Presenting VA Interest Rate Reduction Refinancing Loans (IRRRLs) - PowerPoint PPT Presentation

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Fran Wagner National Trainer 5151 Corporate Drive Troy, MI 48098 1 (800) 945-7700 Wholesale.Flagstar.Com 03-11-2009. Presenting VA Interest Rate Reduction Refinancing Loans (IRRRLs). Definition and Purpose Borrower Eligibility Case Number Assignment Funding Fee

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Presenting VA Interest Rate Reduction Refinancing Loans (IRRRLs)

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Presenting va interest rate reduction refinancing loans irrrls

Fran Wagner

National Trainer

5151 Corporate Drive

Troy, MI 48098

1 (800) 945-7700



PresentingVA Interest Rate Reduction Refinancing Loans(IRRRLs)

Today s agenda

Definition and Purpose

Borrower Eligibility

Case Number Assignment

Funding Fee

Calculating the Loan Amount

Underwriting Requirements

Power of Attorney

Old vs. New Loan Statement

Documentation and Disclosures

Today’s Agenda

Definition and purpose

Refinance of an existing VA loan into another VA loan that

Lowers the Interest Rate

If loan being refinanced is an ARM loan, interest rate reduction requirement is waived


Reduces the Principal and Interest Payment

If loan being refinanced is an ARM or new loan shortens the loan term, principal and interest payment reduction requirement is waived

Credit qualification is required when payment increases 20% or more

Definition and Purpose

Eligible borrowers

Original veteran alone, even if loan being refinanced was joint with previous spouse or other non-veterans – Veteran must be obligated on the existing loan and must still be owner of record – If veteran is still married to spouse who was co-borrower, the spouse must remain on the loan

Original veteran and different spouse

Original veteran and new spouse

Surviving spouse – Must be obligated on the loan being refinanced

New veteran with sufficient entitlement – New veteran’s entitlement substitutes for the existing veteran’s entitlement, which is restored

Eligible Borrowers

Ineligible borrowers

Veteran holding a conventional loan

Veteran without spouse if the spouse was a co-borrower on the loan being refinanced

Veteran’s previous spouse when divorced and previous spouse now owns home as a result of the divorce settlement

Veteran’s widow or widower who is not a borrower on loan being refinanced


Ineligible Borrowers

Prior loan validation

In lieu of Certificate of Eligibility, obtain Prior Loan Validation through WebLGY

Web site -

Select “WebLGY”


Select “Eligibility” link

Select “Prior Loan Validation”

Enter veteran’s Social Security Number and last name

System should produce veteran’s active loan information – Print screen for loan being refinanced and use as certificate of eligibility

Prior Loan Validation

Prior loan validation cont d

Provides the following information

VA case number – Make certain that prior loan validation is for the loan being refinanced and not other VA loans

Guaranty date

Guaranty amount

Guaranty percentage

Status (Must be “guaranty issued”)

Loan amount

Prior Loan Validation, Cont’d

Case number assignment

Obtain a new VA case number through The Appraisal System (TAS)

Do not order an appraisal

If you do not have a log-in, complete Flagstar Form #9701 – VA Case Number/Appraiser Assignment and fax to Government Lending Department – Indicate that loan is an IRRRL and no appraisal is required or requested

Case Number Assignment


Entitlement charged for the IRRRL will be the same amount charged for the loan being refinanced, regardless of new loan amount:

If the entitlement charged to the loan being refinanced was $50,000, the new entitlement is $50,000


Funding fee


Veterans exempt for any of the following reasons do not pay the funding fee:

Veteran received disability benefits in the past

Veteran is eligible to receive disability benefits but receives retirement pay instead

Veteran currently receives disability benefits

Borrower is the surviving spouse of a veteran who died while on active duty or from a service-connected disability

VA Form 26-8937 – Verification of VA Benefits required

Send fully-executed form to VA Regional Loan Center that has jurisdiction over the state in which the property is located

Funding Fee

Maximum loan calculation

Non-Flagstar to Flagstar IRRRL loans for manufactured homes are not permitted:

Complete Interest Rate Reduction Refinancing Loan Worksheet and include in file – The completed form must mirror the way the loan is closed

Link to worksheet is contained in Flagstar Document #9005

VA Form – Interactive pdf format -

Prints from Loan Origination Systems (Calyx, etc.)

