Program Matrix for VA IRRRL Black Programs: Primary Residence 1 to 4 Unit, Condo, PUD none** 600 Second Home* 1 Unit, Condo, PUD none** 600 Investment Property* 1 to 4 Unit, Condo, PUD none** 600 * For Secondary and Investment Properties, the loan file must contain documentation that the veteran previously occupied the subject property as their primary residence at one point in time. ** Please see Appraisal Section on last page. Available Programs: 15, 30 Year Fixed 5/1 CMT ARM Loan Amounts: Minimum: $50,000 Maximum: Subject to current VA county loan limits. $417,000 if county not listed. High Balance loans are not eligible Ineligible Property Types: Mobile Homes Manufactured Housing Subject Property Seasoning Requirements: A minimum 4 month payment history is required existing VA loans. Eligible refinances with less than 6 months seasoning will result in a VA IRRRL Rebuttable Presumption QM loan and must adhere to ALL of the VA IRRRL Rebuttable Presumption requirements detailed below. Rebuttable Presumption Requirements The recoupment period for all allowable fees and charges financed as part of the loan or paid at closing does not exceed thirty six (36) months, except in cases in which the loan is being refinanced from an adjustable rate to a fixed rate mortgage or in which a fixed rate loan is being refinanced into another fixed rate loan of a shorter duration; and VA requirements for exemption of income verification are satisfied. A proposed IRRRL that does not meet the recoupment requirements above will be considered a Rebuttable Presumption QM loan Income Verification VA continues to exempt income verification if ALL of the following conditions are met: 1. Veteran is not 30 days or more past due on the loan being refinanced; May 21, 2015 Page 1
2. The proposed IRRRL does not increase the principal balance outstanding on the prior existing residential mortgage loan, except to the extent of fees and charges allowed by VA; 3. Total points and fees, (as defined in section 103(aa)(4) of TILA, other than bona fide third party charges not retained by the mortgage originator, creditor, or an affiliate of the creditor or mortgage originator and all other applicable VA allowable fees) payable in connection with the proposed IRRRL do not exceed 3% of the total proposed principal amount; 4. The interest rate on the proposed IRRRL is lower than the interest rate on the loan being refinanced, unless the borrower is refinancing from an adjustable rate to a fixed-rate loan, under guidelines that VA has established; 5. The proposed IRRRL is subject to a payment schedule that will fully amortize the IRRRL in accordance with VA regulations; 6. The terms of the proposed IRRRL do not result in a balloon payment, as defined in TILA; and 7. Both the residential mortgage loan being refinanced and the proposed IRRRL satisfy all other VA requirements. A proposed IRRRL that does not meet the requirements for exemption of income verification, as explained above: 1. Must verify income in accordance with the standards set forth in VA s regulation 38 CFR 36.4340 and with those that are generally applicable under TILA that implements the CFPB s Ability to Repay Rule; and 2. Must receive prior approval from VA to be guaranteed. If VA grants approval, the IRRRL will satisfy the requirements of a QM loan with Rebuttable Presumption Underwriting: Other financed properties: Maximum 4 total financed properties. Required Tax Forms: o Neither Form 4506-T or Tax Return Transcripts are required on a non-credit qualifying VA IRRRL transaction. Verification of Employment: A Verbal Verification of Employment (VVOE) is required within 10 days of closing regardless of the AUS findings or documentation type. Self-employed borrowers must have independent 3rd party verification within 30 days of closing. Credit History: Only traditional credit histories are acceptable; all borrowers must have traditional credit established with valid credit scores. o All credit documents must be dated within 90 days of the note date. Borrower Payment History: o A minimum of a 4 month payment history on the current mortgage. o The following documentation is required to be in the loan file: Evidence the existing loan is current. If the loan is seasoned 12 months or more, evidence that the existing loan has not had any 30-day or greater mortgage lates in the past 12 months. If the loan is seasoned less than 12 months, evidence: The existing loan has no 30-day or greater mortgage lates since the inception of the loan. No 30-day or greater mortgage lates for any other first mortgage loans associated with the property and borrower(s) in the most recent 12 months. Interest/Payment Change Requirements: o The new loan must have a lower interest rate than the loan it is refinancing unless the loan it is refinancing is an ARM. o The principal and interest payment on an IRRRL must be less than the principal and interest payment on the loan being refinanced unless one of the following exceptions applies: The IRRRL is refinancing an ARM. The term of the IRRRL is shorter than the term of the loan being refinanced. o The monthly payment (PITI) may not increase by 20 percent or more. Veteran s Statement: The veteran must sign a statement acknowledging the effect of the refinancing loan on the veteran s loan payments and interest rate. o The statement must show the interest rate and monthly payments for the new loan versus that for the old loan. The statement must also indicate how long it would take to recoup ALL closing May 21, 2015 Page 2
o costs (both those included in the loan and those paid outside of closing). The veteran s statement may be combined with the lender s certification and should be on the lender s own letterhead. Closing Cost Fees: The following fees and charges may be included: o Up to 2 discount points. (Any amount of discount points may be paid in cash.) o Any fees allowable by VA that are reasonable and customary: Charge Description Appraisal and The veteran can pay the fee of a VA appraiser and VA compliance Compliance inspectors. Inspections The veteran can also pay for a second appraisal if he or she is requesting reconsideration of value. The veteran cannot pay for an appraisal requested by the lender or seller for reconsideration of value. The veteran cannot pay for appraisals requested by parties other than the veteran or lender. Recording Fees Credit Report Prepaid Items Hazard Insurance Flood Zone Determination Survey Title Examination and Title Insurance Special Mailing Fees for Refinancing Loans VA Funding Fee