VA IRRRL Offering 5/20/14

(1)

(2)

2

What is an IRRRL?

 IRRRL stands for Interest Rate Reduction Refinance Loan

 An IRRRL is a VA guaranteed loan made to refinance an existing VA guaranteed loan, generally at a lower

interest rate and with lower principal and interest payments than the existing VA loan

 IRRRLs are a true streamline product and as such only existing VA loans are eligible

 _{Available on 30, 20, 25 or 15 year fixed rate, 3/1 and} 5/1 ARM

(3)

 IRRRLs have NO INCOME VERIFICATION

 A 2 year employment history is not required on the 1003

(except Credit Qualifying IRRRLs)

 _{HomeBridge will not verbally verify employment (except}

Credit Qualifying IRRRLs)

 IRRRLs do not require asset verification unless funds to close

exceed $500

 No Ratios

 _{No DU (IRRRLs are manual underwrites; do not run through DU)}  _{No Monthly MI}

(4)

4

IRRRL Basics (continued)

 _{Funding Fee .50%}

 Cash back at closing cannot exceed $500  Escrow account mandatory

 Maximum loan term

 _{Term may not exceed the original term of the loan being} refinanced by more than 10 years, not to exceed 30 years and 32 days

 Minimum loan amount $60,000

 Maximum loan amount $1,000,000

(5)

Loan Eligibility

 VA to VA Loans Only; county loan limits do not apply to IRRRLs

 _{Veteran re-uses the entitlement from existing VA loan}

 _{IRRRL does not impact amount of entitlement Veteran} has in use

 IRRRL Case Number Assignment from VA Portal is required from the Broker (order without requesting an appraisal)

 _{VARequests@homebridge.com} _{offers temporary support}

for Brokers without Portal access

(6)

6

Loan Eligibility (continued)

Generally the party/parties obligated on the original loan must be the same on the new loan (and the Veteran must still own the property):

(7)

7

Qualifying

The principal and interest payment on an IRRRL must be less than the

principal and interest payment on the loan being refinanced unless one of the following exceptions applies:

 _{Loan documents a benefit to the Veteran}

 Loan term reduction OR term going from ARM to Fixed

 _{Credit Qualifying required when any of the following apply:}

 PITI is increasing more than 20%  _{Conforming primary residence}

with a FICO < 640

 Spouse being removed from loan  _{High Balance primary residence}

(8)

8

Qualifying - Continued

 Qualifying Quick View Eligibility Chart

(9)

Non Eligible Transactions & Properties

The following are eligible for IRRRL transactions:

 Mortgages with less than 12 months payments made prior to the application (can be considered for exception)

 _{High Balance second home and investment properties}  High Balance 2-4 units properties

(10)

10

Credit Requirements

 Conforming Loan Amounts

 A mortgage only credit report with credit scores is

acceptable unless the PITI payment is increasing by more than 20% or a spouse is being removed from the new

loan, then a tri-merge credit report is required  High Balance Loan Amounts

 Full credit report to verify no major derogatory credit in the past 12 months.

• Major derogatory credit is defined as any payment > 60 days delinquent, collections and/or judgments (excludes medical/utilities)

(11)

Credit Requirements (continued)

_{580-599 FICO}

Credit qualifying only; refer to VA program guidelines for

complete credit qualifying guidelines

1 unit only

_{Conforming and High Balance}

_{Maximum 90% LTV/CLTV}

Minimum 2 year payment history on the loan being

refinanced with a 0x30 in the previous 24 months - Less than 2 year payment history ineligible

_{Maximum 31%/43% DTI – No Exceptions}

(12)

12

Credit Requirements (continued)

_{Minimum 600-639 FICO}

Credit qualifying only; refer to VA program guidelines for

complete credit qualifying guidelines

_{1-4 unit primary residence conforming and high balance}

loan amounts

 _{Minimum 640 FICO}

 1 unit primary non-credit qualifying conforming loan

amounts

 _{Minimum 680 FICO}

 Second home and 1 unit investment property –

non-credit qualifying conforming loan amounts

(13)

