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VA Guaranteed Home Loans Training. Offered by… FIRST MORTGAGE CORPORATION. Serve the mortgage lending needs of borrowers who serve our country…. May 10, 2013.

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VA Guaranteed Home Loans Training


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    1. VA Guaranteed Home Loans Training Offered by… FIRST MORTGAGE CORPORATION Serve the mortgage lending needs of borrowers who serve our country… May 10, 2013 Desktop Underwriter is a registered trademark of Fannie Mae. Loan Prospector is a registered trademark of Freddie Mac. This presentation is a summary and is not complete. This information is for mortgage professionals only and should not be distributed to or used by consumers or other third-parties. Information is accurate as of the date shown below and is subject to change without notice. 05/10/2013

    2. TOPICS FOR DISCUSSION Understanding VA Guaranteed Home Loans • Introduction – VA History • Highlights of the Program • 7 Step Process • General Eligibility Guidelines • Borrower Eligibility • CAIVRS • Certificate of Eligibility • VA Funding Fee • Program Guidelines • Interest Rate Reduction Refinance Loans • Underwriting Guidelines • Income • Assets • Debts & Obligations • Credit • Property • VA Fees & Charges • Resources, Tools, Training, Support

    3. VA Guaranteed Home Loans VA History Highlights of the Program Common VA Terms What the VA Loan Offers 7 Step Process to a VA Loans Understanding VA Guaranteed Home Loans

    4. Veterans Administration (VA) HISTORY Understanding VA Guaranteed Home Loans • Established in 1930 to provide federal benefits to veterans and their families, including health care, financial assistance, and burial benefits. • In 1944, the Servicemen’s Readjustment Act (known as the “G.I. Bill” was signed into law and provided a variety of benefit programs to facilitate the adjustment of returning veterans to civilian life, including federally insured home loans with no down payment. • In 1989, the Veterans Administration was renamed the Department of Veterans Affairs.

    5. Common VA Terms Understanding VA Guaranteed Home Loans • COE (Certificate of Eligibility): • Certificate provided by VA to evidence a Veteran’s entitlement to participate in the VA Home Loan Guarantee Program. A COE is the only reliable Proof of Eligibility for the Lender • In order to get a COE, lenders can access the ACE (Automated Certificate of Eligibility) System on the internet to prove eligibility • CRV (Certificate of Reasonable Value): • The VA certifies the fair market value of the property once the home is appraised • Entitlement: • Dollar amount of loan guarantee that the Veteran’s Benefit Administration (VA) provides to each eligible veteran • Funding Fee: • The fee that VA charges when a veteran uses its Home Loan Guarantee Program • This fee is generally rounded to 2% to 3% depending on whether its your 1st VA loan; disabled veterans may be exempt from this fee • NOV (Notice of Value): • This form is issued to the borrower in conjunction with an appraisal • Every NOV must include an estimated reasonable value of the property, estimated economic life of the property, and list of any property related conditions and requirements necessary for VA loan guaranty

    6. What is a VA Guaranteed Loan? 6 Understanding VA Guaranteed Home Loans • VA guaranteed loans are loans made by private lenders such as banks, savings and loans, or mortgage companies to eligible veterans for the purchase of a home THAT MUST BE FOR THEIR OWN PERSONAL OCCUPANCY. • A veteran applies with a lender and once approved, VA will guarantee a portion of it to the lender. This guarantee protects lenders against loss in the event of foreclosure, up to the amount of the guaranty, and allows a veteran favorable financing terms. • The Veterans Benefit Act of 2004 changed the maximum guaranty amount to 25% of the Freddie Mac Conforming loan limit. Example: • The Freddie Mac Conforming loan limit is $417,000. $417,000 x 25% = $104,250 • Therefore, the maximum guaranty amount is $104,250

    7. What the VA Loan Offers Understanding VA Guaranteed Home Loans • Benefits of a VA Loan: • NO DOWN PAYMENT • NO MONTHLY MORTGAGE INSURANCE PREMIUMS • NO RESERVE REQUIREMENTS – Conforming 1 unit only (Own no other real estate) • 100% GIFT FUNDS ALLOWED • Ability to finance the funding fee (plus reduced funding fee depending on down payment, and the exemptions for veterans receiving compensation) • Fully Assumable to qualified borrowers • VA does NOT do the following: • Guaranty that the property is free of defects. VA guarantees only the loan. It is the veterans responsibility to assure that they are satisfied with the property being purchased. The VA appraisal is not intended to be an “inspection” of the property. A veteran should seek expert advice (a qualified residential service) as necessary BEFORE legally committing to a purchase contract. • If you have a home built, VA cannot compel the builder to correct construction defects although VA does have the authority to suspend a builder from further participation in the home loan program. • VA can’t guarantee the veteran is making a good investment.

