Mitchell6024/quickb · Datasets at Hugging Face

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47fbf2ba-54a8-44af-938d-8e31bef72e29	. 4 Funding fee receipt.	VA_Guidelines.txt
038d1118-c6f1-428d-8b62-b79de8663ae8	Reference: See section 8 of chapter 8 for information on exemptions. 5 Statement signed by the Veteran acknowledging the effect of the refinancing loan on the Veteran’s loan payments and interest rate.	VA_Guidelines.txt
81851588-201c-4bab-9407-1ed7f9fba414	The statement must include: · The interest rate and monthly payments for the new loan versus that for the old loan, and · How long it will take to recoup ALL closing costs (both those included in the loan and those paid outside of closing)	VA_Guidelines.txt
135472fa-bc9a-466c-81d5-788fd79c1a76	. · If applicable, the Veteran’s statement may be combined with the lender’s certification that the Veteran qualifies for the new monthly payment which exceeds the previous payment by 20% or more	VA_Guidelines.txt
b5ce0f6a-3be8-4094-94bd-16fc11747bb1	. 6 VA Form 26-8923, Interest Rate Reduction Refinancing Loan Worksheet 7 VA Form 26-1820, Report and Certification of Loan Disbursement 8 VA Form 26-8937, Verification of VA Benefits (if applicable) 9 HUD-1, settlement statement. 10 VA Form 26-0503, Federal Collection Policy Notice 11 Lender’s certification that the prior loan was current (not 30 days or more past due) at the time of loan closing	VA_Guidelines.txt
27df20fe-0c76-4be1-865d-5d677a6afb74	. 12 If loan is submitted more than 60 days after loan closing, a statement signed by a corporate officer of the lender which identifies the loan, provides the specific reasons for late reporting and certifies that the loan is current.	VA_Guidelines.txt
f38c6a42-ddbf-4020-80e2-5d4aeb5375d1	This statement must be submitted with any late request for issuance of a Loan Guaranty Certificate. 13 Documentation of the cost of energy efficiency improvements included in the loan. For cash reimbursement of the Veteran, the improvements must have been completed within the 90 days immediately preceding the date of the loan.	VA_Guidelines.txt
d8f47b42-e82d-466b-8105-b282b2cb4d17	Reference: See chapter 7 14 Any other necessary documents (see chapter 5). 6-9 VA Lenders Handbook M26-7 Chapter 6: Refinancing Loans Topic 2: IRRRL Made to Refinance a Delinquent Loan Change Date: April 10, 2009 · This section has been changed to update hyperlinks and to make minor grammatical edits. a.	VA_Guidelines.txt
2c97ccec-d5dc-40fb-b06e-3e98a7849e63	Prior Approval Submission Any IRRRL made to refinance a loan that will be 30 days or more past due as of the date of closing, must be submitted for prior approval. The lender must first obtain sufficient information and perform sufficient analysis to determine that: · the cause of the delinquency has been resolved, and · the Veteran is willing and able to make the proposed loan payments.	VA_Guidelines.txt
a585722d-9ef3-4b73-bf8d-857644750749	Submit a written proposal to VA which contains the following information: Table 4: IRRRL Prior Approval Documentation Order Document 1 The full name of the Veteran and all other parties obligated on the prior loan and to be obligated on the new loan. 2 The VA loan number and month and year of origination of the loan to be refinanced. 3 The name and address of the lender proposing to make the loan	VA_Guidelines.txt
4e0ce518-8e64-4271-9f3f-23e4c9ac0047	. 4 The approximate proposed loan amount, interest rate, and term for the new loan versus the old loan. 5 Discount to be charged, expressed as a percentage of the loan and a dollar amount. 6 Statement signed by the Veteran acknowledging the effect of the refinancing loan on the Veteran’s loan payments and interest rate	VA_Guidelines.txt
c4f52ef5-ac88-420c-9c05-0b6ee7367e22	. · 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 will take to recoup ALL closing costs (both those included in the loan and those paid outside of closing). 7 The appropriate certification concerning occupancy signed by the Veteran or the spouse of an active duty servicemember.	VA_Guidelines.txt
5e073f94-33fb-4782-a26c-bdbb98305b8f	One of the following must be signed. · “I have previously occupied the property securing this loan as my home.”, · “While my spouse was on active duty and unable to occupy the property securing this loan, I occupied the property securing this loan as my home.” 8 VA Form 26-8923, Interest Rate Reduction Refinancing Loan Worksheet. 9 VA Form 26-8937, Verification of VA Benefits (if applicable).	VA_Guidelines.txt
9203d88c-2cbb-4209-99e1-77a3c79afc80	Continued on next page 6-10 VA Lenders Handbook M26-7 Chapter 6: Refinancing Loans Topic 2: IRRRL Made to Refinance a Delinquent Loan, continued a.	VA_Guidelines.txt
3b3c7b0c-289b-41a3-b811-e1612cc147f3	Prior Approval Submission, continued Table 4: IRRRL Prior Approval Documentation, continued Order Document 10 VA Form 26-8320 (or 26-8320a), Certificate of Eligibility, or a request for a duplicate certificate on VA Form 26-1880, Request for a Certificate of Eligibility. 11 Uniform Residential Loan Application (URLA)	VA_Guidelines.txt
3ec01749-832d-47ff-92b7-c334c9b5214b	. 11 Uniform Residential Loan Application (URLA). 12 Explanation of the reason(s) for the loan delinquency, including appropriate documentation to verify the cause. 13 Documentation to verify that the cause of the delinquency has been corrected. 14 Credit report (in-file credit report is acceptable). 15 Current pay stub and telephone verification of current employment	VA_Guidelines.txt
b1e4d6d4-946e-4d66-8190-9324872c03d6	. 16 VA Form 26-6393, Loan Analysis. 17 Documentation of the cost of energy efficiency improvements to be included in the loan, if known.	VA_Guidelines.txt
8ec68aaf-959b-495c-9bb5-573c00f18962	See Topic 3 of chapter 7. For cash reimbursement of the Veteran, the improvements must be completed within the 90 days immediately preceding the date of the loan. b. What Happens Next? VA will inform the lender of its decision. The lender may close the loan in reliance on a VA-issued Certificate of Commitment. Reference: See chapter 5 for further information on the Certificate of Commitment.	VA_Guidelines.txt
cf14797a-a815-4f94-828c-f357c692b834	Continued on next page 6-11 VA Lenders Handbook M26-7 Chapter 6: Refinancing Loans Topic 2: IRRRL Made to Refinance a Delinquent Loan, continued c. How to Report Loan Closing and Request Guaranty A prior approval IRRRL must be reported (such as, all documentation submitted) to VA within 60 days of closing.	VA_Guidelines.txt
313c71d9-953c-4cac-9597-cc1493905b4d	A lender that fails to meet this time limit must provide a written explanation. (see order #8). To report an IRRRL, submit the following documents to VA in the order listed. Table 5: IRRRL Closing Documentation Order Document 1 Lender’s cover or transmittal letter (if used). 2 VA Form 26-0286, VA Loan Summary Sheet 3 Funding fee receipt.	VA_Guidelines.txt
32c6a0bd-827b-439d-9acf-378997ec2542	Reference: See chapter 8 for information on exemptions. 4 If the loan amount has increased beyond the amount indicated on the Certificate of Commitment, an updated VA Form 26-8923, Interest Rate Reduction Refinancing Loan Worksheet. 5 VA Form 26-1820, Report and Certification of Loan Disbursement 6 HUD-1, settlement statement	VA_Guidelines.txt
e334f200-8c31-4262-8b01-556d1c4f18df	. 7 VA Form 26-0503, Federal Collection Policy Notice 8 If loan is submitted mor than 60 days after loan closing, a statement signed by a corporate officer of the lender which identifies the loan and provides the specific reason(s) why the loan was not submitted on time. 9 Any other necessary documents (see section 6 of chapter 5). d.	VA_Guidelines.txt
2a3fcc47-2f36-476f-b6b9-270fe9aae4df	Treatment of Late Payments and Late Charges All late payments and late charges (and reasonable costs if legal action to terminate the old loan has commenced) can be rolled into the new loan. If the amount of late payments, late charges and legal costs is significant, the proposed monthly payment will be adversely impacted.	VA_Guidelines.txt
0ed53145-1dae-4b5f-b607-295e2d453267	Carefully analyze whether the IRRRL would benefit the Veteran and not create unacceptable risk to the Government in light of the new monthly payment. 6-12 VA Lenders Handbook M26-7 Chapter 6: Refinancing Loans Topic 3: Cash-Out Refinancing Loans Change Date: October 30, 2024 · This topic has been updated in its entirety	VA_Guidelines.txt
fec33b81-d136-4675-b887-b8e40302d1b4	. · Public Law 115-174, The Economic Growth, Regulatory Relief, and Consumer Protection Act, set different requirements for cash-out refinancing loans based on the payoff amounts of the loan being refinanced.	VA_Guidelines.txt
