VA Correspondent Manual

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Version 4.0 - Effective 9-29-2014

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Clickhereto go directly to the VA Underwriting Guidelines

All items with gray shading indicates LenderLive requirements that take precedence over VA

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4506-T

 A fully executed IRS Form 4506-T must be included in all loan files.

 If the 4506T transcripts do not match the borrower’s income and the borrower is a victim of taxpayer identification theft, the following conditions must be met in order to validate the borrower’s income:

o Proof of identification theft as evidenced by one of the following:

 Proof ID theft was reported to and received by the IRS (IRS form 14039) OR

 Copy of notification from the IRS alerting the taxpayer to possible identification theft

o In addition to one of the documents above, all applicable documents below must be provided:

 W2 or 1099 transcripts which match the W2 or 1099 income shown on the 1040s

 1099 mortgage interest must match the reported interest on Schedule A or Schedule E

 1099G unemployment must match the reported amount of unemployment

 1099 dividend and interest income must match the reported dividend and interest  Validation of prior tax year’s income (income for current year must be in line with prior

years)

APPRAISAL

ACREAGE

The following property requirements must be met:  Acreage size must be typical for the area

 Properties with acreage must be residential in nature. Appraiser must clarify that residential use is the highest and best use of the property.

 LenderLive requires that comparable sales be an acceptable distance from the subject. Deviations from the standard agency guidelines must be addressed by the appraiser.

 Any Income generated by the subject must be inconsequential and may not be used to qualify for the loan.

APPRAISAL VALIDITY

Appraisals are valid for six months.

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PROPERTY ADDRESSES

The property addresses should be consistent throughout the file. However, abbreviation of “Street,” “Road,” etc. is acceptable, even if “Street” or “Road” is fully spelled in another document.

 Use the standardized USPS address. Compare the USPS address to the legal

description on the title commitment and use the city in the legal description if that differs from the USPS address

APPRAISAL MANAGEMENT COMPANIES

(A Lenderlive FHA Requirement)

For appraisals allowed by VA to be ordered outside the VA portal they must be ordered through a LenderLive approved Appraisal Management Company (AMC’s).

Approved AMC’s:

Streetlinks Lender Solutions www.streetlinks.com

United Lender Servicers (ULS) www.ULSnow.com

LenderLive Inc. reserves the right to deny individual appraisers even when they are performing services for an approved AMC.

INTEREST RATE REDUCTION REFINANCING LOANS

(IRRRL’s)

 For refinances that are paying off LenderLive loans, an appraisal is not required.  For refinances paying off non-LenderLive loans, a full FNMA 1004/FHLMC 70 appraisal

is required.

 Lender is responsible for compliance with the Appraisal Independence Regulations and must provide the associated AIR Compliance Certification with the appraisal submission.

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VA APPRAISER ASSIGNMENT – PURCHASE AND CASH-OUT

TRANSACTIONS ONLY

 All appraisals for purchase or cash-out refinance transactions must be ordered electronically through VA’s WebLGY System

 All information contained inVA Case Number / Appraiser Assignment,the sales agreement, and all addendums are required

 VA-approved appraisers are randomly assigned by WebLGY

 Case Number is assigned simultaneously with completion of appraisal order  VA appraisers must provide appraisals in a timely manner

 VA appraiser may only be contacted for status – questions related to repair or value must conform to the standards for appraisal independence

 Borrower may not pay more than the maximum appraisal or inspection fee established by VA. Maximum appraisal and inspection fees are established by the Regional Loan Center having jurisdiction over the property. Refer toVA Appraisal Fee Schedule and Timeliness Requirements

APPRAISAL INVOICE

 VA appraiser sends appraisal and invoice to the underwriting lender that ordered the appraisal

 Borrowers may not pay VA appraisers directly

FORM REQUIREMENTS

 1-Unit residences require Form 1004  2 to 4-Unit residences require Form 1025  Condos require Form 1073

 Fannie Mae Form 1004MC or Freddie Mac Form 71 – Market Conditions Addendum is required for all appraisals

 All appraisals must be Uniform Appraisal Dataset (UAD) compliant. However, due to limitations in WebLGY, appraisals must be uploaded in PDF format and cannot be uploaded in XML format

o Only closed sales may be used as comparables

o The“Lender/Client”field on the appraisal must reflect the lender’s name and“VA” o The address of the lender must now be entered in the“Address”field for the lender o The“Borrower”field must reflect the name of the veteran only and not the veteran’s

spouse. The only exception is for VA Liquidation appraisals, which must reflect “N/A” in the borrower field.

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PHOTOGRAPHS

Photographs of the following rooms/characteristics are required:  Kitchen

 All bathrooms  Main living area

 All physical deterioration, if applicable

 Examples of recent updates, such as restoration, remodeling and renovation, if applicable

ASSETS

All funds to close, when required, must be documented from an acceptable source. Acceptable sources of funds to close and documentation requirements are described below. For AUS “approve” or “accept” responses, document to findings.

EARNEST MONEY DEPOSITS

EMDs refunded to the borrower at closing must be verified with one or more of the following:  Copy of the cancelled check

 Bank statement or print out showing transfer of the funds to the realtor or escrow agent – If the statement does not indicate the payee, a copy of the check is also required  Money order receipts and evidence of source of funds

LARGE DEPOSITS

 LenderLive requires verification of any one deposit (not including payroll direct deposits) that exceeds 25% of the total monthly gross income but not less than $1000 in one specific account

SAVINGS AND CHECKING ACCOUNTS

 Funds must be verified via one or more of the following:

o VOD or

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o Most recent two months’ internet bank statements – must include all pertinent information and URL signature at top and/or bottom of document

 Alllarge depositsmust be verified, regardless of whether the funds are required for closing. “Large deposits” are determined on a case-by-case basis and are non-payroll deposits that are unusual and high for the borrower’s income and obligations. In all cases, if the source of the large deposit was a new debt, the payment must be included in the ratios and residual income calculations. o When one or more of the bank account owners is not a borrower on the loan, the

non- borrowing joint account owner(s) must provide a letter stating the borrower has access to the funds. However, if the account is joint with a non-borrowing spouse and there are no additional joint account owners, an access letter is not required  Non-Sufficient Funds (NSFs) showing on a borrower’s bank statement(s) are generally

an indication of the borrower’s financial mismanagement and are considered a negative layer of risk. Written explanations are required.