    8. 7 STEPS to a VA Loan Understanding Manufactured Homes Understanding VA Guaranteed Home Loans

    9. Basic Veteran Eligibility Occupancy CAIVRS Certificate of Eligibility (COE) VA Guarantee Loan Limits ELIGIBILITY GUIDELINES Understanding VA Guaranteed Home Loans

    10. Who is ELIGIBLE? Understanding Manufactured Homes Understanding VA Guaranteed Home Loans

    11. Proof of Service 11 • Active Duty • DD form 214 (Member 4 copy) • www.nara.gov • Statement of Service • Reserve/Guard Members • NGB Form 22 • Retirement Points Statement • Unmarried Surviving Spouse • Report of Casualty DD Form 1300 • Death Certificate Understanding VA Guaranteed Home Loans

    12. Eligible Branches of Service Understanding Manufactured Homes Understanding VA Guaranteed Home Loans

    13. Eligibility Continues… 13 • Only the spouse of a Veteran is eligible to co-borrow with the Veteran on VA Home Loan. • No other person may co-borrow, i.e. brother, sister, parent, uncle, aunt, significant other, etc. • Non purchasing spouse is acceptable in community property states. • Provide current credit report on non-purchasing spouse • Obligations will be used against Veteran AND non-purchasing spouse’s credit history will be analyzed • Two Veterans or VA eligible borrower’s can purchase together. • Must be submitted directly to VA for approval Understanding VA Guaranteed Home Loans

    14. Basic Occupancy Requirements OCCUPANCY 14 Understanding VA Guaranteed Home Loans

    15. Occupancy 15 Understanding VA Guaranteed Home Loans • Primary Residence – Veteran to certify: • Personally live in the property as his/her home, or • Intent to occupy property upon completion of loan • Veteran must occupy within 60 days after loan closing • Exceptions: • IRRRLs – previously occupied • Active duty service person on temporary status • Spouse or Dependent Child satisfies occupancy requirement • Spouse occupancy also satisfy requirement if due to distant employment of veteran other than military service • Specific future event • Refer to Chapter 3.05 for more details

    16. Credit Alert Interactive Voice Response System CAIVRS 16 Understanding VA Guaranteed Home Loans

    17. CAIVRS 17 • CAIVRS (Credit Alert Interactive Voice Response System) is a HUD-maintained system to determine if the borrower has defaulted on any federally-assisted loan. • A CAIVRS inquiry must be performed on all borrowers. • HUD offers online access for CAIVRS to current FHA lenders, and to VA lenders with registration. https://vip.vba.va.gov (Veterans Information Portal) • Consider any obligations appearing in CAIVRS when qualifying. • Any delinquent or default disqualifies the borrower from obtaining the loan, unless brought current or to satisfactory status with the Federal Agency and a clear CAIVRS is received. Understanding VA Guaranteed Home Loans

    18. Certificate of Eligibility COE 18 Understanding VA Guaranteed Home Loans

    19. Certificate of Eligibility (COE) Understanding VA Guaranteed Home Loans

    20. Certificate of Eligibility (COE) Understanding VA Guaranteed Home Loans

    21. Understanding Manufactured Homes Understanding VA Guaranteed Home Loans

    22. FYI – Ordering an Electronic COE 22 Understanding VA Guaranteed Home Loans

    23. FYI – Ordering an Electronic COE Cont’d… 23 Understanding VA Guaranteed Home Loans

    24. FYI – Ordering an Electronic COE Cont’d… 24 Understanding VA Guaranteed Home Loans

    25. FYI – Ordering an Electronic COE 25 Understanding VA Guaranteed Home Loans

    26. COE continues… • A COE does not expire. It can be re-used again and again if it’s properly restored • If a Veteran holds a valid COE, you can assume he/she has the appropriate length and character of service. Sometimes, the COE is annotated for individuals currently serving in active duty • It is possible for the COE to show an amount that is less than $36,000. • Refer to the VA Lender Handbook Chapter 2 on How to apply for a COE and more details on this issue. 26 Understanding VA Guaranteed Home Loans