bdf67023-352d-4eaf-aae2-d1325f70d8fb	Therefore, VA has categorized cash-out refinancing loans as Type I and Type II. VA has promulgated regulations for cash-out refinancing loans at 38 C. F. R. § 36.4306. a. What is a VA Cash-Out Refinancing Loan? A VA cash-out refinancing loan is a refinance of any existing mortgage(s) and/or other indebtedness secured by a lien(s) of record.	VA_Guidelines.txt
3776fc22-4e6c-43af-8215-bf4fa19f6921	Refinancing loans made on properties without an existing mortgage or lien of record are not eligible for guarantee by VA.	VA_Guidelines.txt
ceff06a1-24ce-48b8-9b17-16a8d95bf11e	A cash-out refinance may also be made to refinance the following: · an interim construction loan (a construction loan that does not provide for permanent financing), regardless of whether there is a change in the original loan amount, · the balance of the purchase of land on which new construction is to be financed through the proceeds of the refinancing loan¹, · the balance of an existing land	VA_Guidelines.txt
7e985888-51c5-46c2-8d77-cd0deb40bccc	loan¹, · the balance of an existing land sale contract relating to the Veteran’s home or farm residence (see Chapter 7 for farm residence details)², · a loan for the purchase of, and is secured by, a manufactured home in order to purchase the lot on which the manufactured home is or will be permanently affixed	VA_Guidelines.txt
fb3adff7-8a45-42c7-b2c2-91a006de4a8f	. (see Chapter 7 for manufactured home detail)³, and · a refinance of any other recorded lien against the property such as, but not limited to a mechanics lien, second mortgage, etc.⁴ There are two types of VA cash-out refinancing loans, Type I and Type II.	VA_Guidelines.txt
786d2712-bc3d-4ceb-9d3f-ea6e62d30867	The type of cash- out refinancing loan is determined by the payoff amount of the loan being refinanced compared to the principal amount of the new loan. The lien to be paid off is not required to be in the Veteran’s name. For instance, it could be in the spouse’s name, provided at the time of the new loan closing the Veteran is an owner.	VA_Guidelines.txt
e3aa1d59-d0ac-4b03-a596-e7f4d653a148	VA does not prescribe limitations for how the Veteran may use cash received from the refinancing loan. Loan proceeds beyond the amount needed to pay off the existing mortgage(s) and/or other lien(s) of record being refinanced may be taken as cash by the Veteran for any purpose. As such, VA does not require a letter of explanation detailing how the Veteran proposes to use the loan proceeds.	VA_Guidelines.txt
e0b1e6f5-8971-4654-9070-6f063de34bb4	Continued on next page 1 38 U. S. C. § 3710(b)(7) 2 38 C. F. R. § 36.4306(f) 3 38 C. F. R. § 36.4306(g) 4 38 U. S. C. § 3710(a)(5), 38 C. F.	VA_Guidelines.txt
2de63407-8631-4820-9d60-5b12e7f8a7c7	R. 36.4301 “Lien” 6-13 VA Lenders Handbook M26-7 Chapter 6: Refinancing Loans Topic 3: Cash-Out Refinancing Loans Change Date: October 30, 2024 · This topic has been updated in its entirety. · Public Law 115-174, The Economic Growth, Regulatory Relief, and Consumer Protection Act, set different requirements for cash-out refinancing loans based on the payoff amounts of the loan being refinanced.	VA_Guidelines.txt
d8c77f2a-946a-4c07-aa31-62e469908b50	Therefore, VA has categorized cash-out refinancing loans as Type I and Type II. VA has promulgated regulations for cash-out refinancing loans at 38 C. F. R. § 36.4306. a. What is a VA Cash-Out Refinancing Loan? A VA cash-out refinancing loan is a refinance of any existing mortgage(s) and/or other indebtedness secured by a lien(s) of record.	VA_Guidelines.txt
4b8da3a0-37f0-46ad-89e9-e421bb5c040f	Refinancing loans made on properties without an existing mortgage or lien of record are not eligible for guarantee by VA.	VA_Guidelines.txt
84e393aa-64ae-4bad-b493-17111335fac3	A cash-out refinance may also be made to refinance the following: · an interim construction loan (a construction loan that does not provide for permanent financing), regardless of whether there is a change in the original loan amount, · the balance of the purchase of land on which new construction is to be financed through the proceeds of the refinancing loan¹, · the balance of an existing land	VA_Guidelines.txt
6f50b306-fe29-4f4a-a3aa-e2978fc8c872	loan¹, · the balance of an existing land sale contract relating to the Veteran’s home or farm residence (see Chapter 7 for farm residence details)², · a loan for the purchase of, and is secured by, a manufactured home in order to purchase the lot on which the manufactured home is or will be permanently affixed	VA_Guidelines.txt
b41a7903-b437-419a-8aaa-878bc087d661	. (see Chapter 7 for manufactured home detail)³, and · a refinance of any other recorded lien against the property such as, but not limited to a mechanics lien, second mortgage, etc.⁴ There are two types of VA cash-out refinancing loans, Type I and Type II.	VA_Guidelines.txt
217a63fa-1dfb-475e-a792-55b2b207faf8	The type of cash- out refinancing loan is determined by the payoff amount of the loan being refinanced compared to the principal amount of the new loan. The lien to be paid off is not required to be in the Veteran’s name. For instance, it could be in the spouse’s name, provided at the time of the new loan closing the Veteran is an owner.	VA_Guidelines.txt
2b7ea47d-016f-4c2c-a374-aeb5196d05db	VA does not prescribe limitations for how the Veteran may use cash received from the refinancing loan. Loan proceeds beyond the amount needed to pay off the existing mortgage(s) and/or other lien(s) of record being refinanced may be taken as cash by the Veteran for any purpose. As such, VA does not require a letter of explanation detailing how the Veteran proposes to use the loan proceeds.	VA_Guidelines.txt
747838ba-23f6-4f66-82fd-40052eb50e06	Continued on next page 1 38 U. S. C. § 3710(b)(7) 2 38 C. F. R. § 36.4306(f) 3 38 C. F. R. § 36.4306(g) 4 38 U. S. C. § 3710(a)(5), 38 C. F. R. 36.4301 “Lien” 6-13 VA Lenders Handbook M26-7 Chapter 6: Refinancing Loans Topic 3: Cash-Out Refinancing Loans, continued b. What is a Type I Cash-Out Refinance Loan?	VA_Guidelines.txt
f9cfc264-59f2-4631-89d3-90116dd76076	What is a Type I Cash-Out Refinance Loan? A Type I cash-out refinance is a refinancing loan in which the new loan amount (including the VA funding fee) does not exceed the payoff amount of the loan being refinanced⁵. A Type I cash-out refinance is distinct from an IRRRL on the basis that it may be a VA- guaranteed loan or a non-VA loan that is being paid off through the refinance. c.	VA_Guidelines.txt
c4ad8c6a-3a30-48a3-aacf-fbaabf875a45	What is a Type II Cash-Out Refinance Loan? A Type II cash-out refinance is a refinancing loan in which the new loan amount (including the VA funding fee) exceeds the payoff amount of the loan and/or lien(s) of record being refinanced. In a Type II cash-out, the Veteran may remove equity from the subject property. d.	VA_Guidelines.txt
0a8e3a26-36be-4a54-a696-9e1a1989e48a	Lien Position Requirement The refinancing loan must be secured by first lien position on the property. All other lien holders must agree to subordinate to the VA refinancing loan. Copies of any subordination agreements must be included in the loan file for VA audit review.⁶ e.	VA_Guidelines.txt
0c3f93d8-e429-47ce-8712-af4e6349b70f	Ownership Requirement The Veteran must have ownership/title of the property securing the loan before, or at the time of closing. There is not a required length of time that the Veteran must have been on title prior to loan closing. f.	VA_Guidelines.txt
b84ddad1-612d-4583-80d7-b06922bb8581	Maximum Loan Term The maximum loan term of the refinancing loan may not exceed the lesser of: · 30-years and 32-days⁷, or · The economic life of the property securing the loan⁸. g. Maximum Loan Amount The maximum loan amount may not exceed 100 percent of the reasonable value⁹ (as determined by VA) of the property securing the loan.	VA_Guidelines.txt
6bbe7009-7451-468a-be1e-490d7c7e3656	The inclusion of energy efficiency improvements up to $6,000¹⁰ and/or the VA funding fee, in part or whole, must not cause the loan to exceed 100 percent of the reasonable value.	VA_Guidelines.txt
f133ff46-5177-4356-b345-98d2c660361e	For Type I refinances: If the loan being refinanced has a fixed interest rate and the Type I cash-out refinancing loan will have an adjustable interest rate and more than one discount point is charged, the loan-to-value ratio (LTV) is limited to 90 percent of the reasonable value¹¹. See chapter 3 for additional information on maximum loan amounts. Continued on next page 5 38 U. S.	VA_Guidelines.txt
