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VA Guaranteed Home Loans Roanoke VA Regional Loan Center Compliments of Roanoke and Cleveland RLC.

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Presentation on theme: "VA Guaranteed Home Loans Roanoke VA Regional Loan Center Compliments of Roanoke and Cleveland RLC."— Presentation transcript:

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2 VA Guaranteed Home Loans Roanoke VA Regional Loan Center Compliments of Roanoke and Cleveland RLC

3 Contact Information National VA website: Roanoke VA website: Toll Free: (800)

4 Types Of VA Loans Purchase or construct a home Purchase or construct a home Purchase a VA/HUD approved condo or townhouse Purchase a VA/HUD approved condo or townhouse Purchase farm property Purchase farm property Purchase a home and improve at the same time Purchase a home and improve at the same time Manufactured home on permanent foundation Manufactured home on permanent foundation Interest Rate Reduction Refinance Loans (IRRRL) Interest Rate Reduction Refinance Loans (IRRRL) Cashout Refinances Cashout Refinances Energy Efficient Improvement Energy Efficient Improvement

5 WHAT A VA LOAN CAN DO Ensures Equal Opportunity to Veterans No Down Payment Program Negotiable Fixed Interest Rate Streamlined Processing for Lenders Right to Prepay without Penalty Assumable Mortgage Limitations on Closing Costs Forbearance Extended to VA Homeowners Experiencing Temporary Financial Difficulty

6 Dispelling The Myths Appraisals take forever! Too much red tape! Too much paperwork! VA takes too long!

7 Find a Home Apply to Lender For Loan For Loan Apply for COE Appraisal Received by VA, Reviewed and CRV Issued Lender Packages Loan and Sends to VA for Approval Lender Closes Loan VA Reviews Each Package (30 to 40 Documents!!) (30 to 40 Documents!!) VA Mails Guaranty To Lender To Lender Lender Orders Appraisal by Phone Lender Sends Loan Package to VA VA Approves or Disapproves Loan and Notifies Lender Processing Time Six to Eight Weeks! Do You Remember The Past ?

8 Find Home Go to Lender Lender: Determines eligibility electronically using ACE Determines eligibility electronically using ACE Uses AUS to get decision in minutes Uses AUS to get decision in minutes Orders Appraisal thru TAS Orders Appraisal thru TAS Obtains Loan Guaranty Electronically Obtains Loan Guaranty Electronically Days Lender Closes Loan Lender Closes Loan Where We Are Today…

9 What Changed? Consolidation Consolidation Automation Automation Delegation Delegation Oversight Oversight How we got from there.. …..To Here

10 How Long Does The Average VA Loan Sit On a Government Employees Desk? 0 days 15 days 15 days 30 days 30 days 45 days 45 days Forever Forever

11 Automatic Procedure Lender.. Originates Originates Processes Processes Underwrites Income & Credit packages and the Appraisal Underwrites Income & Credit packages and the Appraisal Closes loan without sending anything to VA Closes loan without sending anything to VA Lender guarantees loan online through a system called WebLGY Lender guarantees loan online through a system called WebLGY

12 Loans That Must Be Submitted As Prior Approval Joint Loans Joint Loans Vets in receipt of non-service connected pension Vets in receipt of non-service connected pension Vets rated incompetent by VA Vets rated incompetent by VA Interest Rate Reduction Loans when refinancing a delinquent loan Interest Rate Reduction Loans when refinancing a delinquent loan ************************************ ************************************

13 Prior Approval Lender.. Originates Originates Processes Processes Submits loan to VA for underwriting Submits loan to VA for underwriting Closes after VA issues commitment, usually in 3-5 days Closes after VA issues commitment, usually in 3-5 days

14 99% of VA Loans are Automatics 1% are Priors

15 Who Is Eligible For A VA Home Loan? Honorably discharged veterans who served: 2 years on active duty 2 years on active duty 6 years in the Reserve/National guard 6 years in the Reserve/National guard POWs held in captivity for 90 days of more POWs held in captivity for 90 days of more 90 days of wartime duty when called up or ordered under U.S.C. Title 10 (this US code must appear on DD214). 90 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 days of peacetime duty called up under U.S.C. Title 10 Some unmarried surviving spouses Some unmarried surviving spouses

16 90 Days Wartime World War II – (9/16/ /25/47) World War II – (9/16/ /25/47) Korean Conflict – (06/27/50 - 1/31/55) Korean Conflict – (06/27/50 - 1/31/55) Vietnam – (08/05/ /07/75) Vietnam – (08/05/ /07/75) Persian Gulf - 08/02/90 … Persian Gulf - 08/02/90 …

