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VA Guaranteed Home Loans - PowerPoint PPT Presentation

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VA Guaranteed Home Loans. Roanoke VA Regional Loan Center Compliments of Roanoke and Cleveland RLC. Contact Information. National VA website: Roanoke VA website: Toll Free: (800) 933-5499. Types Of VA Loans.

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VA Guaranteed Home Loans

Roanoke VA Regional

Loan Center

Compliments of Roanoke and Cleveland RLC

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Contact Information

National VA website:

Roanoke VA website:

Toll Free: (800) 933-5499

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Types Of VA Loans

Purchase or construct a home

Purchase a VA/HUD approved condo or townhouse

Purchase farm property

Purchase a home and improve at the same time

Manufactured home on permanent foundation

Interest Rate Reduction Refinance Loans (IRRRL)

Cashout Refinances

Energy Efficient Improvement

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  • Ensures Equal Opportunity to Veterans

  • No Down Payment Program

  • Negotiable Fixed Interest Rate

  • Streamlined Processing for Lenders

  • Right to Prepay without Penalty

  • Assumable Mortgage

  • Limitations on Closing Costs

  • Forbearance Extended to VA Homeowners Experiencing Temporary Financial Difficulty

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Dispelling The Myths

Appraisals take forever!

Too much red tape!

Too much paperwork!

VA takes too long!

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Find a Home

Apply for COE

VA Mails Guaranty

To Lender

Apply to Lender

For Loan

Lender Orders

Appraisal by Phone

Processing Time

Six to Eight Weeks!

Lender Sends

Loan Package to VA

Appraisal Received by VA,

Reviewed and CRV Issued

VA Reviews Each Package

(30 to 40 Documents!!)

Lender Packages Loan and

Sends to VA for Approval

Lender Closes Loan

VA Approves or Disapproves

Loan and Notifies Lender

Do You Remember The Past ?

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Find Home

Go to Lender


  • Determines eligibility electronically using ACE

  • Obtains Loan Guaranty Electronically

14-21 Days

Where We Are Today…

  • Uses AUS to get decision in minutes

  • Orders Appraisal thru TAS

  • Lender Closes Loan

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What Changed?





How we got from there..

…..To Here

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How Long Does The Average VA Loan Sit On a Government Employee’s Desk?

0 days

15 days

30 days

45 days


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Automatic Procedure Employee’s Desk?




Underwrites Income & Credit packages and the Appraisal

Closes loan without sending anything to VA

Lender guarantees loan online through a system called WebLGY

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Loans That Must Be Employee’s Desk?Submitted As Prior Approval

Joint Loans

Vets in receipt of non-service connected pension

Vets rated incompetent by VA

Interest Rate Reduction Loans when refinancing a delinquent loan


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Prior Approval Employee’s Desk?




Submits loan to VA for underwriting

Closes after VA issues commitment, usually in 3-5 days

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99% of VA Loans are Automatics Employee’s Desk?

1% are Priors

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Who Is Eligible For A VA Home Loan? Employee’s Desk?

Honorably discharged veterans who served:

2 years on active duty

6 years in the Reserve/National guard

POW’s held in captivity for 90 days of more

90 days of wartime duty when called up or ordered under U.S.C. Title 10 (this US code must appear on DD214).

181 days of peacetime duty called up under U.S.C. Title 10

Some unmarried surviving spouses

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90 Days Wartime Employee’s Desk?

  • World War II – (9/16/40 - 07/25/47)

  • Korean Conflict – (06/27/50 - 1/31/55)

  • Vietnam – (08/05/64 - 05/07/75)

  • Persian Gulf - 08/02/90 …

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181 Days Peacetime Employee’s Desk?

  • Post WWII - 7/26/47 - 6/26/50

  • Post Korean - 2/1/55 - 8/4/64

  • Post Vietnam - 5/8/75 - 8/1/90

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2 Year Requirement Employee’s Desk?

  • Enlisted person - After September 7, 1980

  • Officer – After October 16, 1981

    (90 days applies to Persian Gulf wartime service called up under U.S.C. Title 10)

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Reserve & Employee’s Desk? National Guard

6 Years Total Service unless activated under Title 10

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Obtaining A COE Employee’s Desk?

VA Form 26-1880

Proof of service documentation (DD214, active duty statement of service or Reserve/National Guard points statement)

If veteran had previous VA home that was sold, a copy of the HUD-1 Settlement Statement

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Automated Certificates Of Eligibility (ACE) Employee’s Desk?