abdbc0a6-50e8-4104-ab92-1dfd2f1487f9	Continued on next page 5 38 U. S. Code § 3709(d)(1) 6 38 U. S. C. § 3703(d)(3) 7 38 U. S. C. § 3703 (d)(1) 8 38 CFR § 36.4310(c) 9 38 U. S. C. § 3710(b)(7)) 1038 U. S. C. § 3710(d)(2) 1138 CFR 36.4306(b)(4)(ii) 6-14 VA Lenders Handbook M26-7 Chapter 6: Refinancing Loans Topic 3: Cash-Out Refinancing Loans, continued h.	VA_Guidelines.txt
8720ddce-4fc7-48e2-9906-a18b9a66f8f2	Maximum Guaranty For Veterans with full entitlement, the maximum amount of guaranty entitlement available to the Veteran, for a loan amount above $144,000 is 25 percent of the loan amount¹².	VA_Guidelines.txt
df0bb373-1936-46bd-92c4-79229edac9ba	For Veterans with partial entitlement, the maximum guaranty will be based on the total loan amount, the amount of entitlement available to the Veteran, and the one-unit Freddie Mac Conforming Loan Limit¹³ if the Veteran has partial entitlement (see Chapter 3 for additional information on calculating the maximum guaranty). i.	VA_Guidelines.txt
25dda79f-95d9-44ed-bfff-486c3a0e2bbd	Veteran’s Entitlement The Veteran must have entitlement available for the loan (see Chapter 3 for examples on calculating remaining entitlement for Veterans with partial entitlement).	VA_Guidelines.txt
3980c67e-4a72-403d-be50-a7f2322e1433	If the loan being refinanced is a VA-guaranteed loan, or if the Veteran has unrestored entitlement for a previous VA-guaranteed loan on the subject property, the entitlement charged to that VA-guaranteed loan may be restored for purposes of obtaining the refinancing loan. Except in cases where the Veteran has obtained a one-time restoration, which is addressed in the next paragraph.	VA_Guidelines.txt
b6657543-0910-4555-a255-7347f2872c11	If the Veteran obtained a one-time restoration, all properties obtained using the Veteran’s entitlement must be disposed of prior to the cash-out refinance. That is, the property with the one-time restoration applied and all other properties obtained with a VA loan must be satisfied and sold for any restoration to occur, including a cash-out restoration.	VA_Guidelines.txt
25e5f56e-d98c-43a7-90ad-4049ea30eb56	In these cases, if the Veteran has not sold all of the properties, they may still obtain a cash-out refinance loan; however, the amount of entitlement will be limited to the amount remaining without restoration. This includes instances where the Veteran is obtaining a cash-out refinance on the property obtained with the one-time restoration¹⁴.	VA_Guidelines.txt
d717530c-8d57-404b-8e29-4c07e4b8eae8	Transfer of the property on which a one-time restoration was applied to a spouse (to whom the Veteran is still married) or to a Limited Liability Corporation where the Veteran is a member (owner), does not meet the sale requirement for restoration.	VA_Guidelines.txt
2cc7fab9-c464-4927-a625-95ef2d173fe1	An Energy Efficient Mortgage (EEM) may be added to any cash-out loan provided it meets the program requirements without regards to entitlement availability. The EEM portion of the loan does not increase the entitlement charged to the Veteran¹⁵. Continued on next page 1238 USC § 3703(a)(1)(A)(i)(IV) 1338 U. S. C. § 3703(a)(1)(C)(ii) 1438 U. S. C. § 3702(b)(1) 1538 U. S. C. § 3710(d), 38 C. F.	VA_Guidelines.txt
0555ae0a-2ad7-412c-a7b7-9934d9aa9160	C. § 3702(b)(1) 1538 U. S. C. § 3710(d), 38 C. F. R. 36.4302(c) 6-15 VA Lenders Handbook M26-7 Chapter 6: Refinancing Loans Topic 3: Cash-Out Refinancing Loans, continued j. Underwriting Full credit underwriting is required for all cash-out refinancing loan types.	VA_Guidelines.txt
ae409d77-8f1f-46c6-8b09-9f59b939db5c	The underwriter must follow VA credit underwriting guidelines to ensure all borrowers are a satisfactory credit risk and have stable/reliable income for the repayment of the loan¹⁶ (see Chapter 4 for VA credit underwriting guidelines). Only lenders granted VA automatic authority by VA may close cash-out refinancing loans automatically.	VA_Guidelines.txt
a72971d7-e9ca-43ae-8a46-49be0c4fba38	Lenders without VA automatic authority may close loans through the use of an agent-sponsor relationship or submit the loan to VA for underwriting and approval prior to loan closing¹⁷ (see Chapter 5 for information on how to submit a request for prior approval).	VA_Guidelines.txt
c3b38f51-7379-429b-8ffb-8fbc3e07734f	For non-supervised lenders with automatic authority, only VA-approved credit underwriters may make credit-underwriting decision on VA loans. The lender must certify¹⁸ that all underwriting decisions to approve or deny a VA loan will be made by a VA-approved underwriter.	VA_Guidelines.txt
903aff9d-bafc-4d86-aa25-9bb63bed2eb4	The name of the VA-approved underwriter and their underwriter ID must be provided on VA Forms 26-6393, Loan Analysis, and 26-1820, Report and Certification of Loan Disbursement. k. Occupancy Requirement The Veteran must meet the occupancy requirement outlined in Chapter 3.¹⁹ l. Fees and Charges Refer to Chapter 8 for information on permissible fees and charges.	VA_Guidelines.txt
a681e30d-36b3-48c8-8626-4183c657bfce	Closing costs, including the VA funding fee, may be paid from loan proceeds but the loan amount may not exceed the maximum loan amount outlined in section g. Note: For Type I cash-out refinances that result in an increased principal and interest payment, the lender may not charge the Veteran loan fees, closing costs, or expenses other than taxes, amounts held in escrow, and the VA funding fee.	VA_Guidelines.txt
870c44e2-90a1-4407-8b3d-318f8a868d03	Continued on next page 1638 C. F. R. § 36.4340, 38 U. S. C. § 3710(b)(3) 1738 U. S. C. § 3702(d)(1) 1838 C. F. R. § 363.4352(b)(3) 1938 U. S. C. § 3704(c) 6-16 VA Lenders Handbook M26-7 Chapter 6: Refinancing Loans Topic 3: Cash-Out Refinancing Loans, continued m.	VA_Guidelines.txt
ed1a520d-6716-42e3-84b4-7ad92c427a7c	Fee Recoupment Requirement (VA-to-VA, Type I only)²⁰ Fee recoupment is the length of time it will take the Veteran to recoup certain costs necessitated by the refinance. The fee recoupment period of certain loan fees, expenses, and closing costs must not exceed 36 months.	VA_Guidelines.txt
c06de7aa-515d-42f9-a5f2-24dc34f3f048	This requirement applies to Type I cash-out refinancing loans²¹, regardless of the interest rate and/or loan term of the new loan. Fee Recoupment Calculation The fee recoupment period is computed by dividing allowable loan fees, expenses, and closing costs, whether included in the loan amount or paid outside of closing, by the reduction of the monthly principal and interest (PI) payment.	VA_Guidelines.txt
f016c421-41f9-40bf-8d12-538149247a85	The fee recoupment period is not rounded.	VA_Guidelines.txt
51f1c371-3a94-49fb-823d-7b2ca1bdb662	Example: Acceptable Fee Recoupment Description Amount Allowable loan fees/expenses/closing cost $3,250 Divided by the Monthly PI payment reduction ÷ $200 Fee Recoupment Period = 16.25 months Example: Unacceptable Fee Recoupment Description Amount Allowable loan fees/expenses/closing cost $3,250 Divided by the Monthly PI payment reduction ÷ $90 Fee Recoupment Period = 36	VA_Guidelines.txt
0d8700e0-e115-4334-9555-7e4fb3c91d5b	.1 months The VA Funding Fee, escrow, and prepaid expenses, such as insurance, taxes (including Mello-Roos), special assessments, and homeowner’s association (HOA) fees, may be excluded from the calculations to meet the recoupment requirement.	VA_Guidelines.txt
e471048d-8243-4d14-9e6a-4ed78d4bf161	Lender credits and premium pricing may be used to offset allowable fees and charges. However, temporary buydown accounts and escrow accounts created to subsidize payments through an above market interest rate, or a combination of discount points and above market interest rate, are prohibited by VA. For VA purposes, such accounts are considered cash-advance on principal.	VA_Guidelines.txt
b63c1208-ffb4-4a3c-b3ef-18fbed8c2c6e	If the monthly PI payment changed due to a loan modification or ARM, the monthly PI payment reduction should be computed based on the PI payment at the time of the closing of the new refinancing loan. The monthly PI payment should only include the VA-guaranteed loan even if the refinance is made to consolidate multiple mortgages on the property securing the loan.	VA_Guidelines.txt
b87d9f16-2525-49b6-b645-38ab19df0d04	Note: If the monthly PI payment is not reduced as a result of the refinance, the lender may not charge the Veteran loan fees, closing costs, or expenses other than taxes, amounts held in escrow, and the VA funding fee. Lender credits may be subtracted from the charges made to the Veteran. Continued on next page 2038 C. F.	VA_Guidelines.txt