17 181 Days Peacetime Post WWII - 7/26/47 - 6/26/50 Post WWII - 7/26/47 - 6/26/50 Post Korean - 2/1/55 - 8/4/64 Post Korean - 2/1/55 - 8/4/64 Post Vietnam - 5/8/75 - 8/1/90 Post Vietnam - 5/8/75 - 8/1/90

18 2 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)

19 Reserve & National Guard Reserve & National Guard 6 Years Total Service unless activated under Title 10

20 VETERANS INFORMATION PORTAL (VIP)

21 Obtaining A COE VA Form VA Form Proof of service documentation (DD214, active duty statement of service or Reserve/National Guard points statement) 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 If veteran had previous VA home that was sold, a copy of the HUD-1 Settlement Statement

22 Automated Certificates Of Eligibility (ACE) Automated Certificates Of Eligibility (ACE) An automated system used by lenders to obtain an online certificate of eligibility An automated system used by lenders to obtain an online certificate of eligibility Accessed through the VIP Accessed through the VIP

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29 ACE Facts For use by lenders and mortgage brokers For use by lenders and mortgage brokers No application for certificate of eligibility needed No application for certificate of eligibility needed Vets SSN & Name all thats required to use ACE system Vets SSN & Name all thats required to use ACE system Typical successful ACE candidate is a first time user of VA program, discharged after 1980 and served on active duty for 2 years Typical successful ACE candidate is a first time user of VA program, discharged after 1980 and served on active duty for 2 years

30 ACE Facts (cont.) ACE certificates of eligibility no longer printed on green or gold safety paper. ACE certificates of eligibility no longer printed on green or gold safety paper. ACE certificates printed from computer on white paper. ACE certificates printed from computer on white paper. Authorization number distinguishes authenticity Authorization number distinguishes authenticity

31 ACE Cant Make All Determinations ACE Cant Make All Determinations Reserves/National Guard Prior VA loan foreclosure Insufficient time/discharge type Unmarried surviving spouse

32 If ACE Is Not Successful: How To Obtain A COE

33 VA Eligibility Center Winston Salem Eligibility Center P.O. Box Winston Salem, NC 27120

34 What Does A Certificate Of Eligibility (COE) Mean To You? GNMA, FNMA and FHLMC require government loans to have a minimum of 25% guaranty coverage Basic entitlement – under old law, allows for up to $36,000 for loans not to exceed $144,000 Certificate of eligibility tells the lender, broker or real estate agent how much entitlement a veteran has

35 What 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

36 Maximum VA Loan Amount Limited to the lesser of: Appraised Value or Purchase Price + VA Funding Fee + Energy Efficient Improvements

37 Maximum VA Loan Amounts Maximum VA Loan Amounts Maximum VA loan is the lesser of the appraised value or the purchase price Maximum VA loan is the lesser of the appraised value or the purchase price VA loan is based on available entitlement VA loan is based on available entitlement Secondary market requirements for GNMA, FNMA and FHLMC require at least a 25% guaranty Secondary market requirements for GNMA, FNMA and FHLMC require at least a 25% guaranty

38 Maximum VA Loan Amounts Maximum VA Loan Amounts VAs maximum guaranty on a $417,000 loan is $104,250, or $417,000 x 25% = $104,250 VAs maximum guaranty on a $417,000 loan is $104,250, or $417,000 x 25% = $104,250 ****WEVE 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. 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. 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. 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. If you qualify for a home costing $768,750, the lender that you are approved through would receive a 25% guaranty.

39 Partial Entitlement Remaining Entitlement Scenario Veteran purchases a home in 1995 for $100,000 Veteran purchases a home in 1995 for $100,000 VA guarantees 25% of loan or $25,000 VA guarantees 25% of loan or $25,000 Loan is still open and being paid on Loan is still open and being paid on Assuming the conforming loan limit is $417,000. Assuming the conforming loan limit is $417,000. If the conforming loan limit is higher – ex. bonus as shown on previous screen would be more. 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 left x 4 $317,000 maximum loan to obtain 25% guaranty

40 VA Appraisals Whats changed at VA regarding appraisals?!!! 40% increase in number of appraisers in all states All appraisers must be e-commerce compliant Appraisers are expected to communicate with all parties Lender Appraisal Processing Program (92%) Timeliness issues aggressively monitored

41 VA Appraisals Minimum Property Standards Safe – meets local/county safety codes (electrical, structural and location) Sanitary – well, septic and sanitary sewer pass local/county inspection Sound – meets local/county structural building codes Bottom Line: NO FIXER UPPERS!