 Overdraft protection withdrawals are generally considered a neutral factor and are not considered negatively. Overdraft protection funds are frequently unsecured loans or lines of credit and may not be used for the borrower’s EMD or funds to close unless they are transferred from another asset account held by the borrower and do not constitute an unsecured loan or line of credit.

PROCEEDS FROM THE SALE OF REAL ESTATE

HUD-I Settlement Statement required

SALE OF A PERSONAL ASSET

The borrower may sell a car, motorcycle, recreational vehicle, jewelry, stamp or coin or baseball card collections, etc. All of the following documentation is required:

 Evidence of borrower’s ownership  Estimate of value

 Bill of sale

 Provide paper trail of funds from purchaser to borrower. (i.e. Copy of Check or Money Order, evidence of wire transfer, etc.)

SAVINGS BONDS

 Provide copies of bonds indicating ownership  Provide evidence of redemption value

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 Provide evidence of deposit of proceeds to borrower’s bank account

RETIREMENT SAVINGS

 Document balances with the most recent statement

 Document the terms and conditions for withdrawal and/or borrowing

 Unless funds may be withdrawn within 30 days of request, retirement savings accounts may not be used as reserves but may be used as a compensating factor. If funds may not be withdrawn within 30 days of request, do not include in AUS findings

 When used as reserves, 60% of the vested balance may be used

STOCKS AND/OR BONDS

 Provide most recent two months’ brokerage statements

 When funds are required for closing, proof of liquidation and evidence of deposit into a verified account is required

RENT CREDIT

 Provide a copy of the rent-with-option-to-buy agreement that clearly defines the terms and conditions, including rent credit

 The portion of rent credit that exceeds fair market rents for the area may be credited toward borrower’s funds to close

o Fair market rents for the area are estimated by the appraiser. If borrower is purchasing a home other than the home he or she is currently renting, rent credits may not exceed 4% of the purchase price (see Seller Contributions section)

SWEAT EQUITY

Not allowed

AUS

Loan Prospector or Desktop Underwriter response required for all loan types except Interest Rate Reduction Refinancing Loans – Do not run IRRRL loans through automated underwriting

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DATA INTEGRITY

All information input to DU or LP must mirror the documentation in the file.

BORROWERS

APPLICATION

The veteran must always be the primary borrower on the loan, regardless of whether income from the veteran is being used to qualify

ELIGIBLE BORROWERS

For additional information, refer toVA Pamphlet 26-7, Chapter 7, Section 1– Loans Requiring Special Underwriting - Joint Loans

 Eligible veteran(s)

o If more than one veteran’s entitlement is used and the veterans are not married to one another, prior approval must be obtained by the VA regional loan center having jurisdiction over the property

o If both veterans’ entitlement is used and the veterans are married to each other, loan can be underwritten by LenderLive or a VA Automatic customer

o All veterans using entitlement must occupy the property

 Un-remarried surviving spouse of veteran who died from service-connected injuries or un-remarried surviving spouse of a veteran who was totally disabled at the time of death o VA Regional Loan Center determines cause of death – see Certificate of Eligibility

Section

 Veteran’s spouse co-borrower

o The veteran must be the primary borrower on the loan, regardless of whether the veteran contributes income to the loan

o Veteran’s spouse is not required to be a veteran

o Same-sex spouses require VA’s approval. Provide the following information in the loan file:

 Date and state of marriage

 State of residence at the time of marriage

 State in which the subject property is located

 State in which the couple currently resides

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 For loans underwritten by VA Automatic lenders, determination of eligibility for the same sex spouse must be included in the file at the time of purchase  Non-veteran co-borrower who is not the veteran’s spouse

o Eligible veteran must be primary borrower on the loan

o Additional down payment that is ≥ 25% of the non-veteran’s half of the loan is required – Refer toVA Pamphlet 26-7, Chapter 7, Section 1– Loans Requiring Special Underwriting

o Joint Loans

o Prior approval by VA Regional Loan Center having jurisdiction over the property is required

o VA guaranty will not exceed the lesser of 25% of the veteran’s half of the loan or veteran’s available entitlement – If veteran’s half of the loan is ≤ $144,000, bonus entitlement cannot be used, regardless of total loan amount

o Down payment plus VA guaranty must be ≥ 25% of the base loan amount, excluding the financed funding fee

o All borrowers must occupy the property

o Veteran’s income must be sufficient to qualify for his or her half of the loan

INELIGIBLE BORROWERS/LOANS

 Any borrower who does not meet the eligible borrower criteria described above  Any loan having any of the following characteristics:

o One borrower is required to pay a funding fee and the other is not (If the borrower not required to pay the funding fee is the veteran’s spouse, the loan remains eligible) o Two veteran borrowers are required to pay different funding fees

o Refer to Joint Loan Eligibility/Ineligibility

CASH RESERVES

 Borrower is using rental income to qualify - Borrower’s ability to accumulate liquid assets and the current availability of liquid assets for unplanned expenses should be

considered in the overall credit analysis

o Borrower is using rental income from multi-unit subject property to qualify – Six months reserves from the borrower’s own funds required

o Borrower is using rental income from investment properties that are not the subject property to qualify – Three months reserves from the borrower’s own funds required  Borrower’s debt-to-income ratio exceeds 50% - Two months reserves from the

borrower’s own funds required: o Reserves may not be gifted

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o 401k funds may be used for LenderLive’s reserve requirement. Unless funds may be withdrawn within 30 days of request, retirement savings accounts may not be used as reserves. If funds may not be withdrawn within 30 days of request, do not include in AUS findings

CERTIFICATE OF ELIGIBILITY

A Certificate of Eligibility is required for all VA purchase and cash-out refinance transactions but is not required for VA IRRRLs. For IRRRL transactions, only a VA IRRRL case number is required. The following information is included on a Certificate of Eligibility:

 Veteran’s full name – The veteran’s name on the Certificate of Eligibility must match the veteran’s name in WebLGY, the loan guaranty certificate and the note and mortgage o The following name discrepancies are the only acceptable variations:

 James Everett Brown, James E. Brown, James Brown

 William Smith Jr., William Smith, William R. Smith, William Ryan Smith, Jr., William Ryan Smith, William R. Smith, Jr.

o The following name discrepancies must be resolved prior to the loan closing (this list is not all- inclusive and name discrepancies are reviewed on a case-by-case basis):