Maximum Loan Calculation

Maximum loan calculation cont d

Maximum Mortgage may include all of the following:

Existing VA loan balance, including late charges – If late payments are included in the loan amount, VA must underwrite the file and borrower must be credit qualified

Allowable fees and charges, including up to two discount points

Brokers may charge discount points required to buy down the rate

Correspondents may charge discount points that are reasonable and customary, regardless of loan pricing

Only two points may be financed into the IRRRL loan – Discount points above the 2% limit must be paid in cash by the veteran

Funding Fee

2009 loan limits may be exceeded as long as IRRRL Worksheet calculation is not exceeded

Maximum Loan Calculation, Cont’d

Allowable borrower paid closing costs

Borrowers may pay the following closing costs, provided they are reasonable and customary

1% origination fee

Reasonable discount points – Up to two points may be included in the new loan amount – Discount points above 2% must be paid in cash

Recording fees

Pre-paid items (taxes, assessments, etc.)


Allowable borrower paid closing costs cont d

Insurances (hazard and flood, when required)

Flood zone determination

Survey, if required by lender or veteran, except for surveys of condominiums

Title insurance and title examination and applicable environmental protection lien endorsements

Mailing fees for refinances - Only when the saved per diem interest cost to the veteran will exceed the cost of the special handling

VA funding fee

Mortgage Electronic Registration System (MERS) fee


Non allowable borrower paid closing costs

Borrowers may not pay the following fees and closing costs:

Attorney fees other than for title commitments

Broker fees

Loan closing or settlement fees

Doc prep, loan application or processing fees

Interest rate lock-in fees

Postage, stationery, telephone or other overhead charges


Non allowable borrower paid closing costs cont d

Amortization schedules, etc.

Notary fees

Escrow fees or charges

Commitment fees or marketing fees of secondary purchasers

Trustee fees

Fees charged by third parties, regardless of affiliation with lender

Tax service fees – Flagstar charges a $69 tax service fee

If no origination fee is charged, the veteran may pay non-allowable costs up to 1% of the loan amount


Product highlights

Do not run loan through automated underwriting

The following items are not required:

Credit report

Verification of mortgage

Verification of employment

Verification of assets


Termite inspection

Maximum cash-in-hand $500

Must be the result of documented overages

Product Highlights

Product highlights cont d

New loan term may not exceed original loan term plus ten years

30 year maximum loan term

Existing subordinate financing may be re-subordinated

Borrower must be current on existing mortgage – If the loan funds in April, the March payment must have been made

Product Highlights, Cont’d

Power of attorney

Permitted for active-duty military personnel stationed overseas

or other veterans who cannot be present at closing:

General power of attorney

Veteran must sign initial 1003

Specific power of attorney

Veteran not required to sign any application documents

Power of attorney document must include all of the following specifications:

Entitlement – must state the veteran intends to re-use a specified amount of entitlement

Loan purpose – must state veteran intends to obtain IRRRL financing

Property – must list address and legal description

Loan terms – must state loan type and terms

Occupancy – veteran must state he or she intends to meet VA occupancy requirement

Power of Attorney

Power of attorney cont d

All signatures must be notarized, and the power of attorney must be reviewed by a Flagstar underwriter

All signatures must match signatures on application documents, if applicable

There must be more than one borrower on the loan, and at least one borrower must be present at closing

Single borrower transactions permitted when Flagstar has experience with borrower and can compare signatures from a previous file

Title policy cannot contain any exceptions related to the POA

Power of Attorney, Cont’d

Alive and well statement

Lender must verify veteran is alive and well and not missing in action on the day of closing

E-Mail, fax or letter from veteran

E-Mail, fax or letter from veteran’s commanding officer

In extreme cases, provide lender certification stating conversation with commanding officer or rear detachment personnel

Name and rank/title

Date and time of conversation

Method of communication, including phone number, if applicable

Alive and Well Statement

Old versus new loan comparison

Flagstar document #9723 – Not required when payment is not decreasing (refinance of an ARM loan or shortening of loan term)

Compares loan being refinanced to the new loan

Loan amount

Interest Rate


Monthly Principal and Interest

Monthly PITI

States how long it will take the borrower to recoup all closing costs, regardless of whether they are financed into the loan amount

Determine the payment difference and divide the amount of closing costs, including the funding fee and discount points by the monthly savings