42 Basic Rule Of VA Loans Regarding Owner Occupancy Generally, must occupy within 60 days Generally, must occupy within 60 days Exceptions – IRRRLs – do not have to occupy IRRRLs – do not have to occupy Spouse of veteran can satisfy occupancy Spouse of veteran can satisfy occupancy If veteran is on active duty, must occupy within 12 months If veteran is on active duty, must occupy within 12 months

43 VA FUNDING FEE Funding fee can be added to the based loan amount 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 previously Funding fee amount varies depending on loan type, down payment, and whether or not veteran had VA loan previously Funding fee is paid online at Funding fee is paid online at Some borrowers are exempt Some borrowers are exempt

44 Veterans Exempt From Funding Fee Veteran receiving 10% disability compensation from VA Veteran receiving military pension from VA, in lieu of compensation Surviving spouse of a veteran who died as a result of active duty injuries *******************************

45 VA Funding Fees Basics Please refer to your handbook. VA Funding Fees Basics Please refer to your handbook. Loan Type Active Duty Funding Fee % Reservist/National Guard Funding Fee % Purchase2.15%2.40% Subsequent Use3.30% Cashout Subsequent 2.15% 3.3% 2.4% 3.3%

46 UNDERWRITING UNDERWRITING Determine that the veteran is a satisfactory credit risk, and has the income to qualify for the loan Underwriters Objective:

47 INCOME INCOME Stable and Reliable Stable and Reliable Anticipated to continue Anticipated to continue Sufficient in amount Sufficient in amount Reportable/Verifiable Reportable/Verifiable

48 Income Income must be verifiable Income must be verifiable Prefer a 2 year history, but consideration given for at least 12 months on the job Prefer a 2 year history, but consideration given for at least 12 months on the job Veteran can obtain VA loan immediately out of the military if employment is related to military technical experience Veteran can obtain VA loan immediately out of the military if employment is related to military technical experience Explain significant gaps in employment Explain significant gaps in employment

49 Verification Standard: VA Form , Verification of Employment, or VA Form , Verification of Employment, or Pay stubs Pay stubsAlternative: Telephone verification Telephone verification Pay stubs (30 days) Pay stubs (30 days) W 2s for 2 years W 2s for 2 years

50 Other Types of Verifications Faxed & Internet Verifications Faxed & Internet Verifications Employment Verification Services Employment Verification Services Leave & Earning Statement (LES) for Active Duty Service (available at my pay Leave & Earning Statement (LES) for Active Duty Service (available at my pay Income tax returns (self employment) & YTD P&L and balance sheet Income tax returns (self employment) & YTD P&L and balance sheet Other…… Other……

51 Income less than 12 months… Generally not considered stable and reliable Generally not considered stable and reliable Carefully consider: ~ Employers evaluation of probability of continued employment ~ Special training/education/skills required Carefully consider: ~ Employers evaluation of probability of continued employment ~ Special training/education/skills required If using this income… … you must explain why!!!

52 Overtime, Part Time and Bonus Income Generally not considered stable and reliable unless 2 year history Generally not considered stable and reliable unless 2 year history Verification for at least 12 months – income may be used to offset debts of 10 to 24 months Verification for at least 12 months – income may be used to offset debts of 10 to 24 months

53 Credit History 3-File Merged (MCR) 3-File Merged (MCR) Residential Mortgage Credit Report (RMCR) Residential Mortgage Credit Report (RMCR) Verify Rent/Mortgage history Verify Rent/Mortgage history

54 Does VA Consider Credit Scores? Does VA Consider Credit Scores? YES YES NO NO

55 Automated Underwriting Systems (AUS) Automated Underwriting Systems (AUS) Most major lenders approved to use AUS systems to use AUS systems Typical VA Accept is in the 640 credit score range Typical VA Accept is in the 640 credit score range

56 Automated Underwriting Systems Approved By VA Desktop Underwriter Loan Prospector Countrywides CLUES Chases ZIPPY PMI/AURA For VA Loans

57 AUS Accept For VA Loans In the 640 mid-credit score range Accept gives credit clearance with waiver of certain derogatory issues AUS Accept does not mean loan is clear to close Veteran must still meet debt ratio and residual income factors

58 AUS Refer or Manual Underwrite: What We Consider For Approval AUS Refer or Manual Underwrite: What We Consider For Approval Review individual trade lines – derogatories in last 12 months? Review individual trade lines – derogatories in last 12 months? Collection accounts – minor or major? Collection accounts – minor or major? Charge offs – how much and how long ago? Charge offs – how much and how long ago? Federal debt – cannot close with open, unpaid Federal debt Federal debt – cannot close with open, unpaid Federal debt Judgments – cannot close with open, unpaid judgments Judgments – cannot close with open, unpaid judgments Absence of credit history Absence of credit history