 Name discrepancies due to marriage (C of E shows Mary Smith, but

documentation in WebLGY and/or the note and mortgage shows Mary Jones)

 Hyphenated name discrepancies (C of E shows Bill Smith, but documentation in WebLGY and/or the note and mortgage shows Bill Smith-Jones)

 Middle name discrepancies (C of E shows Bill John Smith, but documentation in WebLGY and/or the note and mortgage shows Bill Robert Smith)

 First name discrepancies (C of E shows Bill Smith, but documentation in WebLGY and/or the note and mortgage shows William Smith)

 Last name prefix discrepancies (C of E shows Bill St. Pete, but documentation in WebLGY and/or the note and mortgage shows Bill Stpete)

 Veteran’s truncated social security number  Entitlement code o 01 – World War II o 02 – Korean War o 03 – Post-Korean War o 04 – Vietnam War o 05 – Entitlement Restored

o 06 – Un-remarried Surviving Spouse o 07 – Spouse of POW/MIA

o 08 – Post World War IIo 09 – Post Vietnam Waro 10 – Gulf War o 11 – Selected Reserves

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 Veteran’s branch of service

 Funding fee status – “Exempt” or “Non-Exempt”

 Itemized list of entitlement amounts charged to previous loans – The following information is provided for each loan:

o VA loan number

o State in which property is located o Total loan amount

o Date of loan

o Entitlement amount charged  Amount of basic entitlement available

 Total entitlement charged to previous VA loans (includes total of all entitlement amounts for all active VA loans)

 Comments stating the amount of the veteran’s disability pay, funding fee status, restoration/non restoration of previously used entitlement and/or instructions to contact the appropriate Regional Loan Center

ELIGIBILITY DETERMINATION

 Eligibility is based on the veteran’s length and type of military service. Generally speaking, VA determines that veterans who fulfill the criteria below are eligible for the VA home loan benefit:

o Veterans with two years of continuous active-duty and an honorable discharge o Veterans with six years of service in the Selected Reserves or National Guard and

an honorable discharge

o Veterans with 90 days active-duty wartime service and an honorable discharge o Veterans with 181 days of continuous active-duty during peacetimes listed below and

an honorable discharge:

 July 26, 1947 – June 26, 1950

 February 1, 1955 – August 4, 1964

 May 8, 1975 – August 1, 1990

o Un-remarried surviving spouse of a veteran

 Eligibility determined by Veterans Administration (VA)

 Veteran must have been totally disabled at the time of death or died on active-duty or as a result of service-connected injuries or illness - VA determines cause of veteran’s death

 For IRRRL transactions, the Certificate of Eligibility must be in the deceased veteran’s name and social security number

 For purchase and cash-out transactions, the Certificate of Eligibility must be in the surviving spouse’s name

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OBTAINING A CERTIFICATE OF ELIGIBILITY

There are three methods for obtaining a veteran’s certificate of eligibility:

 VA’s ACE (Automated Certificate of Eligibility) system – This must be attempted before using the Eligibility Center or Regional Loan Center

o Obtained through VA’s Website: https://vip.vba.va.gov- For a brief on-line

demonstration, refer to VA’s on-line training –Ordering a Certificate of Eligibility On-Line

 VA’s Eligibility Center

o 1700 Clairmont Road, Decatur, GA 30031 – 888-768-2132

o Send the following documentation to the address above (faxes are not permitted):

 Copy of veteran’s Member 4 copy of VA Form DD-214 or other Reservist/National Guard discharge papers

 Fully executedRequest for Certificate of Eligibility,VA Form 26-1880

 Active-duty veterans must provide a current statement of service on military letterhead and signed by the appropriate personnel stating all of the following:  Veteran’s name

 Veteran’s date of birth  Active-duty entry date

 Lost time, if any and its duration

 Name of commanding officer providing the information

o Turn time is typically seven days from receipt of documentation to VA mailing out the completed Certificate of Eligibility – Turn times may increase with volume increase o Up-load a certified true copy of the Certificate of Eligibility into the paperless file – A

blanket certified-true-copy stamp for all the items in the file is sufficient  Veteran Walk-In

o Most Regional loan centers prepare Certificates of Eligibility for walk-in veterans o Call in advance to verify Regional Loan Center accepts walk-in requests and the

office hours during which Certificates of Eligibility are prepared

o Provide the following documentation to regional loan center team member (faxes are not permitted):

 Copy of veteran’s Member 4 copy of VA Form DD-214 or other Reservist/National Guard discharge papers

 Fully executedRequest for Certificate of Eligibility,VA Form 26-1880

 Active-duty veterans must provide a current statement of service on military letterhead and signed by the appropriate personnel stating all of the following:  Veteran’s name

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 Active-duty entry date

 Lost time, if any and its duration

 Name of commanding officer providing the information

o Up-load a certified true copy of the Certificate of Eligibility into the paperless file – A blanket certified-true-copy stamp for all the items in the file is sufficient

 Un-remarried Surviving Spouse

o Send fully executedRequest for Determination of Loan Guaranty – Unmarried Surviving Spouses –VA Form 26-1817to the VA Eligibility Center at the Atlanta Regional Loan Center – Turn times may be lengthy

INTEREST RATE REDUCTION REFINANCING LOANS

 No Certificate of Eligibility is required

 Prior Loan Validation printout is no longer required

CERTIFICATE OF ELIGIBILITY RESOURECES

 VA Pamphlet 26-7, Chapter 2

CLOSING COSTS

ALLOWABLE CLOSING COSTS

Veteran may pay any of the following reasonable closing costs and fees:  1% origination fee

o For purchase and cash-out loans, the origination fee is calculated using the total loan amount, including the financed funding fee

o For IRRRLs, the origination fee is calculated using the payoff minus any cash payments by the veteran, if applicable

 Reasonable and customary discount points

 VA appraisal fee – The veteran may not pay a fee higher than the maximum allowable appraisal fee for the state in which the property is located and may not pay for more than one appraisal. Therefore, do not order appraisals for properties under construction until the property is at least 90% complete – SeeVA Appraisal Fee Schedules  VA compliance inspector fees – Only if required by the NOV (Notice of Value)  Recording fees

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 Credit report fees – a $50 credit evaluation fee may be paid in lieu of the credit report fee for automated underwriting approvals

 Pre-paid items

 Insurances (hazard and flood, when required)  Flood zone determination

 Well and septic inspection fees

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

 Title insurance, title examination, title endorsement, title policy, title search, including the owner’s title policy