9ed0640a-c65a-4a8d-a140-a21a1a4c5a67	Continued on next page 2038 C. F. R. §36.4306(b)(1) 2138 CFR § 36.4306(b)(1) 6-17 VA Lenders Handbook M26-7 Chapter 6: Refinancing Loans Topic 3: Cash-Out Refinancing Loans, continued m.	VA_Guidelines.txt
91e189f0-1116-4bc2-bf97-490e2c2dcca5	Fee Recoupment Requirement (VA-to-VA, Type I only), continued Lender’s Certification The lender must ensure and certify to VA that the fee recoupment period does not exceed 36 months from the first payment due date. The lender must make the certification before or upon requesting the VA Loan Guaranty Certificate (LGC). n.	VA_Guidelines.txt
7be6c7a1-da88-4c10-9e7e-6da1eaa565b3	Requirement to Reduce the Interest Rate (VA-to-VA, Type I only) All cash-out refinancing loans must meet a net tangible benefit requirement as discussed in section o of this chapter. Additionally, if the loan is a Type I cash-out refinance made to refinance a fixed-rate loan, the new loan must have a lower interest rate as specified below.	VA_Guidelines.txt
5a36f464-f274-48b7-96a1-ed7c76d1c978	Note for modified loans: If the interest rate on the VA-guaranteed loan being refinanced has changed due to a loan modification, the Type I cash-out refinance interest rate must be reduced based on the modified interest rate, appropriately.	VA_Guidelines.txt
e40bb9e2-202e-4487-9649-ce78a435478c	Fixed – Fixed²²: If the existing VA-guaranteed loan being refinanced has a fixed interest rate and the Type I cash-out refinance will have a fixed interest rate, the interest rate of the cash-out refinance must be at least 0.5 percent (50 basis points) lower than the interest rate on the existing VA- guaranteed loan being refinanced.	VA_Guidelines.txt
982cd42d-5182-418f-a586-bd7e0afe1649	Example 1: Fixed to Fixed If the interest rate of the existing VA-guaranteed loan being refinanced is 3.75 percent (fixed), then the interest rate of the Type I cash-out refinance may not be greater than 3.25 percent (fixed).	VA_Guidelines.txt
78719887-a2cd-4d8b-a794-e6d24df77ce5	Example 2: Fixed to Fixed If the interest rate of the existing loan was modified from 3.5 percent (fixed) to 7.0 percent (fixed), then the interest rate of the Type I cash-out refinance may not be greater than 6.5 percent (fixed).	VA_Guidelines.txt
418bc03f-2b98-4668-8d6f-28ca63d941e3	Fixed – ARM (or Hybrid ARM (h-ARM))²³: If the existing VA-guaranteed loan being refinanced has a fixed interest rate and the Type I cash-out refinancing loan will have an adjustable interest rate, the interest rate of the cash-out refinancing loan must be at least 2 percent (200 basis points) lower than the interest rate on the VA-guaranteed loan being refinanced. (fixed-to-ARM).	VA_Guidelines.txt
f3981621-31c8-452f-b095-6a06864cc6e3	Continued on next page 2238 C. F. R. § 36.4306(b)(3) 2338 C. F. R. § 36.4306(b)(4) 6-18 VA Lenders Handbook M26-7 Chapter 6: Refinancing Loans Topic 3: Cash-Out Refinancing Loans, continued n.	VA_Guidelines.txt
ab34229a-7701-4c8d-af59-89166d2916e6	Requirement to Reduce the Interest Rate (VA-to-VA, Type I only), continued Example: Fixed to ARM If the interest rate of the VA-guaranteed loan being refinanced is 3.75 percent (fixed), then the initial interest rate of the Type I cash-out refinance may not be greater than 1.75 percent (adjustable).	VA_Guidelines.txt
e9f63f28-1ea2-4162-9744-38672b10d14a	Note: The lower interest rate of the Type I cash-out refinancing loan may not result solely from discount points. When discount points greater than one discount point are included in the loan amount, the LTV ratio of the Type I refinancing loan (fixed-to-ARM) may not exceed of 90 percent of the reasonable value of the property.	VA_Guidelines.txt
274a0eec-40ec-48e4-bb78-f3887e3c55dd	ARM (or h-ARM)²⁴ – Fixed: If the VA-guaranteed loan being refinanced has an ARM and the Type I cash-out refinancing loan will have a fixed rate, there is not a requirement to reduce the interest rate. Therefore, the interest rate may increase on these transactions. o.	VA_Guidelines.txt
6a48d7e4-f586-4a67-864f-568e7972ac1f	Net Tangible Benefit (NTB) Requirement²⁵ (Type I & Type II) The lender must provide the Veteran a NTB test demonstrating how the Veteran will benefit from the refinance. A loan that provides a NTB means that it is in the financial interest of the Veteran.	VA_Guidelines.txt
9f94d35e-fc4e-454c-b30c-68a0c370c101	Each cash-out refinancing loan must provide at least one NTB to the Veteran: · If the loan being refinanced has been modified, the modified terms should be used to evaluate the NTB. · If the loan being refinanced is an ARM, the interest rate and PI payment at the time of the new loan closing should be used to evaluate the NTB	VA_Guidelines.txt
383438d8-56a0-41c9-a990-51233ee985d8	. · If the loan being refinanced has a temporary buydown, the note interest rate and full PI payment should be used to evaluate the NTB.	VA_Guidelines.txt
944c290f-a3b9-4e09-83a3-6512ab41577d	The NTB requirement is met if the loan satisfies at least one of the following: · The refinance will eliminate monthly mortgage insurance, this includes the elimination of the United States Department of Agriculture Rural Development annual fee, (current mortgage statement or other document reflecting monthly mortgage insurance is required), or · The loan term of the new refinancing loan is less	VA_Guidelines.txt
88d1e098-bf34-4874-a342-0b121b28c096	The loan term of the new refinancing loan is less than the loan term of the loan being refinanced (the note or other document reflecting the current loan term is required), or · The interest rate of the new refinancing loan is less than the interest rate of the loan being refinanced (the note or other document reflecting the current loan term is required); or · The new refinancing LTV ratio is	VA_Guidelines.txt
c4eabcc0-2ee2-42ce-bc6b-618fb59b37cb	required); or · The new refinancing LTV ratio is equal to or less than 90 percent of the reasonable value of the home; or Continued on next page 2438 U	VA_Guidelines.txt
0c9f3ebb-2379-4f7c-b921-54b93f824d64	.	VA_Guidelines.txt
273e156a-2657-4689-8aad-8f15532dfa9c	S. C. § 3710(e)(1)(A) 2538 C. F. R. § 36.4306(a)(3) 6-19 VA Lenders Handbook M26-7 Chapter 6: Refinancing Loans Topic 3: Cash-Out Refinancing Loans, continued o. Net Tangible Benefit (NTB) Requirement²⁶ (Type I & Type II), continued · The monthly principal and interest (PI) payment of the new refinancing loan is less than the monthly PI payment of the loan being refinanced.	VA_Guidelines.txt
20403fc4-66b4-4070-b430-ecb05d137b4e	If the monthly PI payment changed due to a loan modification or adjustable-rate mortgage, the monthly PI payment reduction should be computed based on the current monthly PI payment.	VA_Guidelines.txt
17982058-d952-4745-96a1-16f7e38edfea	The monthly PI payment should only include the first lien mortgage even if the refinance is made to consolidate multiple mortgages on the property securing the loan; or · The Veteran’s monthly residual income is higher as a result of the new refinancing loan.	VA_Guidelines.txt
bd5ed4cb-b4eb-43eb-8c9c-49659077bb8c	If this NTB is utilized, the lender should compare the residual income based on the proposed loan terms with the residual income that would exist if the refinance was not completed	VA_Guidelines.txt
421accab-2fed-4f52-a62d-0f418d25b974	. · The refinancing of an interim loan to construct, alter, or repair the Veteran’s primary home (interim loans to construct do not include one-time construction to permanent loans that provided for permanent financing); or · The Veteran’s monthly residual income is higher as a result of the new refinancing loan.	VA_Guidelines.txt
988c9fcd-153d-4cab-a71c-d9f0cc7a6571	If this NTB is utilized, the lender should compare the residual income based on the proposed loan terms with the residual income that would exist if the refinance was not completed.	VA_Guidelines.txt
57cb739c-3764-4e9b-b217-7e2d48ceadbb	Example of Residual Income Calculation: Factor Without-Refinance After-Refinance Net Income* $5,750 $5,750 Debts (-) ($1,630) ($1,630) Mortgage Payment** (-) ($2,320) ($2,100) Residual Income $1,800 $2,020 * Net income is gross income net of applicable deductions	VA_Guidelines.txt
be8aec1c-1bb1-40f1-af99-dc7844cb6d34	. (Line 39 on VA Form 26- 6393, Loan Analysis) **Monthly principal, interest, taxes, insurance, and mortgage insurance, if applicable Note: If the monthly PI payment is scheduled to change on the loan being refinanced, due to an ARM, on or before the closing date of the proposed refinance transaction, the adjusted PI amount for the loan being refinanced must be used to determine the pre-refinance	VA_Guidelines.txt