An automated system used by lenders to obtain an online certificate of eligibility

Accessed through the VIP

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ACE Facts Employee’s Desk?

  • For use by lenders and mortgage brokers

  • No application for certificate of eligibility needed

  • Vet’s SSN & Name all that’s required to use ACE system

  • Typical successful ACE candidate is a first time user of VA program, discharged after 1980 and served on active duty for 2 years

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ACE Facts Employee’s Desk?(cont.)

  • ACE certificates of eligibility no longer printed on green or gold safety paper.

  • ACE certificates printed from computer on white paper.

  • Authorization number distinguishes authenticity

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ACE Can’t Make Employee’s Desk?All Determinations

  • Reserves/National Guard

  • Prior VA loan foreclosure

  • Insufficient time/discharge type

  • Unmarried surviving spouse

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If ACE Is Not Successful: Employee’s Desk?How To Obtain A COE

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VA Eligibility Center Employee’s Desk?

Winston Salem Eligibility CenterP.O. Box 20729Winston Salem, NC 27120

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What Does A Certificate Of Eligibility (COE) Mean To You? Employee’s Desk?

GNMA, FNMA and FHLMC require government loans to have a minimum of 25% guaranty coverage

Basic entitlement – under old law, allows for up to $36,000 for loans not to exceed $144,000

Certificate of eligibility tells the lender, broker or real estate agent how much entitlement a veteran has

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What Does A Certificate Of Eligibility Mean To You Employee’s Desk?(cont.)?

A veteran who previously used the VA home loan program would need to sell the home and transfer title to obtain the full basic and bonus entitlement back (restoration of entitlement)

A veteran can obtain a certificate of eligibility over and over, provided they have adequate entitlement

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Maximum Employee’s Desk? VA Loan Amount

Limited to the lesser of:

Appraised Value or Purchase Price


VA Funding Fee


Energy Efficient Improvements

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Maximum VA Employee’s Desk?Loan Amounts

Maximum VA loan is the lesser of the appraised value or the purchase price

VA loan is based on available entitlement

Secondary market requirements for GNMA, FNMA and FHLMC require at least a 25% guaranty

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Maximum VA Employee’s Desk?Loan Amounts

VA’s maximum guaranty on a $417,000 loan is $104,250, or $417,000 x 25% = $104,250


Example: The COE issued to you shows $36,000 basic entitlement. This amount can be increased to an amount equal to 25% of the Freddie Mac conforming loan limit which is $417,000 across the country – exception for those counties with a temporary increase.

Alexandria, VA, for example, is one county with a temporary increase of $768,750 for a home over $144,000.

Entitlement = $192,187.5 ($36,000 basic + $156,187.5 bonus)….$192,187.5 x 4 = $768,750.

If you qualify for a home costing $768,750, the lender that you are approved through would receive a 25% guaranty.

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Veteran purchases a home in 1995 for $100,000 Employee’s Desk?

VA guarantees 25% of loan or $25,000

Loan is still open and being paid on

Assuming the conforming loan limit is $417,000.

If the conforming loan limit is higher – ex. bonus as shown on previous screen would be more.

Remaining Entitlement:

$36,000 basic entitlement

- 25,000 used

$11,000 remaining basic

+68,250 bonus entitlement

$79,250 total entitlement left

x 4

$317,000 maximum loan to

obtain 25%


Partial Entitlement Remaining Entitlement Scenario

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VA Appraisals Employee’s Desk?

What’s changed at VA regarding appraisals?!!!

  • 40% increase in number of appraisers in all states

  • All appraisers must be e-commerce compliant

  • Appraisers are expected to communicate with all parties

  • Lender Appraisal Processing Program (92%)

  • Timeliness issues aggressively monitored

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VA Appraisals Employee’s Desk?

Minimum Property Standards

  • Safe – meets local/county safety codes (electrical, structural and location)

  • Sanitary – well, septic and sanitary sewer pass local/county inspection

  • Sound – meets local/county structural building codes

    Bottom Line: NO “FIXER UPPERS!”

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Generally, must occupy within 60 days Employee’s Desk?

Exceptions –

IRRRLs – do not have to occupy

Spouse of veteran can satisfy occupancy

If veteran is on active duty, must occupy within 12 months

Basic Rule Of VA Loans Regarding Owner Occupancy

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VA FUNDING FEE Employee’s Desk?

