New 2019 VA Loan Guidelines

New 2019 VA Loan Guideline changes

In 2019, President Trump pushed new legislative initiatives to better protect Veterans from predatory lending that is unfortunately still in practice. Most of the new changes affect refinances. Little information is available online so I wanted to recap what I learned at the 2019 VA Lenders Conference that I attended.

  • Certificate of Eligibility (COE) must be in hand before the lender can order the appraisal.
  • Improved process on obtaining COEs
  • Commission employees can no longer use IRS Form 2106 to deduct unreimbursed business expenses
  • Verification of Rental Property Income –Documentation of cash reserves totaling at 3 months mortgage payments PITI, and –Individual income tax returns, signed and dated or lender obtained tax transcripts, plus all applicable schedules for the previous 2 years, must show rental income generated by the property –If the borrower has multiple properties, the borrower must have 3 months PITI documented for each property to consider the rental income. –If no lien on the rental property(ies), 3 months reserves to cover expenses (taxes, hazard/flood insurance, HOA or other recurring fees must be documented. –Equity in the property CANNOT be used as reserves. –Cash proceeds from a VA refinance CANNOT be counted as required reserves.  Reserve funds must be in borrower’s account before new VA loan closes –Gift funds CANNOT be used to meet reserve requirements.

Verification of Rental Property Income –Documentation of cash reserves totaling at 3 months mortgage payments PITI, and –Individual income tax returns, signed and dated or lender obtained tax transcripts, plus all applicable schedules for the previous 2 years, must show rental income generated by the property –If the borrower has multiple properties, the borrower must have 3 months PITI documented for each property to consider the rental income. –If no lien on the rental property(ies), 3 months reserves to cover expenses (taxes, hazard/flood insurance, HOA or other recurring fees must be documented. –Equity in the property CANNOT be used as reserves. –Cash proceeds from a VA refinance CANNOT be counted as required reserves.  Reserve funds must be in borrower’s account before new VA loan closes –Gift funds CANNOT be used to meet reserve requirements.

Collection Accounts –While VA does not require that collection accounts be paid-off prior to closing if overall credit is acceptable, an underwriter must address the collection account(s) with an explanation on VA Form 26-6393, Loan Analysis. –If the collection account is listed on the credit report with a minimum payment, the debt should be recognized at the minimum payment amount.
Charged Off Accounts –The underwriter must address the circumstances regarding the negative credit history when reviewing the overall credit.

Disputed Accounts –Lenders may consider a Veteran’s claim of bona fide or legal defenses regarding unpaid debts except when the debt has been reduced to judgment –The underwriter should document the reason(s) for not considering an account on VA Form 26-6393, Loan Analysis

Judgments –In certain cases when a judgment has only been in place for a few months, an underwriter could justify on VA Form 26-6393, Loan Analysis, a shorter repayment history if the documentation indicates the borrower immediately addressed the judgment after it was filed and began a repayment plan. •Foreclosures –If a foreclosure, deed in lieu, or short sale process is in conjunction with a bankruptcy, use the latest date of either the discharge of the bankruptcy or transfer of title for the home to establish the beginning date of re-established credit. •Deed in Lieu (DIL) or Short Sale –Develop complete information on the facts and circumstances if the borrower(s) voluntarily surrendered the property. –If the borrower’s payment history before the short sale or DIL was satisfactory, a waiting period from the date of transfer of the property may not be necessary. –If the foreclosure, DIL or short sale was on a VA loan, a borrower may not have full entitlement.

  • Non-Taxable income may now sse a figure of 125% of the borrower’s non-taxable income when “grossing up”
  • Purchasing after 1 year of Bankruptcy is possible if certain circumstances exist

https://www.benefits.va.gov/homeloans/lenders.asp

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