47fbf2ba-54a8-44af-938d-8e31bef72e29

. 4 Funding fee receipt.

VA_Guidelines.txt

038d1118-c6f1-428d-8b62-b79de8663ae8

Reference: See section 8 of chapter 8 for information on exemptions. 5 Statement signed by the Veteran acknowledging the effect of the refinancing loan on the Veteran’s loan payments and interest rate.

VA_Guidelines.txt

81851588-201c-4bab-9407-1ed7f9fba414

The statement must include: · The interest rate and monthly payments for the new loan versus that for the old loan, and · How long it will take to recoup ALL closing costs (both those included in the loan and those paid outside of closing)

VA_Guidelines.txt

135472fa-bc9a-466c-81d5-788fd79c1a76

. · If applicable, the Veteran’s statement may be combined with the lender’s certification that the Veteran qualifies for the new monthly payment which exceeds the previous payment by 20% or more

VA_Guidelines.txt

b5ce0f6a-3be8-4094-94bd-16fc11747bb1

. 6 VA Form 26-8923, Interest Rate Reduction Refinancing Loan Worksheet 7 VA Form 26-1820, Report and Certification of Loan Disbursement 8 VA Form 26-8937, Verification of VA Benefits (if applicable) 9 HUD-1, settlement statement. 10 VA Form 26-0503, Federal Collection Policy Notice 11 Lender’s certification that the prior loan was current (not 30 days or more past due) at the time of loan closing

VA_Guidelines.txt

27df20fe-0c76-4be1-865d-5d677a6afb74

. 12 If loan is submitted more than 60 days after loan closing, a statement signed by a corporate officer of the lender which identifies the loan, provides the specific reasons for late reporting and certifies that the loan is current.

VA_Guidelines.txt

f38c6a42-ddbf-4020-80e2-5d4aeb5375d1

This statement must be submitted with any late request for issuance of a Loan Guaranty Certificate. 13 Documentation of the cost of energy efficiency improvements included in the loan. For cash reimbursement of the Veteran, the improvements must have been completed within the 90 days immediately preceding the date of the loan.

VA_Guidelines.txt

d8f47b42-e82d-466b-8105-b282b2cb4d17

Reference: See chapter 7 14 Any other necessary documents (see chapter 5). 6-9 VA Lenders Handbook M26-7 Chapter 6: Refinancing Loans Topic 2: IRRRL Made to Refinance a Delinquent Loan Change Date: April 10, 2009 · This section has been changed to update hyperlinks and to make minor grammatical edits. a.

VA_Guidelines.txt

2c97ccec-d5dc-40fb-b06e-3e98a7849e63

Prior Approval Submission Any IRRRL made to refinance a loan that will be 30 days or more past due as of the date of closing, must be submitted for prior approval. The lender must first obtain sufficient information and perform sufficient analysis to determine that: · the cause of the delinquency has been resolved, and · the Veteran is willing and able to make the proposed loan payments.

VA_Guidelines.txt

a585722d-9ef3-4b73-bf8d-857644750749

Submit a written proposal to VA which contains the following information: Table 4: IRRRL Prior Approval Documentation Order Document 1 The full name of the Veteran and all other parties obligated on the prior loan and to be obligated on the new loan. 2 The VA loan number and month and year of origination of the loan to be refinanced. 3 The name and address of the lender proposing to make the loan

VA_Guidelines.txt

4e0ce518-8e64-4271-9f3f-23e4c9ac0047

. 4 The approximate proposed loan amount, interest rate, and term for the new loan versus the old loan. 5 Discount to be charged, expressed as a percentage of the loan and a dollar amount. 6 Statement signed by the Veteran acknowledging the effect of the refinancing loan on the Veteran’s loan payments and interest rate

VA_Guidelines.txt

c4f52ef5-ac88-420c-9c05-0b6ee7367e22

. · 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 will take to recoup ALL closing costs (both those included in the loan and those paid outside of closing). 7 The appropriate certification concerning occupancy signed by the Veteran or the spouse of an active duty servicemember.

VA_Guidelines.txt

5e073f94-33fb-4782-a26c-bdbb98305b8f

One of the following must be signed. · “I have previously occupied the property securing this loan as my home.”, · “While my spouse was on active duty and unable to occupy the property securing this loan, I occupied the property securing this loan as my home.” 8 VA Form 26-8923, Interest Rate Reduction Refinancing Loan Worksheet. 9 VA Form 26-8937, Verification of VA Benefits (if applicable).

VA_Guidelines.txt

9203d88c-2cbb-4209-99e1-77a3c79afc80

Continued on next page 6-10 VA Lenders Handbook M26-7 Chapter 6: Refinancing Loans Topic 2: IRRRL Made to Refinance a Delinquent Loan, continued a.

VA_Guidelines.txt

3b3c7b0c-289b-41a3-b811-e1612cc147f3

Prior Approval Submission, continued Table 4: IRRRL Prior Approval Documentation, continued Order Document 10 VA Form 26-8320 (or 26-8320a), Certificate of Eligibility, or a request for a duplicate certificate on VA Form 26-1880, Request for a Certificate of Eligibility. 11 Uniform Residential Loan Application (URLA)

VA_Guidelines.txt

3ec01749-832d-47ff-92b7-c334c9b5214b

. 11 Uniform Residential Loan Application (URLA). 12 Explanation of the reason(s) for the loan delinquency, including appropriate documentation to verify the cause. 13 Documentation to verify that the cause of the delinquency has been corrected. 14 Credit report (in-file credit report is acceptable). 15 Current pay stub and telephone verification of current employment

VA_Guidelines.txt

b1e4d6d4-946e-4d66-8190-9324872c03d6

. 16 VA Form 26-6393, Loan Analysis. 17 Documentation of the cost of energy efficiency improvements to be included in the loan, if known.

VA_Guidelines.txt

8ec68aaf-959b-495c-9bb5-573c00f18962

See Topic 3 of chapter 7. For cash reimbursement of the Veteran, the improvements must be completed within the 90 days immediately preceding the date of the loan. b. What Happens Next? VA will inform the lender of its decision. The lender may close the loan in reliance on a VA-issued Certificate of Commitment. Reference: See chapter 5 for further information on the Certificate of Commitment.

VA_Guidelines.txt

cf14797a-a815-4f94-828c-f357c692b834

Continued on next page 6-11 VA Lenders Handbook M26-7 Chapter 6: Refinancing Loans Topic 2: IRRRL Made to Refinance a Delinquent Loan, continued c. How to Report Loan Closing and Request Guaranty A prior approval IRRRL must be reported (such as, all documentation submitted) to VA within 60 days of closing.

VA_Guidelines.txt

313c71d9-953c-4cac-9597-cc1493905b4d

A lender that fails to meet this time limit must provide a written explanation. (see order #8). To report an IRRRL, submit the following documents to VA in the order listed. Table 5: IRRRL Closing Documentation Order Document 1 Lender’s cover or transmittal letter (if used). 2 VA Form 26-0286, VA Loan Summary Sheet 3 Funding fee receipt.