 Environmental protection lien endorsement

 Express mail fees for refinances if the saved per diem interest cost to the veteran will exceed the cost of the special handling – Anything over $50, provide the invoice to verify fee

 VA funding fee

 Mortgage Electronic Registration System (MERS) fee

 Closing protection letter – Must not exceed the actual documented cost  Fraud protection report

 Termite, provided the loan is a cash-out refinance – The borrower may never pay these fees for purchase transactions

 The veteran may pay for repairs. For purchase transactions, the purchase agreement must state the veteran is responsible for the cost of necessary repairs

If a fee is not listed above, assume VA does NOT permit the veteran to pay it

NON-ALLOWABLE BORROWER-PAID CLOSING COSTS

Generally, the veteran may NOT pay any of the fees listed below, but the seller or lender may pay the non- allowable fees. However, if no origination fee is charged and the fee is not listed in the section below that itemizes fees the Veteran may never pay, the Veteran may pay non-allowable costs up to 1% of the purchase price. The veteran may also pay a combination of non-allowable fees and an origination fee, provided the combination does not exceed 1% of the purchase price. The non-allowable fees are:

 Attorney fees other than for title commitments  Lender’s appraisals

 Lender’s inspections, except construction loan inspections and inspections required on the appraisal/NOV

 Loan closing or settlement fees

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 Assignment fees  Photographs

 Interest rate lock-in fees

 E-Mail, fax, copying, postage, stationery, telephone or other overhead charges  Amortization schedules, Truth-in-Lending fees, 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

 The veteran may never pay any of the following fees or charges, regardless of whether an origination fee was paid:

o Termite inspection fee for a purchase transaction o Attorney fee that benefits the lender

o Broker fee

o Brokerage fees or commissions charged by real estate agents or real estate brokers in connection with a VA loan

o Prepayment penalties financed through a refinance transaction – When the payoff states a pre-payment penalty is due, veterans may pay pre-payment penalties out-of-pocket only

o FHA/VA inspection fees for builders (Normal new construction inspections of the dwelling are permitted when required by the appraiser)

o Any portion of the seller’s lien(s) or short sale fees

CLOSING REQUIREMENTS

PROPERTY ADDRESSES

The property addresses on the appraisal, mortgage, note, and the flood certification must be identical. However, abbreviation of “Street,” “Road,” etc. is acceptable, even if “Street” or “Road” is fully spelled in another document. This is the only acceptable variance

 Use the standardized USPS address. Compare the USPS address to the legal

description on the title commitment and use the city in the legal description if that differs from the USPS address

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CLOSING REQUIREMENTS

 Non-borrowers who are not married to the veteran may not take title under any circumstance

 A fully executedReport and Certification of Loan Disbursement–VA Form 26-1820 must be included in the closing package

o Section 6 stating the name and address of nearest living relative not living with the veteran must be completed for all VA loans – Spouse may not be listed as nearest living relative

o Active duty veterans must complete the active duty certification by checking the box located between item 27g and 28A on page 2 of the form

 A VA Origination Statement itemizing all of the fees from lines 801 and 1101 and all of the credits in section 200 of the HUD-I Settlement is required

o CompleteVA Origination Statement

 Interest credit allowed - Loan must close by the 7th calendar day of the month preceding the first payment date

 A minimum of 12 months chain of title as evidenced by the title commitment satisfactory to LenderLive review

 A verbal VOE must be submitted with the funding request

o Verbal VOEs for hourly, salaried, or commission income borrowers must be completed within 10 business days of the note and must confirm the borrower is currently employed and must address the probability of continued employment. If the company representative states they do not perform verbal verifications, confirm borrower is still employed via a receptionist, phone extension directory and/or active voice mail box. If the company representative indicates they do not comment on probability of continued employment, indicate that response onVerbal Verification of Employment,

o Verifications for active-duty military borrowers may be in the form of a military Leave and Earnings Statement (LES) dated within 30 days of closing

o Verifications for self-employed borrowers must be within the most recent 30 days and must be obtained from a third party such as a CPA, regulatory agency or the applicable licensing bureau and verification of the business’ phone listing and address via phone book, the internet or directory assistance is also required o Verification of employment/certification of non-employment income is required for all

loans prior-to-funding and must be completed on Verbal Verification of Employment,  For purchase transactions, VA does not permit the borrower to bring additional funds to

close to pay any portion of the remaining lien(s) on behalf of the seller or short sale fees on behalf of the seller – For example, if the seller owes $120,000 on an existing property, and the sales price is $100,000, the borrower may not pay any portion of the remaining $20,000 on behalf of the seller

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 A payoff statement must be included in all refinance transaction files and must be reviewed by the underwriter

 All conditions must be collected and provided in the closing package

o Down payment assistance funds are typically wired to the closing agent – Wire transfer documentation must be included in the file prior to funding or purchase  Any changes to loan amount, funding fee, cash-to-close, interest rate, points, PITI, etc.

must be reviewed by underwriter prior to closing and disbursing loan

 Principal reductions are required when the total of lender and/or seller credits reflected on the HUD- I Settlement Statement exceeds the total of the actual closing costs, pre-paid expenses and discount points

 Principal reductions are required when the borrower receives any cash back at a purchase transaction closing

o Documented funds paid by the borrower outside of closing for items such as EMD or appraisal and credit report may be refunded to the borrower at closing – Document funds paid outside of closing with one of the following:

 Cancelled checks

 Bank statement showing transfer of funds – If the statement does not indicate the payee, a copy of the check is also required

 Money order receipts and evidence of source of funds

 Principal reductions are required when the borrower is receiving more than $500 cash at closing on an interest rate reduction refinancing loan. The principal reduction must include all cash back and not just the portion of cash back that exceeds $500. For example, if the HUD Settlement Statement indicates the borrower is receiving $626 cash back, a principal reduction in the amount of $626 is required. A principal reduction in the amount of $126 is insufficient

 Closing documents must be signed and notarized on or before the closing date indicated on the closing documents, regardless of the state in which the property is located and/or whether it’s an escrow state

 For properties located in California, interest may not be charged prior to loan disbursement unless disbursement.