    27. Restorations of Entitlement • Full Restoration requires • Payoff • Transfer of Title • Must apply for a new COE • One-Time Restoration (Still owns home) • Provide documentation • VA Entitlement Codes • 01 World War 2 • 02 Korean War • 04 Viet Nam • 05 Entitlement Restored • 06 Un-remarried Surviving Spouse • 07 Spouse of POW / MIA • 08 Post World War 2 • 09 Post Viet Nam • 10 Persian Gulf War • 11 Selected Reserves 27 Understanding VA Guaranteed Home Loans

    28. VA GUARANTEE 28 Understanding VA Guaranteed Home Loans

    29. Maximum Guaranty 29 • The VA guarantee is the amount VA may pay a lender in the event of loss due to a Foreclosure • The VA guaranty or a combination of the VA guaranty plus the borrower’s down payment and/or equity, must be equal to at least 25% of the subject property’s estimated reasonable value as documented in the Notice of Value (NOV) • The maximum guaranty on a VA loan is the lesser of the veteran’s available entitlement or the maximum potential guaranty amount indicated below • The percentage and amount of guaranty is based on the loan amount including the funding fee portion when the fee is paid from loan proceeds. Understanding VA Guaranteed Home Loans

    30. Maximum Guaranty 30 Understanding VA Guaranteed Home Loans

    31. VA Guaranty Samples Calculations… 31 Example 1: • Veteran has full entitlement available and is purchasing a home for $300,000 where the county loan limit is $417,000. • $417,000 x 25% = $104,250 Maximum Guaranty and Available Entitlement • $300,000 x 25% = $75,000 Guaranty and Down Payment Combination Required • Since VA’s guaranty is limited to the lesser of 25% of the county loan limit or 25% of the loan amount, VA will guaranty $75,000 on Veteran’s $300,000 loan in this county. • A down payment should not be required. Example 2: • Veteran has used $48,000 of entitlement on a prior loan, which may not be restored, and is purchasing a home for $320,000 where the county loan limit is $625,000. • $625,000 x 25% = $156,250 Maximum Guaranty and Available Entitlement • $156,250 - $48,000 = $108,250 Entitlement Available • $108,250 x 4 = $433,000 Maximum Loan Amount with 25% Guaranty • Since the proposed loan amount will be less than $433,000, the lender will receive 25% VA Guaranty on the loan of $320,000. • A down payment should not be required. Understanding VA Guaranteed Home Loans

    32. VA Guaranty Samples Calculations… 32 Example 3: • Veteran has used $104,250 of entitlement on a prior loan, which may not be restored and is purchasing a home for $380,000, where the county loan limit is $815,000. • $815,000 x 25% = $203,750 Maximum Guaranty • $203,750 - $104,250 = $99,500 Entitlement Available • $99,500 x 4 = $398,000 Maximum Loan Amount with 25% Guaranty • Since the proposed loan amount will be less than $398,000, the lender will receive 25% VA Guaranty on the loan of $380,000. • A down payment should not be required. Example 4: • Veteran has full entitlement available and is purchasing a home for $800,000 where the county loan limit is $729,750. • $729,750 x 25% = $182,437.50 Maximum Guaranty and Available Entitlement • $182,437.50 / $800,000 = 22.81% Guaranty • $800,000 x 25% = $200,000 Guaranty and Down Payment Combination Required • $200,000 - $182,437.50 = $17,562.50 Down Payment • A down payment of $17,562.50 is required. Understanding VA Guaranteed Home Loans

    33. VA 2013 Loan Limits LOAN LIMITS 33 Understanding VA Guaranteed Home Loans

    34. VA 2013 Loan Limits 34 Understanding VA Guaranteed Home Loans • Loan limits: VA has no specified dollar amount(s) for the “maximum loan”. It depends on: • The NOV – reasonable value of the property, AND • Lenders needs in terms of Secondary Market requirements • The maximum guaranty amount (available for loans over $144,000) is25 percent of the 2013 VA Limit shown. • A veteran with full entitlement available may borrow up to the limit shown and VA will guarantee 25 percent of the loan amount. • If a veteran has previously used entitlement that has not been restored, the maximum guaranty amount available to that veteran is reduced accordingly.