VA_Guidelines.txt

32c6a0bd-827b-439d-9acf-378997ec2542

Reference: See chapter 8 for information on exemptions. 4 If the loan amount has increased beyond the amount indicated on the Certificate of Commitment, an updated VA Form 26-8923, Interest Rate Reduction Refinancing Loan Worksheet. 5 VA Form 26-1820, Report and Certification of Loan Disbursement 6 HUD-1, settlement statement

VA_Guidelines.txt

e334f200-8c31-4262-8b01-556d1c4f18df

. 7 VA Form 26-0503, Federal Collection Policy Notice 8 If loan is submitted mor than 60 days after loan closing, a statement signed by a corporate officer of the lender which identifies the loan and provides the specific reason(s) why the loan was not submitted on time. 9 Any other necessary documents (see section 6 of chapter 5). d.

VA_Guidelines.txt

2a3fcc47-2f36-476f-b6b9-270fe9aae4df

Treatment of Late Payments and Late Charges All late payments and late charges (and reasonable costs if legal action to terminate the old loan has commenced) can be rolled into the new loan. If the amount of late payments, late charges and legal costs is significant, the proposed monthly payment will be adversely impacted.

VA_Guidelines.txt

0ed53145-1dae-4b5f-b607-295e2d453267

Carefully analyze whether the IRRRL would benefit the Veteran and not create unacceptable risk to the Government in light of the new monthly payment. 6-12 VA Lenders Handbook M26-7 Chapter 6: Refinancing Loans Topic 3: Cash-Out Refinancing Loans Change Date: October 30, 2024 · This topic has been updated in its entirety

VA_Guidelines.txt

fec33b81-d136-4675-b887-b8e40302d1b4

. · Public Law 115-174, The Economic Growth, Regulatory Relief, and Consumer Protection Act, set different requirements for cash-out refinancing loans based on the payoff amounts of the loan being refinanced.

VA_Guidelines.txt

bdf67023-352d-4eaf-aae2-d1325f70d8fb

Therefore, VA has categorized cash-out refinancing loans as Type I and Type II. VA has promulgated regulations for cash-out refinancing loans at 38 C. F. R. § 36.4306. a. What is a VA Cash-Out Refinancing Loan? A VA cash-out refinancing loan is a refinance of any existing mortgage(s) and/or other indebtedness secured by a lien(s) of record.

VA_Guidelines.txt

3776fc22-4e6c-43af-8215-bf4fa19f6921

Refinancing loans made on properties without an existing mortgage or lien of record are not eligible for guarantee by VA.

VA_Guidelines.txt

ceff06a1-24ce-48b8-9b17-16a8d95bf11e

A cash-out refinance may also be made to refinance the following: · an interim construction loan (a construction loan that does not provide for permanent financing), regardless of whether there is a change in the original loan amount, · the balance of the purchase of land on which new construction is to be financed through the proceeds of the refinancing loan¹, · the balance of an existing land

VA_Guidelines.txt

7e985888-51c5-46c2-8d77-cd0deb40bccc

loan¹, · the balance of an existing land sale contract relating to the Veteran’s home or farm residence (see Chapter 7 for farm residence details)², · a loan for the purchase of, and is secured by, a manufactured home in order to purchase the lot on which the manufactured home is or will be permanently affixed

VA_Guidelines.txt

fb3adff7-8a45-42c7-b2c2-91a006de4a8f

. (see Chapter 7 for manufactured home detail)³, and · a refinance of any other recorded lien against the property such as, but not limited to a mechanics lien, second mortgage, etc.⁴ There are two types of VA cash-out refinancing loans, Type I and Type II.

VA_Guidelines.txt

786d2712-bc3d-4ceb-9d3f-ea6e62d30867

The type of cash- out refinancing loan is determined by the payoff amount of the loan being refinanced compared to the principal amount of the new loan. The lien to be paid off is not required to be in the Veteran’s name. For instance, it could be in the spouse’s name, provided at the time of the new loan closing the Veteran is an owner.

VA_Guidelines.txt

e3aa1d59-d0ac-4b03-a596-e7f4d653a148

VA does not prescribe limitations for how the Veteran may use cash received from the refinancing loan. Loan proceeds beyond the amount needed to pay off the existing mortgage(s) and/or other lien(s) of record being refinanced may be taken as cash by the Veteran for any purpose. As such, VA does not require a letter of explanation detailing how the Veteran proposes to use the loan proceeds.

VA_Guidelines.txt

e0b1e6f5-8971-4654-9070-6f063de34bb4

Continued on next page 1 38 U. S. C. § 3710(b)(7) 2 38 C. F. R. § 36.4306(f) 3 38 C. F. R. § 36.4306(g) 4 38 U. S. C. § 3710(a)(5), 38 C. F.

VA_Guidelines.txt

2de63407-8631-4820-9d60-5b12e7f8a7c7

R. 36.4301 “Lien” 6-13 VA Lenders Handbook M26-7 Chapter 6: Refinancing Loans Topic 3: Cash-Out Refinancing Loans Change Date: October 30, 2024 · This topic has been updated in its entirety. · Public Law 115-174, The Economic Growth, Regulatory Relief, and Consumer Protection Act, set different requirements for cash-out refinancing loans based on the payoff amounts of the loan being refinanced.

VA_Guidelines.txt

d8c77f2a-946a-4c07-aa31-62e469908b50

Therefore, VA has categorized cash-out refinancing loans as Type I and Type II. VA has promulgated regulations for cash-out refinancing loans at 38 C. F. R. § 36.4306. a. What is a VA Cash-Out Refinancing Loan? A VA cash-out refinancing loan is a refinance of any existing mortgage(s) and/or other indebtedness secured by a lien(s) of record.

VA_Guidelines.txt

4b8da3a0-37f0-46ad-89e9-e421bb5c040f

Refinancing loans made on properties without an existing mortgage or lien of record are not eligible for guarantee by VA.

VA_Guidelines.txt

84e393aa-64ae-4bad-b493-17111335fac3

A cash-out refinance may also be made to refinance the following: · an interim construction loan (a construction loan that does not provide for permanent financing), regardless of whether there is a change in the original loan amount, · the balance of the purchase of land on which new construction is to be financed through the proceeds of the refinancing loan¹, · the balance of an existing land

VA_Guidelines.txt

6f50b306-fe29-4f4a-a3aa-e2978fc8c872

loan¹, · the balance of an existing land sale contract relating to the Veteran’s home or farm residence (see Chapter 7 for farm residence details)², · a loan for the purchase of, and is secured by, a manufactured home in order to purchase the lot on which the manufactured home is or will be permanently affixed

VA_Guidelines.txt

b41a7903-b437-419a-8aaa-878bc087d661

. (see Chapter 7 for manufactured home detail)³, and · a refinance of any other recorded lien against the property such as, but not limited to a mechanics lien, second mortgage, etc.⁴ There are two types of VA cash-out refinancing loans, Type I and Type II.

VA_Guidelines.txt

217a63fa-1dfb-475e-a792-55b2b207faf8

The type of cash- out refinancing loan is determined by the payoff amount of the loan being refinanced compared to the principal amount of the new loan. The lien to be paid off is not required to be in the Veteran’s name. For instance, it could be in the spouse’s name, provided at the time of the new loan closing the Veteran is an owner.

VA_Guidelines.txt

2b7ea47d-016f-4c2c-a374-aeb5196d05db

VA does not prescribe limitations for how the Veteran may use cash received from the refinancing loan. Loan proceeds beyond the amount needed to pay off the existing mortgage(s) and/or other lien(s) of record being refinanced may be taken as cash by the Veteran for any purpose. As such, VA does not require a letter of explanation detailing how the Veteran proposes to use the loan proceeds.

VA_Guidelines.txt

747838ba-23f6-4f66-82fd-40052eb50e06

Continued on next page 1 38 U. S. C. § 3710(b)(7) 2 38 C. F. R. § 36.4306(f) 3 38 C. F. R. § 36.4306(g) 4 38 U. S. C. § 3710(a)(5), 38 C. F. R. 36.4301 “Lien” 6-13 VA Lenders Handbook M26-7 Chapter 6: Refinancing Loans Topic 3: Cash-Out Refinancing Loans, continued b. What is a Type I Cash-Out Refinance Loan?

VA_Guidelines.txt

f9cfc264-59f2-4631-89d3-90116dd76076

What is a Type I Cash-Out Refinance Loan? A Type I cash-out refinance is a refinancing loan in which the new loan amount (including the VA funding fee) does not exceed the payoff amount of the loan being refinanced⁵. A Type I cash-out refinance is distinct from an IRRRL on the basis that it may be a VA- guaranteed loan or a non-VA loan that is being paid off through the refinance. c.