 A fully executed Social Security Number Validation, SSA-89 required in all closing packages

ESCROW STATES

Alaska Idaho Utah

Arizona Montana Washington

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Colorado New Mexico

Hawaii Oregon

NOTARY POLICY

 Notaries may not be associated with the correspondent. Ineligible notaries include but are not limited to the following:

o Any employee of the broker/correspondent, including but not limited to loan originators, processors, etc. (When closing loans in-house, banks and credit unions may use an employee to perform notary services)

o Any family member of one of the principal owners

o Anyone who receives funds, other than the notary fee, upon loan closing

 Loans that close with an unacceptable notary must be re-closed with a non-associated notary prior- to-funding

CO-BORROWERS

 Co-borrower must be Veteran’s spouse and/or eligible veteran or loan requires prior approval by VA regional loan center having jurisdiction over the property

o Same-sex spouses require VA’s approval. Provide the following information in the loan file:

 Date and state of marriage

 State of residence at the time of marriage

 State in which the subject property is located

 State in which the couple currently resides

 Estimated closing date

 The underwriter will obtain VA’s approval

 When co-borrower is not a veteran or the veteran borrower’s spouse, VA will guaranty only the veteran’s portion of the loan – A down payment ≥ 25% of the non-veteran co-borrower’s portion of the loan is required – If there is one co-borrower who is not the veteran’s spouse and is also not a veteran, the veteran’s “portion” of the loan is half of the loan amount

o Combination of veteran’s entitlement plus down payment must be ≥ 25% of the base loan amount, excluding the financed funding fee

COMPENSATING FACTORS

Ratio guidelines may be exceeded when compensating factor(s) that support loan approval are documented in the file. The remarks section of Loan Analysis,VA form 26-6393must contain

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the underwriter’s list of compensating factors that were used to justify approval. The following items are VA recognized compensating factors:

 Excellent credit history

 Conservative use of consumer credit  Minimal debt

 Long-term employment  Significant liquid assets  Sizable down payment

 Equity position in refinance loans

 Minimal or no increase in monthly housing expense  Military benefits

 Satisfactory homeownership experience  High residual income

o For loans that exceed VA’s 41% total debt ratio guideline, residual income must be at least 20% more than the loan’s residual income requirement

o Supervisory underwriter signature and written justification required when ratio exceeds 41% but borrower’s residual income is < 120% of requirement  Low debt-to-income ratio

 Tax credits for child care  Tax benefits of homeownership

When any of the above factors have been evaluated by automated underwriting and the loan receives a “refer” response, automated underwriting has determined the compensating factor is not sufficient to render an “approve” or “accept” response. Alternative compensating factors must be provided for review.

CONDOMINIUMS

 For all VA loan purposes, condos, including site condos must be VA-approved o Condominiums should not be appraised until the project and/or phase in which the

unit is located is approved by VA

 Condominiums without Homeowner’s Associations are ineligible for LenderLive financing

CONDOMINIUM RESOURCES

 VA Pamphlet 26-7, Chapter 16

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CONFLICT OF INTEREST

 Transactions in which the realtor and the originator are the same individual are ineligible.

CREDIT HISTORY

Underwriters must address all recent derogatory credit and provide justification for loan approval, regardless of AUS response.

CREDIT INQUIRIES

Inquiries within the most recent 90 days must be explained in writing, regardless of automated underwriting response

DEBTS EXCLUDED FROM THE CREDIT REPORT

 Debts exceeding 2% of the stable monthly income for all borrowers but not appearing on the credit report must be verified by the creditor.

o If the debt is held by a private individual, 12 months canceled checks are required. o If the loan receives an “approve” or “accept” response through automated

underwriting but the payment history reflects more than 1 30-day late payment within the most recent 12 months, the loan must be downgraded to a “refer” response and manually underwritten

o The debt must be included as a liability in the ratio and residual income calculations

FORECLOSURES

 Foreclosures aged more than two years may be disregarded:

o If the mortgage was not included in the Chapter 7 Bankruptcy, the foreclosure time frame is measured form the foreclosure completion date.

o If the mortgage was included in a Chapter 7 Bankruptcy, the foreclosure time frame is measured from the earlier of the foreclosure completion or the Chapter 7 Bankruptcy discharge.

o If the foreclosed loan was a VA loan and VA took a loss, the Veteran’s entitlement for the property is not restored until VA is reimbursed for their loss. If the borrower’s Certificate of Eligibility indicates a foreclosure, VA permits the Veteran to use any

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remaining entitlement. If there is no remaining basic entitlement, the loan amount must be greater than $144,000.

 Loans for borrowers having foreclosures within the most recent two years are rarely acceptable unless both of the following requirements are met:

o Borrower has obtained consumer credit with a satisfactory payment history over a continued period (at least one year)

o Foreclosure was due to documented extreme extenuating circumstances such as unemployment, prolonged strikes, medical bills not covered by insurance, etc. Divorce is not generally viewed as beyond the control of the borrower. When the foreclosure was related to failure of a self-employed business, the following must be documented:

 Evidence that borrower is employed in a permanent position after business failure

 Evidence of no derogatory credit prior to self-employment

 Evidence of no derogatory credit after the foreclosure

 Evidence business failure was not due to borrower’s misconduct

 Loans for borrowers having foreclosures within the most recent 12 months cannot be approved

 Defaulted time-share loans are considered foreclosures

SHORT SALES

 The borrower must have made all mortgage and installment payments within the month due for the 12 months prior to the short sale

 The short sale must serve as payment in full on the existing lien(s) and the existing mortgage servicer may not require repayment of the difference between the mortgage balance and the short payoff

 Borrowers may not execute a short sale to take advantage of declining market conditions and purchase, at a reduced price, a similar or superior property within a reasonable commuting distance

 If a borrower was delinquent on the mortgage at the time of short sale, LenderLive will not approve the borrower for VA financing for at least two years after the date of the short sale unless the borrower experienced significant extenuating circumstances

CHAPTER 7 BANKRUPTCIES

 Chapter 7 bankruptcies discharged more than two years ago may be disregarded  Loans for borrowers having Chapter 7 bankruptcies within the most recent two years are

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o Borrower has obtained new consumer credit with a satisfactory payment history over a continued period (at least one year)

o Bankruptcy was due to documented extreme extenuating circumstances such as unemployment, prolonged strikes, medical bills not covered by insurance, etc. Divorce is not generally viewed as beyond the control of the borrower. When the Chapter 7 bankruptcy was related to failure of a self-employed business, the following must be documented:

 Evidence that borrower is employed in a permanent position after business failure

 Evidence of no derogatory credit prior to self-employment

 Evidence of no derogatory credit after the foreclosure

 Evidence business failure was not due to borrower’s misconduct

 Loans for borrowers having Chapter 7 bankruptcies within the most recent 12 months cannot be approved

CHAPTER 13 BANKRUPTCIES

 Must document at least one year into the payout plan has elapsed  Must document satisfactory payment history

 Must obtain court permission to enter into new mortgage

 When the bankruptcy is still in repayment, include Chapter 13 payment in the debt ratio  If the borrower has satisfactorily completed the repayment, the borrower is considered to

have re-established credit.