59 Bankruptcy ~ Chapter 7 Discharged 2 + years ago if bankruptcy was caused by borrowers financial mismanagement Discharged 2 + years ago if bankruptcy was caused by borrowers financial mismanagement Discharged 12 months ago - must be due to circumstances beyond borrowers control Discharged 12 months ago - must be due to circumstances beyond borrowers control Must have documentation Must have documentation Must have re-established credit in most recent 12 months Must have re-established credit in most recent 12 months

60 Bankruptcy ~ 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 lates 12 month payment history, no lates Acknowledgment of trustee or agency Acknowledgment of trustee or agency

61 Foreclosures Develop facts and circumstances Develop facts and circumstances Same waiting periods as Chapter 7 Bankruptcy Same waiting periods as Chapter 7 Bankruptcy Prior VA Loan: Ensure no debt to Government and entitlement restored Prior VA Loan: Ensure no debt to Government and entitlement restored

62 Debts & Obligations May remove debts with 10 monthly payments remaining (if not significant) May remove debts with 10 monthly payments remaining (if not significant) Only monthly revolving and installment accounts considered Only monthly revolving and installment accounts considered Child care is a monthly obligation Child care is a monthly obligation Investigate all allotments on LES or pay stubs Investigate all allotments on LES or pay stubs Verify and consider Alimony and Child Support Verify and consider Alimony and Child Support

63 Debts & Obligations You May Disregard Co-obligor on anothers loan: Co-obligor on anothers loan: evidence payments made by someone else evidence payments made by someone else No reason to believe applicant will need to make payments in the future No reason to believe applicant will need to make payments in the future Student Loan payments deferred 12 months or more. Student Loan payments deferred 12 months or more. 401K loans (or other loans secured against deposited funds). 401K loans (or other loans secured against deposited funds).

64 Assets Sufficient in amount Sufficient in amount VA Form a, Verification of Deposit VA Form a, Verification of Deposit Alt Docs: Last two bank statements Alt Docs: Last two bank statements Internet and faxed verifications Internet and faxed verifications ********************** **********************

65 VAs Standards Debt-to-income Ratio – 41% Debt-to-income Ratio – 41% Residual Income - should meet VAs residual income tables Residual Income - should meet VAs residual income tables Lender must complete Loan Analysis, VA Form Lender must complete Loan Analysis, VA Form

66 Debt Ratio 46% - $50 Residual Shortfall Approve Loan Approve Loan Reject Loan Reject Loan Could go either way Could go either way

67 Contract Issues Contingent on VA financing VA Contingent on VA financing VA Escape Clause is mandatory Escape Clause is mandatory Seller must pay termite inspection Seller must pay termite inspection ************************ ************************

68 Allowable Fees & Charges Appraisal Report & Compliance Inspections Appraisal Report & Compliance Inspections Credit Report Credit Report Prepaid Taxes and Hazard Insurance Prepaid Taxes and Hazard Insurance Title Exam and Title Insurance Fees Title Exam and Title Insurance Fees Flood Zone Determination Flood Zone Determination Environmental Endorsements (3.0, 8.1,103.5) Environmental Endorsements (3.0, 8.1,103.5) Recording Fees and Taxes Recording Fees and Taxes EPA Endorsement EPA Endorsement Origination Fee (1%) Origination Fee (1%) Reasonable Discount Points (May roll up to 2 points into an IRRRL) Reasonable Discount Points (May roll up to 2 points into an IRRRL)

69 Fees That Can Never Be Charged To A Veteran Termite/Pest Inspection Termite/Pest Inspection Septic Inspection (as mandated by county) Septic Inspection (as mandated by county) Well Inspection (as mandated by county) Well Inspection (as mandated by county) Mortgage Broker Fee Mortgage Broker Fee

70 WHATS NEW IMPACT OF RESPA FOR VA New HUD1 and Good Faith Estimate VA 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.

71 One 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 lenders 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.

72 2009 VA Loan Statistics 325,675 VA loans nationwide $68.2 billion in VA loan volume Average VA loan $209,395.

73 Foreclosure Avoidance Options Repayment Plans Deed In Lieu of Foreclosure Loan Modification VA Refunding Compromise Sale THE HOMEOWNER NEEDS TO CONTACT THEIR LENDER

74 VA Compromise Sales (Short Sales) If the value of the veterans 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 the value of the veterans 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. 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. 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. 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.

75 VA Compromise Sales (Short Sales) Foreclosure Principal: $110,000 Interest $ 2,019 Foreclosure Costs $ 1,000 Advances $ 600 TOTAL Debt $113,619 *Net Value -96,943 Foreclosure Claim $ 16,676 Compromise Sale Contract Sales Price: $ 95,000 Closing Costs: $ 7,800 Total $102,800 Total Debt of $113,619 less Net After Sale of $102,800 = Comp Claim Payment of $10,819 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.

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