VA_Guidelines.txt

c4ad8c6a-3a30-48a3-aacf-fbaabf875a45

What is a Type II Cash-Out Refinance Loan? A Type II cash-out refinance is a refinancing loan in which the new loan amount (including the VA funding fee) exceeds the payoff amount of the loan and/or lien(s) of record being refinanced. In a Type II cash-out, the Veteran may remove equity from the subject property. d.

VA_Guidelines.txt

0a8e3a26-36be-4a54-a696-9e1a1989e48a

Lien Position Requirement The refinancing loan must be secured by first lien position on the property. All other lien holders must agree to subordinate to the VA refinancing loan. Copies of any subordination agreements must be included in the loan file for VA audit review.⁶ e.

VA_Guidelines.txt

0c3f93d8-e429-47ce-8712-af4e6349b70f

Ownership Requirement The Veteran must have ownership/title of the property securing the loan before, or at the time of closing. There is not a required length of time that the Veteran must have been on title prior to loan closing. f.

VA_Guidelines.txt

b84ddad1-612d-4583-80d7-b06922bb8581

Maximum Loan Term The maximum loan term of the refinancing loan may not exceed the lesser of: · 30-years and 32-days⁷, or · The economic life of the property securing the loan⁸. g. Maximum Loan Amount The maximum loan amount may not exceed 100 percent of the reasonable value⁹ (as determined by VA) of the property securing the loan.

VA_Guidelines.txt

6bbe7009-7451-468a-be1e-490d7c7e3656

The inclusion of energy efficiency improvements up to $6,000¹⁰ and/or the VA funding fee, in part or whole, must not cause the loan to exceed 100 percent of the reasonable value.

VA_Guidelines.txt

f133ff46-5177-4356-b345-98d2c660361e

For Type I refinances: If the loan being refinanced has a fixed interest rate and the Type I cash-out refinancing loan will have an adjustable interest rate and more than one discount point is charged, the loan-to-value ratio (LTV) is limited to 90 percent of the reasonable value¹¹. See chapter 3 for additional information on maximum loan amounts. Continued on next page 5 38 U. S.

VA_Guidelines.txt

abdbc0a6-50e8-4104-ab92-1dfd2f1487f9

Continued on next page 5 38 U. S. Code § 3709(d)(1) 6 38 U. S. C. § 3703(d)(3) 7 38 U. S. C. § 3703 (d)(1) 8 38 CFR § 36.4310(c) 9 38 U. S. C. § 3710(b)(7)) 1038 U. S. C. § 3710(d)(2) 1138 CFR 36.4306(b)(4)(ii) 6-14 VA Lenders Handbook M26-7 Chapter 6: Refinancing Loans Topic 3: Cash-Out Refinancing Loans, continued h.

VA_Guidelines.txt

8720ddce-4fc7-48e2-9906-a18b9a66f8f2

Maximum Guaranty For Veterans with full entitlement, the maximum amount of guaranty entitlement available to the Veteran, for a loan amount above $144,000 is 25 percent of the loan amount¹².

VA_Guidelines.txt

df0bb373-1936-46bd-92c4-79229edac9ba

For Veterans with partial entitlement, the maximum guaranty will be based on the total loan amount, the amount of entitlement available to the Veteran, and the one-unit Freddie Mac Conforming Loan Limit¹³ if the Veteran has partial entitlement (see Chapter 3 for additional information on calculating the maximum guaranty). i.

VA_Guidelines.txt

25dda79f-95d9-44ed-bfff-486c3a0e2bbd

Veteran’s Entitlement The Veteran must have entitlement available for the loan (see Chapter 3 for examples on calculating remaining entitlement for Veterans with partial entitlement).

VA_Guidelines.txt

3980c67e-4a72-403d-be50-a7f2322e1433

If the loan being refinanced is a VA-guaranteed loan, or if the Veteran has unrestored entitlement for a previous VA-guaranteed loan on the subject property, the entitlement charged to that VA-guaranteed loan may be restored for purposes of obtaining the refinancing loan. Except in cases where the Veteran has obtained a one-time restoration, which is addressed in the next paragraph.

VA_Guidelines.txt

b6657543-0910-4555-a255-7347f2872c11

If the Veteran obtained a one-time restoration, all properties obtained using the Veteran’s entitlement must be disposed of prior to the cash-out refinance. That is, the property with the one-time restoration applied and all other properties obtained with a VA loan must be satisfied and sold for any restoration to occur, including a cash-out restoration.

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In these cases, if the Veteran has not sold all of the properties, they may still obtain a cash-out refinance loan; however, the amount of entitlement will be limited to the amount remaining without restoration. This includes instances where the Veteran is obtaining a cash-out refinance on the property obtained with the one-time restoration¹⁴.

VA_Guidelines.txt

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Transfer of the property on which a one-time restoration was applied to a spouse (to whom the Veteran is still married) or to a Limited Liability Corporation where the Veteran is a member (owner), does not meet the sale requirement for restoration.

VA_Guidelines.txt

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An Energy Efficient Mortgage (EEM) may be added to any cash-out loan provided it meets the program requirements without regards to entitlement availability. The EEM portion of the loan does not increase the entitlement charged to the Veteran¹⁵. Continued on next page 1238 USC § 3703(a)(1)(A)(i)(IV) 1338 U. S. C. § 3703(a)(1)(C)(ii) 1438 U. S. C. § 3702(b)(1) 1538 U. S. C. § 3710(d), 38 C. F.

VA_Guidelines.txt

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C. § 3702(b)(1) 1538 U. S. C. § 3710(d), 38 C. F. R. 36.4302(c) 6-15 VA Lenders Handbook M26-7 Chapter 6: Refinancing Loans Topic 3: Cash-Out Refinancing Loans, continued j. Underwriting Full credit underwriting is required for all cash-out refinancing loan types.

VA_Guidelines.txt

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The underwriter must follow VA credit underwriting guidelines to ensure all borrowers are a satisfactory credit risk and have stable/reliable income for the repayment of the loan¹⁶ (see Chapter 4 for VA credit underwriting guidelines). Only lenders granted VA automatic authority by VA may close cash-out refinancing loans automatically.

VA_Guidelines.txt

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Lenders without VA automatic authority may close loans through the use of an agent-sponsor relationship or submit the loan to VA for underwriting and approval prior to loan closing¹⁷ (see Chapter 5 for information on how to submit a request for prior approval).

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For non-supervised lenders with automatic authority, only VA-approved credit underwriters may make credit-underwriting decision on VA loans. The lender must certify¹⁸ that all underwriting decisions to approve or deny a VA loan will be made by a VA-approved underwriter.

VA_Guidelines.txt

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The name of the VA-approved underwriter and their underwriter ID must be provided on VA Forms 26-6393, Loan Analysis, and 26-1820, Report and Certification of Loan Disbursement. k. Occupancy Requirement The Veteran must meet the occupancy requirement outlined in Chapter 3.¹⁹ l. Fees and Charges Refer to Chapter 8 for information on permissible fees and charges.

VA_Guidelines.txt

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Closing costs, including the VA funding fee, may be paid from loan proceeds but the loan amount may not exceed the maximum loan amount outlined in section g. Note: For Type I cash-out refinances that result in an increased principal and interest payment, the lender may not charge the Veteran loan fees, closing costs, or expenses other than taxes, amounts held in escrow, and the VA funding fee.

VA_Guidelines.txt

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Continued on next page 1638 C. F. R. § 36.4340, 38 U. S. C. § 3710(b)(3) 1738 U. S. C. § 3702(d)(1) 1838 C. F. R. § 363.4352(b)(3) 1938 U. S. C. § 3704(c) 6-16 VA Lenders Handbook M26-7 Chapter 6: Refinancing Loans Topic 3: Cash-Out Refinancing Loans, continued m.

VA_Guidelines.txt

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Fee Recoupment Requirement (VA-to-VA, Type I only)²⁰ Fee recoupment is the length of time it will take the Veteran to recoup certain costs necessitated by the refinance. The fee recoupment period of certain loan fees, expenses, and closing costs must not exceed 36 months.

VA_Guidelines.txt

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This requirement applies to Type I cash-out refinancing loans²¹, regardless of the interest rate and/or loan term of the new loan. Fee Recoupment Calculation The fee recoupment period is computed by dividing allowable loan fees, expenses, and closing costs, whether included in the loan amount or paid outside of closing, by the reduction of the monthly principal and interest (PI) payment.

VA_Guidelines.txt

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The fee recoupment period is not rounded.