 Evidence of the discharge of the Chapter 13 is required.

CREDIT COUNSELING

The following documentation is required if veteran entered credit counseling after becoming delinquent on one or more obligation. However, if borrower entered into credit counseling prior to incurring delinquent credit, credit counseling is treated as a neutral or positive factor.

 Must document at least one year into the payout plan has elapsed  Must document satisfactory payment performance

 Must document the debts/trade lines included in the payment plan  Must obtain counseling agency permission to enter into new mortgage

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JUDGMENTS

 Judgments must be paid in full prior to closing unless the borrower is in a re-payment plan – Provide the following:

o Fully executed repayment agreement

o Evidence timely payments have been made (Evaluated on a case-by-case basis generally for a minimum of a 12-month period) - Payment must be included in ratios when qualifying borrower

 Judgments belonging to a non-purchasing spouse in a community property state are subject to all of the above requirements

DEFAULTED CAIVR NUMBERS

 Credit Alert Interactive Voice Response System (CAIVRS) verification required for all borrowers and non-borrowing spouses in community property states

 If the borrower or non-borrowing spouse in a community property state is currently delinquent on any federal debt, VA mortgage, Title I Loan, Federal student loan, SBA loan, Federal taxes or has a lien against the property for debt owed to the United States, the borrower is not eligible until the delinquent account is brought current or satisfactory payment arrangements have been made. If the debt owed to the federal government is a judgment lien against the property, it must be satisfied. The borrower’s CAIVR number is preceded by one of the following codes indicating whether the borrower has an acceptable CAIVR number or the type of loan default:

o A – Clear (this indicates the borrower has no delinquent Federal debt) o B – Bankruptcy o C – Claim o D – Default o E – Department of Education o F – Foreclosure o J – Department of Justice

CREDIT REPORTS

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AGE OF CREDIT REPORTS

 All credit reports must be tri-merge credit reports or Residential Mortgage Credit Reports  Credit reports must be dated within 120 days of loan disbursement

 To achieve LenderLive’s and VA’s minimum credit requirements, a new credit report may be re-pulled after a borrower has repaired derogatory credit and LenderLive will honor the new credit score.

 The following credit report discrepancies require a new credit report: o Social Security number is incorrect

o Last name is incorrect o Middle initial is incorrect

o Misspelled first names and/or missing or incorrect suffixes (Jr./Sr.) require a new credit report unless the name variation appears in the AKA section of the credit report

 Credit report must contain Office of Foreign Assets Control (OFAC) screening

CREDIT SCORES

MEDIAN CREDIT SCORE (REPRESENTATIVE CREDIT

SCORE)

The following methodology is used to determine a borrower’s representative credit score:  Three Scores – Use the middle credit score

 Two Scores – Use the lowest credit score  One Score – Use that score

MINIMUM CREDIT SCORES

Minimum VA Credit Score Requirements

Loan Purpose

Purchase Rate and Term Refinance 1

Cash-Out Refinance 2,3 IRRRL

Units 1-4 Units 1-2 Units 3-4 Units SFR 2 Units 1-2 Units 3-4 Units Minimum

Credit Score ₆₂₀ ₆₂₀ ₆₄₀ ₆₄₀ ₆₈₀ ₆₂₀ ₆₄₀

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2. Borrower receives cash back and/or consolidates non-mortgage debt 3. 3-4 Units ineligible

DECLINING MARKETS

At this time, there are no declining market restrictions.

DISCLOSURES/FORMS

REQUIRED DISCLOSURES AND FORMS

 AVA Origination Statement, itemizing all of the fees from lines 801 and 1101 and all of the credits in section 200 of the HUD-I Settlement Statement is required

DOWN PAYMENT

No minimum down payment or cash investment required unless:

 Veteran’s available entitlement is less than 25% of the base loan amount, excluding the financed funding fee or

 Co-borrower is not a veteran or the spouse of the veteran borrower

DOWN PAYMENT ASSISTANCE

 Not available.

EMPLOYMENT/INCOME

INCOME DOCUMENTATION

 Follow the income documentation requirements for AUS “approve” or “accept” responses  While VA no longer requires a pay stub if the lender obtains a full VOE containing all

required information, LenderLive requires a pay stub

 If the property is located in a presidentially declared disaster area, and the disaster was declared by the President prior to the loan closing, the underwriter must determine the

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borrower remains employed and income has not declined as a result of the disaster or any other factors

NON-MILITARY INCOME

Borrowers with non-military employment must have a two-year history of employment prior to application

 Verify all employment within the most recent two years

CURRENT EMPLOYMENT < 12 MONTHS

Current employment less than 12 months is generally not considered stable and reliable. The following must be evaluated:

 Employer’s written statement of the probability of continued employment, if provided  Applicant’s training and/or education related to the duties of the current position – This

generally applies to skilled positions: nurses, medical technicians, lawyers, paralegals, computer systems analysts, etc.

 Underwriter must provide justification in writing on the Loan Analysis,VA Form 26-6393 for use of income from a borrower employed by his or her current employer less than 12 months

JOB CHANGES

 Frequent job changes for career advancement in the same or related field are acceptable – Borrower should be employed by current employer for the most recent 12 months unless there is strong justification provided by the employer for use of income

 Frequent job changes from one field to another and/or that do not improve the borrower’s position are not acceptable without strong justification. Underwriter explanation must accompany the file

AUTO ALLOWANCES

 May be used to offset a car payment, if applicable

 In the event the documented auto allowance exceeds the car payment, the portion of income that exceeds the car payment may be counted as effective income

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DISABILITY INCOME

 VA disability income may be used to calculate the veteran’s ratio and residual income. When the amount of disability income is displayed on the Certificate of Eligibility, no further documentation is required

 Long term disability income used for qualification purposes must continue for at least three years after closing. The file must contain evidence of the amount of disability income and evidence of continuance

o Social Security Disability income is the only disability income exempt from evidence of continuation

 Short term disability income may not be used to calculate the borrower’s ratio or residual income

MATERNITY LEAVE

A borrower’s regular, stable income may be considered as acceptable income when a maternity leave occurs. The employer must state in writing on their letterhead that the borrower’s employment and wages will not be adversely affected and will be available when the borrower returns to work. The borrower must state in writing his or her intent to return to work.