    35. VA County Loan Limits 35 Understanding VA Guaranteed Home Loans • Published on VA website: http://www.benefits.va.gov/homeloans/purchaseco_loan_limits.asp • Based on a guaranty of 25% • Loans may exceed this amount, however may require a down payment to meet investor requirements • May need to adjust loan limit based on un-restored entitlement

    36. Basic Program Guidelines Interest Rate Reduction Refinance Loans (IRRRLs) PROGRAM GUIDELINES 36 Understanding VA Guaranteed Home Loans

    37. Program Guidelines Understanding VA Guaranteed Home Loans

    38. Basic Program Guidelines 38 Understanding Manufactured Homes Understanding VA Guaranteed Home Loans

    39. Basic Program Guidelines 39 Understanding Manufactured Homes Understanding VA Guaranteed Home Loans

    40. Maximum Loan Amount Understanding Manufactured Homes Understanding VA Guaranteed Home Loans

    41. Processing an IRRRL IRRRL loan limits VA IRRRL 41 Understanding VA Guaranteed Home Loans

    42. Interest Rate Reduction Refinance Loans (IRRRL’s) 42 Understanding Manufactured Homes IRRRL is a VA loan to refinance an existing VA loan at a lower interest rate and monthly payments with streamlined documentation Loan Limit Maximum: $417,000 Interest Rate: Interest Rate and PITI must be lower than rate on current VA loan (unless previous loan is an ARM) Term: Lesser of 30 years, or original VA term 10 years Payment: The P&I must be less than the P&I on the current loan, unless the IRRRL is refinancing an ARM, or the term of the IRRRL is shorter than the term of the current loan, or Energy Efficient Improvements are included in the IRRRL If the PITI increases by more than 20%, the Veteran must credit qualify Understanding VA Guaranteed Home Loans

    43. VA IRRRL 43 Understanding Manufactured Homes FMC VA IRRRL Highlights (07 Program only): • NO Credit Report required • NO Fico Score required • 12-Month Mortgage Rating on Subject Property Only • Drive-by (2055) appraisal required on non-FMC IRRRL’s only • VA loan must be current • No Mortgage lates in last 12 months • Finance up to 2 discount points • No Cash Back to borrower • Refer to Chapter 6 for change in obligors – depends on Veteran on loan Understanding VA Guaranteed Home Loans

    44. Basic Program Guidelines • Maximum Loan Amount = • The amount of the existing VA loan balance, PLUS • Allowable fees and closing costs, PLUS • VA funding fee, PLUS • Up to 2 discount points, PLUS • Cost of any energy efficient improvements up to $6,000 44 Understanding Manufactured Homes Understanding VA Guaranteed Home Loans

    45. Basic Program Guidelines • Initial Computation • Preliminary Loan Amount • Provides initial computation of fees and charges • Final Computation • Adjusts for discount and funding fee 45 Understanding Manufactured Homes Understanding VA Guaranteed Home Loans

    46. Order a VA IRRRL Case 46 Understanding Manufactured Homes Understanding VA Guaranteed Home Loans

    47. VA IRRRL vs Cash Out) 47 Understanding Manufactured Homes Understanding VA Guaranteed Home Loans

    48. Underwriting Methods General Underwriting Guidelines Credit UW Standards (Income, Assets, Debts & Obligations) Property Guidelines UNDERWRITING GUIDELINES 48 Understanding VA Guaranteed Home Loans

    49. Underwriting Philosophy 49 • Two Basic Underwriting Questions… • Can the applicant pay? • Will the applicant pay? • Uses flexibility and sound judgment • Make sense, case by case basis – not an exact science • FMC Overlays Understanding VA Guaranteed Home Loans

    50. Underwriting Methods UW follows standard VA guidelines and regulations Refer to VA Handbook – Chapter 4 (DU Automated Underwriting Engine incorporates VA’s credit standards) Understanding VA Guaranteed Home Loans