VA_Guidelines.txt

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Example: Acceptable Fee Recoupment Description Amount Allowable loan fees/expenses/closing cost $3,250 Divided by the Monthly PI payment reduction ÷ $200 Fee Recoupment Period = 16.25 months Example: Unacceptable Fee Recoupment Description Amount Allowable loan fees/expenses/closing cost $3,250 Divided by the Monthly PI payment reduction ÷ $90 Fee Recoupment Period = 36

VA_Guidelines.txt

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.1 months The VA Funding Fee, escrow, and prepaid expenses, such as insurance, taxes (including Mello-Roos), special assessments, and homeowner’s association (HOA) fees, may be excluded from the calculations to meet the recoupment requirement.

VA_Guidelines.txt

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Lender credits and premium pricing may be used to offset allowable fees and charges. However, temporary buydown accounts and escrow accounts created to subsidize payments through an above market interest rate, or a combination of discount points and above market interest rate, are prohibited by VA. For VA purposes, such accounts are considered cash-advance on principal.

VA_Guidelines.txt

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If the monthly PI payment changed due to a loan modification or ARM, the monthly PI payment reduction should be computed based on the PI payment at the time of the closing of the new refinancing loan. The monthly PI payment should only include the VA-guaranteed loan even if the refinance is made to consolidate multiple mortgages on the property securing the loan.

VA_Guidelines.txt

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Note: If the monthly PI payment is not reduced as a result of the refinance, the lender may not charge the Veteran loan fees, closing costs, or expenses other than taxes, amounts held in escrow, and the VA funding fee. Lender credits may be subtracted from the charges made to the Veteran. Continued on next page 2038 C. F.

VA_Guidelines.txt

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Continued on next page 2038 C. F. R. §36.4306(b)(1) 2138 CFR § 36.4306(b)(1) 6-17 VA Lenders Handbook M26-7 Chapter 6: Refinancing Loans Topic 3: Cash-Out Refinancing Loans, continued m.

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Fee Recoupment Requirement (VA-to-VA, Type I only), continued Lender’s Certification The lender must ensure and certify to VA that the fee recoupment period does not exceed 36 months from the first payment due date. The lender must make the certification before or upon requesting the VA Loan Guaranty Certificate (LGC). n.

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Requirement to Reduce the Interest Rate (VA-to-VA, Type I only) All cash-out refinancing loans must meet a net tangible benefit requirement as discussed in section o of this chapter. Additionally, if the loan is a Type I cash-out refinance made to refinance a fixed-rate loan, the new loan must have a lower interest rate as specified below.

VA_Guidelines.txt

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Note for modified loans: If the interest rate on the VA-guaranteed loan being refinanced has changed due to a loan modification, the Type I cash-out refinance interest rate must be reduced based on the modified interest rate, appropriately.

VA_Guidelines.txt

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Fixed – Fixed²²: If the existing VA-guaranteed loan being refinanced has a fixed interest rate and the Type I cash-out refinance will have a fixed interest rate, the interest rate of the cash-out refinance must be at least 0.5 percent (50 basis points) lower than the interest rate on the existing VA- guaranteed loan being refinanced.

VA_Guidelines.txt

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Example 1: Fixed to Fixed If the interest rate of the existing VA-guaranteed loan being refinanced is 3.75 percent (fixed), then the interest rate of the Type I cash-out refinance may not be greater than 3.25 percent (fixed).

VA_Guidelines.txt

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Example 2: Fixed to Fixed If the interest rate of the existing loan was modified from 3.5 percent (fixed) to 7.0 percent (fixed), then the interest rate of the Type I cash-out refinance may not be greater than 6.5 percent (fixed).

VA_Guidelines.txt

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Fixed – ARM (or Hybrid ARM (h-ARM))²³: If the existing VA-guaranteed loan being refinanced has a fixed interest rate and the Type I cash-out refinancing loan will have an adjustable interest rate, the interest rate of the cash-out refinancing loan must be at least 2 percent (200 basis points) lower than the interest rate on the VA-guaranteed loan being refinanced. (fixed-to-ARM).

VA_Guidelines.txt

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Continued on next page 2238 C. F. R. § 36.4306(b)(3) 2338 C. F. R. § 36.4306(b)(4) 6-18 VA Lenders Handbook M26-7 Chapter 6: Refinancing Loans Topic 3: Cash-Out Refinancing Loans, continued n.

VA_Guidelines.txt

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Requirement to Reduce the Interest Rate (VA-to-VA, Type I only), continued Example: Fixed to ARM If the interest rate of the VA-guaranteed loan being refinanced is 3.75 percent (fixed), then the initial interest rate of the Type I cash-out refinance may not be greater than 1.75 percent (adjustable).

VA_Guidelines.txt

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Note: The lower interest rate of the Type I cash-out refinancing loan may not result solely from discount points. When discount points greater than one discount point are included in the loan amount, the LTV ratio of the Type I refinancing loan (fixed-to-ARM) may not exceed of 90 percent of the reasonable value of the property.

VA_Guidelines.txt

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ARM (or h-ARM)²⁴ – Fixed: If the VA-guaranteed loan being refinanced has an ARM and the Type I cash-out refinancing loan will have a fixed rate, there is not a requirement to reduce the interest rate. Therefore, the interest rate may increase on these transactions. o.

VA_Guidelines.txt

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Net Tangible Benefit (NTB) Requirement²⁵ (Type I & Type II) The lender must provide the Veteran a NTB test demonstrating how the Veteran will benefit from the refinance. A loan that provides a NTB means that it is in the financial interest of the Veteran.

VA_Guidelines.txt

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Each cash-out refinancing loan must provide at least one NTB to the Veteran: · If the loan being refinanced has been modified, the modified terms should be used to evaluate the NTB. · If the loan being refinanced is an ARM, the interest rate and PI payment at the time of the new loan closing should be used to evaluate the NTB

VA_Guidelines.txt

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. · If the loan being refinanced has a temporary buydown, the note interest rate and full PI payment should be used to evaluate the NTB.

VA_Guidelines.txt

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The NTB requirement is met if the loan satisfies at least one of the following: · The refinance will eliminate monthly mortgage insurance, this includes the elimination of the United States Department of Agriculture Rural Development annual fee, (current mortgage statement or other document reflecting monthly mortgage insurance is required), or · The loan term of the new refinancing loan is less

VA_Guidelines.txt

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The loan term of the new refinancing loan is less than the loan term of the loan being refinanced (the note or other document reflecting the current loan term is required), or · The interest rate of the new refinancing loan is less than the interest rate of the loan being refinanced (the note or other document reflecting the current loan term is required); or · The new refinancing LTV ratio is

VA_Guidelines.txt

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required); or · The new refinancing LTV ratio is equal to or less than 90 percent of the reasonable value of the home; or Continued on next page 2438 U

VA_Guidelines.txt

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.

VA_Guidelines.txt

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S. C. § 3710(e)(1)(A) 2538 C. F. R. § 36.4306(a)(3) 6-19 VA Lenders Handbook M26-7 Chapter 6: Refinancing Loans Topic 3: Cash-Out Refinancing Loans, continued o. Net Tangible Benefit (NTB) Requirement²⁶ (Type I & Type II), continued · The monthly principal and interest (PI) payment of the new refinancing loan is less than the monthly PI payment of the loan being refinanced.

VA_Guidelines.txt

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If the monthly PI payment changed due to a loan modification or adjustable-rate mortgage, the monthly PI payment reduction should be computed based on the current monthly PI payment.

VA_Guidelines.txt

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The monthly PI payment should only include the first lien mortgage even if the refinance is made to consolidate multiple mortgages on the property securing the loan; or · The Veteran’s monthly residual income is higher as a result of the new refinancing loan.

VA_Guidelines.txt

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If this NTB is utilized, the lender should compare the residual income based on the proposed loan terms with the residual income that would exist if the refinance was not completed

VA_Guidelines.txt

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. · The refinancing of an interim loan to construct, alter, or repair the Veteran’s primary home (interim loans to construct do not include one-time construction to permanent loans that provided for permanent financing); or · The Veteran’s monthly residual income is higher as a result of the new refinancing loan.

VA_Guidelines.txt

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If this NTB is utilized, the lender should compare the residual income based on the proposed loan terms with the residual income that would exist if the refinance was not completed.

VA_Guidelines.txt

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Example of Residual Income Calculation: Factor Without-Refinance After-Refinance Net Income* $5,750 $5,750 Debts (-) ($1,630) ($1,630) Mortgage Payment** (-) ($2,320) ($2,100) Residual Income $1,800 $2,020 * Net income is gross income net of applicable deductions

VA_Guidelines.txt

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. (Line 39 on VA Form 26- 6393, Loan Analysis) **Monthly principal, interest, taxes, insurance, and mortgage insurance, if applicable Note: If the monthly PI payment is scheduled to change on the loan being refinanced, due to an ARM, on or before the closing date of the proposed refinance transaction, the adjusted PI amount for the loan being refinanced must be used to determine the pre-refinance

VA_Guidelines.txt