ACTIVE-DUTY MILITARY INCOME

 Obtain borrower’s Leave and Earnings Statement (LES)

 For active duty veterans, the ETS (Expiration of Term of Service) date must be at least 12 months after loan closing. If the active duty veteran’s ETS date is within 12 months of the closing date or the borrower is a Reservist or National Guard Veteran, regardless of remaining ETS, one of the following is required:

o Documentation that active-duty service personnel has re-enlisted or extended period of active duty beyond 12 months after closing

o A written statement from active-duty service personnel that he or she intends to re-enlist or extend period of active duty 12 months beyond closing and a written statement from commanding officer stating active-duty service personnel is eligible to re-enlist and commanding officer has no reason to believe re-enlistment will not be granted

o Evidence of a valid offer of local civilian employment following release from active duty – Employer must document the following:

 Date employment will begin

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 If the ETS field on the Leave and Earnings Statement reflects “9999,” evidence of 12 months remaining enlistment must be obtained from the veteran’s commanding officer  Leave and earnings statements for officers will not have a date in the ETS field. The ETS

field will be blank or contain “XXXX” - No documentation of remaining length of service is required

 Explanation and documentation of allotments listed on the LES is required. Allotments that are obligations and/or debts must be included in the borrower’s liabilities. Small allotments need not be explained and/or counted as a liability. Bank allotments that are deposits to checking and/or savings accounts are not a liability.

 In addition to base pay, active-duty military personnel receive various allowances and pays – allowances and pays may be included in income calculation when they are expected to continue due to the military personnel’s duty assignment

o Allowances are non-taxable (clothing allowance is reflected on LES as an annual figure – divide by 12 to determine monthly amount)

o Pro-pay, combat pay, etc. are taxable

COMMISSION

 Averaged over two years

 Obtain the following documentation:

o Most recent two years’ signed and dated tax returns, including all schedules

 Borrower’s unreimbursed business expenses from Schedule A of IRS Form 1040 must be deducted from the gross commission before averaging the commission income

o Verification of employment or other written verification of YTD commissions, pay structure (salary plus commission, straight commission, or draws against commission), and when commissions are paid

 Commission income received less than two years may only be considered when the borrower has previous related employment and/or extensive training

 Commissions received less than one year are generally not allowable

EDUCATIONAL ASSISTANCE

 May not be used as effective income

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NON-TAXABLE INCOME

 For the purpose of calculating ratios only, non-taxable income may be grossed up by the applicable state and federal income tax rate. Use current income tax withholding tables to determine the appropriate tax rates.

 Non-taxable income may not be grossed up when calculating the veteran’s residual income

OVERTIME/BONUS/PART-TIME EMPLOYMENT/SECOND JOB

 Acceptable when received two years and income is regular and predictable – Income is

calculated by averaging the income over the most recent two years

 If received between 12 and 24 months, may be used to offset debts with 10 to 24 months remaining

RECENTLY DISCHARGED VETERANS

Employment Income

 If applicant is employed less than 12 months in current position, obtain a statement from employer that verifies applicant is performing job duties satisfactorily and probability of continued employment is favorable

o Job duties that are similar or directly related to the veteran’s military experience are one indicator of likely continuance of employment

o Employment that requires skills for which the veteran has no training or experience requires greater time in the job

o If the veteran receives retirement income and only minimal income from employment is required to meet ratio and residual income requirement, “resolve doubt in favor of the veteran”

o Veterans who are self-employed must meet the self-employment requirements below  Underwriter must provide justification for use of income from a borrower employed by his

or her current employer less than 12 months

RESERVE / NATIONAL GUARD INCOME

 May be used when the expiration date of the applicant’s current contract indicates a strong probability that the reserve/guard income will continue

 Underwriters must consider whether income for Reserve/National Guard borrowers is subject to change due to activation

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o If the income will be reduced, consideration must be given to applicant’s ability to repay the loan during activation

o If income will increase, consideration must be given to applicant’s ability to repay the loan once activation is terminated

SECTION 8 HOUSING VOUCHERS

 The amount of the housing voucher may be treated as income – HUD must provide evidence three year continuance

SELF-EMPLOYMENT

 Averaged over two years

 Obtain the following documentation:

o Year-to-date profit and loss and balance sheet for the business o Most recent two years’ signed and dated personal tax returns

o Most recent two years’ signed and dated business or corporate returns, including all applicable schedules and list of stockholders or partners showing percentage of ownership

o Business credit report as needed

 Self-employment income received less than two years may be considered when borrower has previous related employment and/or extensive specialized training  Self-employment income received less than one year is ineligible

ENERGY EFFICIENT

MORTGAGES/IMPROVEMENTS

 Not allowed

ENTITLEMENT/GUARANTY

 Veteran’s available entitlement is the amount of the loan VA will guarantee  Investors require at least a 25% guaranty

o May consist of veteran’s available entitlement only, if available entitlement ≥ 25% of the base loan amount, excluding the financed funding fee and the co-borrower is the veteran’s spouse and/or a veteran

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o For purchase transactions, may consist of combination of the veteran’s available entitlement and down payment, provided the sum of the veteran’s available entitlement plus down payment ≥ 25% of the base loan amount, excluding the financed funding fee

o For refinance transactions, may consist of a combination of the veteran’s available entitlement, existing equity and/or down payment, provided the total is ≥ 25% of the base loan amount, excluding the financed funding fee

o Veterans without any available entitlement are ineligible for VA loans, regardless of the amount of the down payment or equity in the property

BASIC ENTITLEMENT

 All veterans receive $36,000 basic entitlement

 Remaining basic entitlement is shown on veteran’s Certificate of Eligibility – Will be $0 to $36,000, depending on the amount of outstanding un-restored entitlement used  Provides veteran with VA guaranty for loan amounts ≤ $144,000

 May be used multiple times (see restoration of entitlement below)  May be combined with bonus entitlement for loan amounts > $144,000

