan: Ensure no debt to Government and entitlement restoredApply bankruptcy guidelines.
61Debts & ObligationsMay remove debts with 10 monthly payments remaining (if not significant)Only monthly revolving and installment accounts consideredChild care is a monthly obligationInvestigate all allotments on LES or pay stubsVerify and consider Alimony and Child SupportObtain verification directly from creditor for: - Debts not on credit report - Accounts listed “will rate by mail” or “need written authorization”Resolve any discrepancies.Childcare falls under the guidelines as debt that has not been rated on the credit report. (sec. 4.05, page 4-31)
62Debts & Obligations You May Disregard Co-obligor on another’s loan:evidence payments made by someone elseNo reason to believe applicant will need to make payments in the futureStudent Loan payments deferred 12 months or more.401K loans (or other loans secured against deposited funds).401K Loan example:A veteran has $10,000 in his TSP (or other retirement account).He takes out a loan (borrows against it) for $7,000.The lender does not have to include this monthly payment as debt AND may only include the remaining $3,000 as available assets.
63Assets Sufficient in amount VA Form 26-8497a, Verification of Deposit Alt Docs: Last two bank statementsInternet and faxed verifications**********************Gift Letters: Statement from the gift giver stating that the gift does not have to be repaid. (Evidence of available funds not a VA requirement)Note: down payment can be borrowed (not when price exceeds value)
64VA’s Standards Debt-to-income Ratio – 41% Residual Income - should meet VA’s residual income tablesLender must complete Loan Analysis, VA Form
65Debt Ratio 46% - $50 Residual Shortfall Approve LoanReject LoanCould go either wayVA standards are “guidelines”Consider all of the facts in the individual caseConsider COMPENSATING FACTORSWas it an AUS approve (with data integrity)?
66Contract Issues Contingent on VA financing VA “Escape Clause” is mandatorySeller must pay termite inspection************************. See Option Clause in handout
67Allowable Fees & Charges Appraisal Report & Compliance InspectionsCredit ReportPrepaid Taxes and Hazard InsuranceTitle Exam and Title Insurance FeesFlood Zone DeterminationEnvironmental Endorsements (3.0, 8.1,103.5)Recording Fees and TaxesEPA EndorsementOrigination Fee (1%)Reasonable Discount Points (May roll up to 2 points into an IRRRL)See HandoutWhenever the charge relates to services performed by a third party, the amount paid by the borrower is limited to the actual charge of that third party. For example: The lender obtains a credit report at a cost of $30. Then the lender may only charge the borrower $30.The borrower may not pay a duplicate fee for services that have already been paid for by another party.Alta Endorsement fees for Hybrid ARMS is allowable as long as the charge is reasonable. ($50).
68Fees That Can Never Be Charged To A Veteran Termite/Pest InspectionSeptic Inspection (as mandated by county)Well Inspection (as mandated by county)Mortgage Broker FeeSee Handout(if asked) HUD/FHA inspection Fees for buildersOthers…..
69WHAT’S NEW IMPACT OF RESPA FOR VA New HUD1 and Good Faith EstimateVA will continue to have a cap on the origination fee and limit the type of charges that may be paid by the veteran.In order to monitor these fees, VA is requiring lenders to itemize these charges in the empty 800 lines of the HUD-1 (effective 5/1/2010).Lenders will be required to maintain a copy of the GFE and invoices for third party charges as part of their origination package.
70One Percent Origination Fee The lender may charge the veteran a flat fee up to one percent of the loan amount. The flat fee is intended to cover the lender’s costs and services which are not reimbursable as itemized fees. For Interest Rate Reduction Refinance Loans – this fee may not exceed 1% of the existing loan balance of the loan being refinanced plus the cost of energy efficient items less any cash payments from the veteran.Circular – Lists Reasonable and Customary Items along with Unallowable Itemized Fees – Also refer to Chapter 8, section 2d of the Lenders Handbook.
712009 VA Loan Statistics 325,675 VA loans nationwide $68.2 billion in VA loan volumeAverage VA loan $209,395.
72Foreclosure Avoidance Options Repayment PlansDeed In Lieu of ForeclosureLoan ModificationVA RefundingCompromise SaleTHE HOMEOWNER NEEDS TO CONTACT THEIR LENDER
73VA Compromise Sales (Short Sales) If the value of the veteran’s property has dropped and you, as a realtor, cannot get a contract to pay the loan in full, you may want to consider the VA compromise sale program.If you get a contract equal to the value and the closing costs are reasonable and customary, this program may work for you.With this program, the lender (on behalf of VA) can step in and pay the difference to pay the loan off plus closing costs that are reasonable so that the homeowner can avoid foreclosure. When the lender reviews a case for VA compromise, they look at the case as if it were going to foreclosure versus allowing the VA compromise to go through. There must be a savings in order for the compromise sale to go through.*******************************************************************If, for example, you submit a contract that equals the value but the value has dropped drastically or the closing costs are too high for whatever reason (or a combination of both factors), the contract will fall through.Funding Fee is only cost that can be added to the loanCurrent rates (see handout):Purchase – 2.15% (2.4%-for reservists)Subsequent Use – 3.3% for all veterans5% down payment – 1.5% (1.75% for reservists)10% down payment – 1.25% (1.5% for reservists)IRRRLs - .5%FFPSDebt Checks Referred to earlier.
74VA Compromise Sales (Short Sales) Contract Sales Price: $ 95,000Closing Costs: $ 7,800Total $102,800Total Debt of $113,619 less Net After Sale of $102,800 =Comp Claim Payment of $10,819ForeclosurePrincipal: $110,000Interest $ 2,019Foreclosure Costs $ 1,000Advances $TOTAL Debt $113,619*Net Value ,943Foreclosure Claim $ 16,676Funding Fee is only cost that can be added to the loanCurrent rates (see handout):Purchase – 2.15% (2.4%-for reservists)Subsequent Use – 3.3% for all veterans5% down payment – 1.5% (1.75% for reservists)10% down payment – 1.25% (1.5% for reservists)IRRRLs - .5%FFPSDebt Checks Referred to earlier.Potential Foreclosure Claim of$16,676 – Comp Claim $10,819=$5,857.Savings to VA: $5,857 and VA does not have to take back a property to re-sell.*Note: net value = appraisal of $105,000 less 11.87% = net value of 96,943.The 11.87% is the average cost to acquire and market a foreclosed property.