Required Submission Documentation

IRRRL submissions require the following from the Broker in addition to standard submission requirements:

 2 year employment history not required; do not show income

(except Credit Qualifying IRRRLs)

 _{Assets should not be included unless the amount of funds to close}

is > $500

 _{Liabilities should not be included with the exception of the}

mortgage loan to be paid off (except Credit Qualifying IRRRLs) from webLGY

(14)

14

Required Submission Documentation (cont.)

 IRRRL Worksheet

 Located at www.homebridgewholesale.com > Forms  VA Debt Questionnaire

 _{Located at}_{www.homebridgewholesale.com} _{> Forms}  _{VA Rate Reduction Certification signed by Borrower}

 Sample available at www.homebridgewholesale.com > Forms

 Copy of existing Note/Current Mortgage Statement/Payoff

 _{When funds required to close exceeds $500, 1 month} bank statement is required

(15)

Required Submission Documentation (cont.)

 AVM /2055/or full appraisal as required per matrix  Signed 4506T

 _{Only processed on Credit Qualifying transactions}  _{Broker completed IRRRL Worksheet VA Form 26-8923}

 This form breaks out loan amount calculation  Sample available at

www.homebridgewholesale.com > Forms

NOTE: HomeBridge VA Indebtedness Questionnaire is not required on IRRRL transactions

(16)

16

Appraisal Options and Requirements

 _{Acceptable on loan amounts ≤ or equal to $417,000 ($625,500 for}

properties located in AK/HI)

 Always check the estimated value to ensure it works for the loan

parameter/LTV!

 _{Max LTV when using an AVM is 125%}

 _{A standard deviation of ≤ or equal to 18 must be received}  _{If the standard deviation is > 18 a 2055 is required}

(17)

Appraisal Options and Requirements

 Loans with 2055 will have max LTV of 125%

 _{2055 is required to be completed by HomeBridge approved} AMC

 Loans with loan amount ≥ $417,000 ($625,500 in AK/HI) will require a

 Full appraisal must be from HomeBridge approved AMC  _{Max LTV is 100%}

(18)

18

How To Order a CoreLogic GeoAVM™

 Brokers not signed up with CoreLogic can contact Brian Keysor at bkeysor@corelogic.com to establish account

 Go to www.realquest.com

 _{Enter your user name and password}

 _{From the menu on the left side of the screen, under}

“Report Summary” select “AVMs” as the report option; select “AVM Cascade”, then “GeoAVM™ Core” (1)

 Type in the property address and zip code.  _{Click on “Submit Request”}

 _{On the Report Summary screen, the address will appear. (2)}  Click on the “Get” button, next to “AVM Cascade” to

(19)

(20)

20

How to Read AVM Results

GeoAVM™ will run 4 valuation models at one time and will return results for the AVM with the highest score:

(21)

How to Read AVM Results

Note the Estimated Value, Confidence Score and Standard Deviation on the final AVM report:

(22)

22

Maximum Base Loan Amount < $417,000

Maximum Base Loan Amount will be the lesser of the following two calculations:

Unpaid Principal Balance (current at time of closing)  PLUS Allowable VA Closing Costs

 PLUS VA Funding Fee (if applicable)

 PLUS up to 2 points to obtain rate reduction (discount) Appraised value X 125%

(23)

Maximum Base Loan Amount > $417,001

Maximum Base Loan Amount will be the lesser of the following two calculations:

Unpaid Principal Balance (current at time of closing)  PLUS Allowable VA Closing Costs

 PLUS VA Funding Fee (if applicable)

 PLUS up to 2 points to obtain rate reduction (discount Appraised Value (FULL appraisal required)

(24)