  • Funding fee can be added to the based loan amount

  • Funding fee amount varies depending on loan type, down payment, and whether or not veteran had VA loan previously

  • Funding fee is paid online at

  • Some borrowers are exempt

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Veterans Exempt From Employee’s Desk?Funding Fee

Veteran receiving 10% disability compensation from VA

Veteran receiving military pension from VA, in lieu of compensation

Surviving spouse of a veteran who died as a result of active duty injuries


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VA Funding Fees Employee’s Desk?Basics Please refer to your handbook.

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UNDERWRITING Employee’s Desk?

Determine that the veteran is a

satisfactory credit risk, and has the

income to qualify for the loan

Underwriter’s Objective:

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INCOME Employee’s Desk?

  • Stable and Reliable

  • Anticipated to continue

  • Sufficient in amount

  • Reportable/Verifiable

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Income must be “verifiable” Employee’s Desk?

Prefer a 2 year history, but consideration given for at least 12 months on the job

Veteran can obtain VA loan immediately out of the military if employment is related to military technical experience

Explain significant gaps in employment


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Verification Employee’s Desk?


  • VA Form 26-8497, Verification of Employment, or

  • Pay stubs


  • Telephone verification

  • Pay stubs (30 days)

  • W 2s for 2 years

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Other Types of Verifications Employee’s Desk?

  • Faxed & Internet Verifications

  • Employment Verification Services

  • Leave & Earning Statement (LES) for Active Duty Service (available at “my pay”

  • Income tax returns (self employment) & YTD P&L and balance sheet

  • Other……

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Income less Employee’s Desk? than 12 months…

  • Generally not considered stable and reliable

  • Carefully consider:~ Employer’s evaluation of probability of continued employment~ Special training/education/skills required

    If using this income… … you must explain why!!!

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Overtime, Part Time and Bonus Income Employee’s Desk?

  • Generally not considered stable and reliable unless 2 year history

  • Verification for at least 12 months – income may be used to offset debts of 10 to 24 months

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Credit History Employee’s Desk?

  • 3-File Merged (MCR)

  • Residential Mortgage Credit Report (RMCR)

  • Verify Rent/Mortgage history

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Does VA Employee’s Desk?Consider Credit Scores?

  • YES

  • NO

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Automated Underwriting Systems (AUS) Employee’s Desk?

  • Most major lenders approved

    to use AUS systems

  • Typical VA “Accept” is in the 640 credit score range

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Automated Underwriting Systems Approved By VA Employee’s Desk?

  • Desktop Underwriter

  • Loan Prospector

  • Countrywide’s CLUES

  • Chase’s ZIPPY

  • PMI/AURA For VA Loans

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AUS “Accept” Employee’s Desk?For VA Loans

  • In the 640 mid-credit score range

  • “Accept” gives credit clearance with waiver of certain derogatory issues

  • AUS “Accept” does not mean loan is clear to close

  • Veteran must still meet debt ratio and residual income factors

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AUS Refer or Manual Employee’s Desk? Underwrite: What We Consider For Approval

  • Review individual trade lines – derogatories in last 12 months?

  • Collection accounts – minor or major?

  • Charge offs – how much and how long ago?

  • Federal debt – cannot close with open, unpaid Federal debt

  • Judgments – cannot close with open, unpaid judgments

  • Absence of credit history

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Bankruptcy ~ Chapter 7 Employee’s Desk?

  • Discharged 2 + years ago if bankruptcy was caused by borrower’s financial mismanagement

  • Discharged 12 months ago - must be due to circumstances beyond borrower’s control

  • Must have documentation

  • Must have re-established credit in most recent 12 months

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Bankruptcy ~ Chapter 13 & Employee’s Desk?Consumer Credit Counseling

  • This indicates an effort to pay and may be viewed as evidence of acceptable credit if:

  • 12 month payment history, no lates

  • Acknowledgment of trustee or agency

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Foreclosures Employee’s Desk?

  • Develop facts and circumstances

  • Same waiting periods as Chapter 7 Bankruptcy

  • Prior VA Loan:Ensure no debt to Government and entitlement restored

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Debts & Obligations Employee’s Desk?

  • May remove debts with 10 monthly payments remaining (if not significant)

  • Only monthly revolving and installment accounts considered

  • Child care is a monthly obligation

  • Investigate all allotments on LES or pay stubs

  • Verify and consider Alimony and Child Support

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Debts & Obligations Employee’s Desk?You May Disregard

  • Co-obligor on another’s loan:

    • evidence payments made bysomeone else

    • No reason to believe applicant will need to make payments in the future

  • Student Loan payments deferred 12 months or more.

