The Veteran’s Administration (VA) published Circular 26-19-22 on August 8, 2019. The Circular is effective immediately and clarifies the Recoupment, NTB, Appraisal, Seasoning Requirements, and Loan Comparison Statement requirements for all VA IRRRLs. All previous Circulars pertaining to VA IRRRLs are superseded by this new Circular. The Circular is effective immediately.
This Circular impacts all loans in the pipeline. CMS will not purchase any loan that does not meet the criteria listed below. Effective immediately all IRRRLs:
All loans in process, regardless of milestone, must meet these requirements. There is no grandfathering of these rules for Correspondent loans.
Below is a chart that summarizes the requirements for VA IRRRLS:
|Loan Type||36 Month Recoupment||NTB Rate Reduction||Loan Seasoning||NTB - Loan Comparison Statement||Appraisal|
|Fixed-to-Fixed||Yes||Yes – 50bps||Yes||Yes|
|Fixed-to-ARM**||Yes||Yes – 200bps||Yes||Yes||Yes*|
*only if Discount points charged
**CMS does not offer ARM loans at this time.
Requirements for VA IRRRL Loans
IRRRL requirements are now determined by Loan Rate Type of the refinanced and new loan and payment increase or decrease of the old loan vs. the new loan. Term reduction is not a valid Net Tangible Benefit and should not be considered when determining Recoup or rate reduction requirements.
For Guaranty purposes recoupment is calculated by dividing all fees, expenses, and closing costs, whether included in the loan or paid outside of closing (i.e., an appraisal fee), by the reduction of the monthly P&I payment, which is calculated off the base loan amount excluding the VA Funding fee. The VA Funding fee, escrow, and prepaid expenses, such as, insurance, taxes, special assessments, and homeowners’ association (HOA) fees, are excluded from the recoupment calculations. Lender credit for interest rate chosen and any other lender credits reduce the qualifying closing costs for recoupment purposes. This calculation is different than the one shown on the Veteran Comparison Statement. All Loans must be underwritten to the Guaranty/Qualifying Calculation not the Veteran Comparison Statement Calculation.
Net Tangible Benefit (NTB)
Appraisals are no longer required except on Fixed-to-ARM transactions with discount points, which CMS does not offer at this time.
Both of the following conditions must be met as of the date of loan closing:
Veteran Comparison Disclosure and Certification Recoupment
Please contact CorrespondentRM@carringtonms.com with any questions.
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