24

Calculating Maximum IRRRL Loan Amount

Assuming using an AVM with Appraised Value Less Than Existing Loan amount plus allowable costs:

Appraised Value $100,000 X 125% = $125,000 Existing VA Loan UPB $145,000 Allowable Costs $3,000

_________ $148,000 Max loan amount is $125,000 (lesser of two)

(25)

Calculating Loan Amount (continued)

Assuming using an AVM with Appraised Value higher than Unpaid Principal plus allowable costs:

Appraised Value $100,000 X 125%= $125,000 Existing VA loan UPB $114,000 Allowable Costs $3,000

_________ $117,000 Max loan amount is $117,000 (lesser of two)

(26)

26

Fees and Charges

VA allows the following fees and charges:

 1% origination fee based on total loan amount. Fees determined by

VA as unallowable cannot be charged to the Borrower OR

 1% unallowable fees based on the total loan amount. An origination

fee cannot be charged to the Borrower OR

 Blend of loan origination and unallowable fees based on total loan

amount can be charged to the Borrower. Blend cannot exceed 1% of total loan amount.

 Since there is no origination fee charged, the Borrower can pay up to

(27)

Unallowable Fees

The following fees be charged if a 1% origination fee is charged:

 _{Lender’s Appraisal}

 _{Closing/Settlement or Escrow Fee}  Doc Prep or Notary Fees

 Conveyance or Trustee Fee

 Underwriting Fee or Commitment Fee  _{Interest Rate Lock Fee}

 _{Postage/Mail Fees}  Tax Service Fee

 Attorney services other than title work  Loan application/Processing Fee

(28)

28

Allowable Fees

 _{The following fees} _{be charged to the Borrower if} applicable:

 Loan Origination Fee

 Reasonable Discount Points  _{Appraisal Fee}

 _{Credit report Fee (actual)}

 Title examination/Title Insurance Fees  Recording fees and taxes

 Flood determination

 _{Federal Express/Express mail fee}  _{Closing Protection letter fee}

 VA Funding Fee

(29)

Fee/Charge Calculation Examples

Loan Amount $200,000 Loan Origination $2000 Un-Allowable Fees $595

 In this example the Borrower is paying a 1% loan

origination fee. Therefore the Borrower is not able to cover the un-allowable fees

 The lender will be responsible for covering the un-allowable fees of $595 via a lender credit

(30)

30

Fee/Charge Calculation Examples (continued

)

Loan Amount $150,000 Loan Origination $0

Un-Allowable Fees $595

 In this example the Borrower is not paying a loan

origination fee. The Borrower is able to cover the un-allowable fees up to 1%

(31)

Fee/Charge Calculation Examples (continued

)

Loan Amount $300,000 Loan Origination $2000 Un-Allowable Fees $595

 In this example the Borrower can cover the loan origination fee and the unallowable fees since the total is less than 1% of the loan amount

(32)

32

Closing Tips

 For VA IRRRLs, a general or military POA is acceptable if Veteran signed initial application and disclosures

 _{Alive and Well statement required if Veteran not at closing}  _{Maximum principal reduction is 1% of the loan amount}

 Funding into the month with an interest credit is allowed  Prior months payment must be made

 Existing IRRRL payoffs do not require full months worth of interest to be paid off (unlike FHA)

 _{For AVM option, insurance coverage only required for loan} amount

(33)

VA Resources

VA Resources include:  www.va.gov

 _{Under Veteran Services click Home Loans}  _{Lender’s Handbook is available}

 http://benefits.va.gov/benefits  Veterans Information Portal

(34)

34

VA IRRRL Forms

 IRRRL Forms (located under FORMS on website): Federal Collection Policy Notice

HUD/VA Addendum to URLA Loan Summary

Interest Rate Reduction Worksheet Verification of VA Benefits

 _{(N/A if exempt from funding fee)} IRRRL Worksheet

(35)

(36)

36

(37)

(38)

38

(39)