  • 401K loans (or other loans secured against deposited funds).

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Assets Employee’s Desk?

  • Sufficient in amount

  • VA Form 26-8497a, Verification of Deposit

  • Alt Docs: Last two bank statements

  • Internet and faxed verifications


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VA’s Standards Employee’s Desk?

  • Debt-to-income Ratio – 41%

  • Residual Income - should meet VA’s residual income tables

  • Lender must complete Loan Analysis, VA Form 26-6393

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Debt Ratio 46% - $50 Residual Shortfall Employee’s Desk?

  • Approve Loan

  • Reject Loan

  • Could go either way

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Contract Issues Employee’s Desk?

  • Contingent on VA financing VA

  • “Escape Clause” is mandatory

  • Seller must pay termite inspection


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Allowable Fees & Charges Employee’s Desk?

  • Appraisal Report & Compliance Inspections

  • Credit Report

  • Prepaid Taxes and Hazard Insurance

  • Title Exam and Title Insurance Fees

  • Flood Zone Determination

  • Environmental Endorsements (3.0, 8.1,103.5)

  • Recording Fees and Taxes

  • EPA Endorsement

  • Origination Fee (1%)

  • Reasonable Discount Points (May roll up to 2 points into an IRRRL)

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Fees That Can Never Be Charged To A Veteran Employee’s Desk?

  • Termite/Pest Inspection

  • Septic Inspection (as mandated by county)

  • Well Inspection (as mandated by county)

  • Mortgage Broker Fee

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New HUD1 and Good Faith Estimate

VA will continue to have a cap on the origination fee and limit the type of charges that may be paid by the veteran.

In order to monitor these fees, VA is requiring lenders to itemize these charges in the empty 800 lines of the HUD-1 (effective 5/1/2010).

Lenders will be required to maintain a copy of the GFE and invoices for third party charges as part of their origination package.

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One Percent Origination Fee Employee’s Desk?

The lender may charge the veteran a flat fee up to one percent of the loan amount. The flat fee is intended to cover the lender’s costs and services which are not reimbursable as itemized fees. For Interest Rate Reduction Refinance Loans – this fee may not exceed 1% of the existing loan balance of the loan being refinanced plus the cost of energy efficient items less any cash payments from the veteran.

Circular 26-10-01 – Lists Reasonable and Customary Items along with Unallowable Itemized Fees – Also refer to Chapter 8, section 2d of the Lenders Handbook.

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2009 VA Loan Statistics Employee’s Desk?

  • 325,675 VA loans nationwide

  • $68.2 billion in VA loan volume

  • Average VA loan $209,395.

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Foreclosure Avoidance Options Employee’s Desk?

Repayment Plans

Deed In Lieu of Foreclosure

Loan Modification

VA Refunding

Compromise Sale


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VA Compromise Sales (Short Sales) Employee’s Desk?

If the value of the veteran’s property has dropped and you, as a realtor, cannot get a contract to pay the loan in full, you may want to consider the VA compromise sale program.

If you get a contract equal to the value and the closing costs are reasonable and customary, this program may work for you.

With this program, the lender (on behalf of VA) can step in and pay the difference to pay the loan off plus closing costs that are reasonable so that the homeowner can avoid foreclosure. When the lender reviews a case for VA compromise, they look at the case as if it were going to foreclosure versus allowing the VA compromise to go through. There must be a savings in order for the compromise sale to go through.


If, for example, you submit a contract that equals the value but the value has dropped drastically or the closing costs are too high for whatever reason (or a combination of both factors), the contract will fallthrough.

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VA Compromise Sales (Short Sales) Employee’s Desk?


Principal: $110,000

Interest $ 2,019

Foreclosure Costs $ 1,000

Advances $ 600

TOTAL Debt $113,619

*Net Value -96,943

Foreclosure Claim$ 16,676

Compromise Sale

Contract Sales Price: $ 95,000

Closing Costs: $ 7,800

Total $102,800

Total Debt of $113,619 less Net After Sale of $102,800 =

Comp Claim Payment of $10,819

Potential Foreclosure Claim of$16,676 – Comp Claim $10,819=$5,857.

Savings to VA: $5,857 and VA does not have to take back a property to re-sell.

*Note: net value = appraisal of $105,000 less 11.87% = net value of 96,943.

The 11.87% is the average cost to acquire and market a foreclosed property.