The veteran can pay for recording fees and recording taxes or other charges incident to recordation. The veteran can pay for the credit report obtained by the lender. For Automated Underwriting cases, the veteran may pay the evaluation fee of $50 in lieu of the charge for a credit report. For Refer cases, the veteran may also pay the charge for a merged credit report, if required. The veteran can pay that portion of taxes, assessments, and similar items for the current year chargeable to the borrower and the initial deposit for the tax and insurance account. The veteran can pay the required hazard insurance premium. This includes flood insurance, if required. The veteran can pay the actual amount charged for a determination of whether a property is in a special flood hazard area, if made by a third party who guarantees the accuracy of the determination. The veteran can pay a charge for a life-of-the-loan flood determination service purchased at the time of loan origination. A fee may not be charged for a flood zone determination made by the lender or a VA appraiser. The veteran can pay a charge for a survey, if required by the lender or veteran. Any charge for a survey in connection with a condominium loan must have the prior approval of VA. The veteran may pay a fee for title examination and title insurance, if any. If the lender decides that an environmental protection lien endorsement to a title policy is needed, the cost of the endorsement may be charged to the veteran. For refinancing loans only, the veteran can pay charges for Federal Express, Express Mail, or a similar service when the saved per diem interest cost to the veteran will exceed the cost of the special handling. Unless exempt, each veteran must pay a funding fee to VA. May 21, 2015 Page 3
Mortgage Electronic Registration System (MERS) Fee Other Fees Authorized by VA The veteran may pay a fee for MERS. MERS is a one-time fee for the purpose of electronically tracking the ownership of the beneficial interest in a loan and its servicing rights. Additional fees attributable to local variances may be charged to the veteran only if specifically authorized by VA. The lender may submit a written request to the Regional Loan Center for approval if the fee is normally paid by the borrower in a particular jurisdiction and considered reasonable and customary in the jurisdiction. Cash Back: The borrower cannot receive cash proceeds from the loan. If necessary, the refinancing loan amount must be rounded down to avoid payments of cash to the borrower. Maximum Loan Amount: Use VA Form 26-8923, IRRRL Worksheet, to calculate the maximum loan amount. The maximum loan amount is the existing VA loan balances plus the following: o Allowable fees and charges (includes up to two discount points). o The VA funding fee. Maximum Loan Term: The maximum loan term is the original term of the VA loan being refinanced plus 10 years, but not to exceed 30 years and 32 days. Amount of Guaranty and Entitlement Use: The new IRRRL loan amount may be equal to, greater than, or less than, the original amount of the loan being refinanced. This may impact the amount of guaranty on the new loan, but not the veteran s use of entitlement. See table below for amount of guaranty: IRRRL Loan Amount How to calculate the amount of guaranty on an IRRRL $50,000 to $56,250 First, calculate the lesser of: $22,500, or The amount of guaranty used on the VA loan being refinanced. The amount of guaranty is the greater of: The above result, or 25 percent of the IRRRL loan amount. $56,251 to $144,000 First, calculate the lesser of: 40 percent of the IRRRL loan amount, or The amount of guaranty used on the VA loan being refinanced. Greater than $144,000 The amount of guaranty is the greater of: The above result, or 25 percent of the IRRRL loan amount. Guaranty on these is always 25 percent of the IRRRL loan amount. May 21, 2015 Page 4
Title/Lien Requirements: The IRRRL must replace the existing VA loan as the first lien on the same property. Any second lien-holder would have to agree to a subordinate to the first lien holder. o The borrower cannot pay off liens other than the existing VA loan from IRRRL proceeds. o The veteran (or surviving co-obligor spouse) must still own the property. Eligible Borrowers: Generally, the borrowers on the original loan must be the same on the new loan, and the veteran must still own the property. If there is a change in borrowers, see the table below. Contact VA regarding a change if the acceptability of the IRRRL is unclear. Parties Obligated on Old VA Loan Parties to be Obligated on new IRRRL Is IRRRL Possible? Unmarried veteran Veteran and new spouse Yes Veteran and spouse Divorced veteran alone Yes Veteran and spouse Veteran and different spouse Yes Veteran alone Different veteran who has substituted Yes entitlement Veteran and spouse Spouse alone (veteran died) Yes Veteran and nonveteran joint Veteran alone Yes loan obligors Veteran and spouse Divorced spouse alone No Unmarried veteran Spouse alone (veteran died) No Veteran and spouse Different spouse alone (veteran died) No Veteran and nonveteran joint Nonveteran alone No loan obligors o While VA does not required any credit/income documentation or re-underwriting when there has been a change in borrowers, lender should verify that the lower payment and interest rate, and the minimum 25 percent guaranty compensate for no re-underwriting. Occupancy: The veteran or the spouse of an active servicemember must certify that he or she previously occupied the property as his or her home. VA Loan Identification Number: Request a new loan number for each IRRRL through the Appraisal System (TAS), without requesting an appraisal. Bankruptcy: A borrower with a recent Chapter 13 bankruptcy may need approval of the trustee for the new loan. VA Funding Fee: Provide evidence that the VA Funding Fee (VAFF) has been paid in full prior to delivery for purchase. Appraisal: If FICO is 680, there is no maximum LTV/CLTV, and no AVM is required If FICO is < 680, LTV/CLTV is permitted to 115% with one of the following options: o 2055 exterior-only conventional appraisal with 1004 MC, OR o AVM ordered by the Correspondent from an approved AVM The Seller should address required repairs. Any repairs that impact safety, livability, or habitability must be completed. The property condition must be rated average or better. Ratings of fair or less will not be accepted. FNMA Form 1004MC, Market Condition Addendum, is now required on all VA appraisals. Appraisals are good for 120 days. May 21, 2015 Page 5