Payment on loan being refinanced - $1000

New payment - $900

Closing costs, discount points, funding fee, and pre-paid expenses for new loan - $5000

$5000 divided by $100 monthly savings = 50 months to recoup costs

Old Versus New Loan Comparison

Required file documentation


Must be new 1003 – Not a copy of 1003 from original loan

IRRRL Worksheet – VA Form 26-8923

VA Old vs. New Statement – Flagstar document #9723

VA Form 1802-A (or FHA 92900-A) – Pages 1 and 2 only

VA disability questionnaire – Flagstar document #9706

VA Letter of Indebtedness – VA Form 26-8937

Required only if borrower is exempt from funding fee

Military Counseling Checklist – VA Form 26-0592

Required for active-duty borrowers only

Federal Collection Policy – VA Form 26-0503

Required File Documentation

Required file documentation1

VA Case Number Assignment

Eligibility verification via ONE of the following methods:

Certified true copy of original certificate of eligibility

Prior loan validation from WebLGY – must indicate same loan number as loan being refinanced

CAIVR Verification



Servicing Disclosure

Privacy Disclosures – Flagstar Document #4804

Required File Documentation

Required file documentation2

Patriot Act Disclosure – Flagstar document #3243

Driver’s License

Interest Rate/Point Disclosure Statement – Flagstar document #9704

ARM Disclosure, if applicable

Payoff verifying loan is current

Copy of original note

Power of attorney, if applicable

Alive and well and not missing in action verification if using POA

Input “999” in Loantrac credit score field

Required File Documentation

Documents required at closing


Social Security Verification – Flagstar document #3257

Fully executed Request for Certificate of Eligibility – VA Form 26-1880

Report and Certification of Loan Disbursement – VA Form 26-1820

Documents Required at Closing

Va regional loan centers

VA Regional Loan Centers

Regional loan centers

Cleveland Regional Loan Center

Delaware, Indiana, Michigan, New Jersey, Ohio, Pennsylvania

1240 East Ninth Street

Cleveland, Ohio 44199

(800) 729-5772

Houston Regional Loan Center

Arkansas, Louisiana, Oklahoma, Texas

6900 Almeda Road

Houston, TX 77030

(888) 232-2571

Regional Loan Centers

Regional loan centers1

St. Paul Regional Loan Center

Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota Wisconsin

1 Federal Building

Fort Snelling

St. Paul, MN 55111

(800) 827-0611

Atlanta Regional Loan Center

Georgia, North Carolina, South Carolina, Tennessee

1700 Clairmont Road

Decatur, GA 30031

(888) 768-2132

Regional Loan Centers

Regional loan centers2

Denver Regional Loan Center

Alaska, Colorado, Idaho, Montana, Oregon, Utah, Washington, Wyoming

155 Van Gordon Street

Lakewood, CO 80228

(888) 349-7541

Manchester Regional Loan Center

Connecticut, Maine, Massachusetts, New Hampshire, New York, Rhode Island, Vermont

275 Chestnut Street

Manchester, NH 03101

(800) 827-6311

Regional Loan Centers

Regional loan centers3

Phoenix Regional Loan Center

Arizona, California, Nevada, New Mexico

3333 North Central Avenue

Phoenix, AZ 85012

(888) 869-0194

Roanoke Regional Loan Center

District of Columbia, Kentucky, Maryland, Virginia, West Virginia

210 Franklin Road, SW

Roanoke, VA 20411

(800) 933-5499

Regional Loan Centers

Regional loan centers4

St. Petersburg Regional Loan Center

Alabama, Florida, Mississippi, Puerto Rico, U.S. Virgin Islands

9500 Bay Pines Boulevard

St. Petersburg, FL 33708

(888) 611-5916

Honolulu Regional Office


459 Patterson Road

Honolulu, HI 96810

(808) 433-0481

Regional Loan Centers

Government underwriting support contact numbers

Questions pertaining to files in process:


General government loan questions:

Government Underwriting Support Desk

866-945-9872 – Select one for underwriting and then 2 for Government Underwriting

Government Underwriting Support/Contact Numbers

Thank you for giving flagstar bank this opportunity we appreciate your business and loyalty

Contact Information

Fran Wagner

National Trainer

Direct Number: 248-312-5801

Toll Free: 800-945-7700, Ext. 5801


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