ADDITIONAL OR BONUS ENTITLEMENT

 Amount depends on VA County Loan Limits – For a list of high cost counties, refer to or VA County Loan Limits for High Cost Counties

o If the county in which the property is located is not listed on the High Cost Matrix, the county limit is $417,000

 Additional or bonus entitlement is calculated using the following formula: (County maximum limit X 25%) - $36,000 = additional or bonus entitlement (i.e. If the county maximum is $417,000 X 25% = $104,250. $104,250 minus $36,000 = $68,250. $68,250 is the additional or bonus entitlement)

 May be combined with basic entitlement for loan amounts > $144,000  May not be used for loan amounts ≤ $144,000

 May be used for loan amounts > $144,000, even when there is no basic entitlement remaining

RESTORATION OF ENTITLEMENT

 Previously used entitlement may be restored only when the VA loan is paid in full and title has been transferred to a new owner

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o A one-time exception to the transfer of title requirement may be granted by VA when the VA loan is paid in full but the veteran still owns the property to which entitlement was charged

 To obtain restoration of entitlement, submit the following documents to the VA Eligibility Center:

o Fully executedRequest for Certificate of Eligibility,VA Form 26-1880

o Evidence prior loan was paid in full (HUD-I statement, etc.) o Previous certificates of eligibility, if available

 Borrower who had a previous foreclosure must pay the foreclosure in full before entitlement may be restored

o A borrower who had a previous VA foreclosure may use remaining available entitlement, subject to meeting all underwriting guidelines, including clear CAIVR response

 Entitlement charged to the subject property is simultaneously restored and re-used for refinance transactions

 Simultaneous restoration of entitlement is permitted when a veteran is purchasing a new home and the sale of his or her existing VA guaranteed residence will close within seven days of the new purchase – A fully executedRequest for Certificate of Eligibility, VA Form 26-1880is required

ENTITLEMENT RESOURCES

 VA Pamphlet 26-7 – Chapter 2

ESCROWS

 Escrow waivers not allowed

 Property tax escrows for new construction properties may be calculated based on the fully assessed property value – Obtain actual tax amounts from the local assessor’s office based on the completed value or 1.50% of the purchase price

 For new construction properties and purchases of properties located in California only, property taxes may be calculated using 1.50% of the purchase price or the actual tax rate

ESCROW HOLDBACKS

 Allowed only for exterior property repairs that cannot be completed due to inclement weather

Commented [BF1]:Joe Neamon to confirm if we can provide this service

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 The veteran may pay for repairs, provided the purchase agreement indicates the veteran is to pay for them

 Underwriter approval required on a case-by-case basis

 Construction must be complete and the home must be suitable for immediate occupancy  Postponement of the improvements must be beyond the control of the builder/seller  For completion of exterior work only – Acceptable escrow repair items include but are not

limited to the following:

o Walkways, driveways, and retaining walls o Exterior painting

o Landscaping o Garages

 Not allowed for structural repairs and foundation work

 Appraiser must indicate “subject to” on appraisal and list all required repairs  Fully executedCompliance Inspection Report,VA Form 26-1839required prior to

disbursement

 Escrow holdback will be 1½ times reasonable bid for repair  Repairs must usually be completed within 90-120 days of closing  Two bids required

 For loans underwritten by LenderLive, all repair escrows are held by LenderLive’s servicing department and may not be held by the title company or any municipality  For loans underwritten by VA Automatic Correspondents, repair escrows are held

according to the Correspondent’s policies

BANK-OWNED PROPERTIES

Approval of repair escrow is granted on a case-by-case basis for completion of exterior repairs that will not be completed prior to close. Escrows are not permitted for structural repairs or items that affect the health and safety of the occupants.

FUNDING FEE

 Any loan having any of the following funding fee characteristics is ineligible

o One borrower is required to pay a funding fee and the other is not (If the borrower not required to pay the funding fee is the veteran’s spouse, the loan remains eligible) o Two veteran borrowers are required to pay different funding fees

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 Most veterans pay a VA funding fee – The amount of the funding fee is determined by the following veteran and/or loan characteristics:

o Type of military service (Regular Military or National Guard/Selected Reserve) o Down payment amount, if any on purchase transactions – For the purposes of

calculating the funding fee on purchases, the LTV is calculated by dividing the base loan amount by the purchase price, regardless of the appraised value. While this calculation includes transactions where the appraised value is less than the purchase price, the maximum base loan amount is 100% of the lesser of the purchase price or appraised value

o Loan purpose (purchase, cash-out refinance, IRRRL)

o First time or subsequent use of entitlement – Entitlement code “05” indicates the borrower is subject to the subsequent use funding fee. Furthermore, if the entitlement code is anything other than “05,” but a condition on the veteran’s Certificate of Eligibility states the veteran is subject to a subsequent use funding fee, the veteran must pay the subsequent use funding fee.

 The following borrowers are exempt from paying the VA funding fee: o Veterans currently receiving service-connected disability income

o Veterans who were in receipt of disability compensation or who received military retirement compensation instead of disability compensation but are now receiving active-duty pay due to re-enlistment or being recalled to active duty

o Veterans receiving pension in lieu of service-connected disability income o Veterans who previously received service-connected disability income

o Veterans for whom VA has issued a memorandum disability rating resulting from a “pre- discharge review of existing medical evidence”

 If the VA disability questionnaire indicates the veteran filed a claim while on active duty and the veteran is not yet discharged,VA Form 26-8937-Verification of VA Benefits must be completed by a an employee located at the Regional Loan Center having jurisdiction over the property location

o Un-remarried surviving spouses of veterans who were totally disabled at the time of death or died as the result of service-connected injuries

 If the Comments section of the Certificate of Eligibility instructs the lender to fax a copy ofVerification of VA Benefits,VA Form 26-8937fax the fully executed form to the Regional Loan Center having jurisdiction over the property location

 If the certificate of eligibility contains information that conflicts with any

information in the file, fax a fully executed copy ofVerification of VA Benefits,VA Form 26-8937to the Regional Loan Center having jurisdiction over the property location. For example, if the Certificate of Eligibility states the veteran is “non-exempt” from paying the funding fee, and the file contains evidence the borrower receives disability income, the RLC must completeVA form 26-8937

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o For joint loans on which the co-borrower is not the veteran’s spouse, the funding fee is calculated using the veteran’s portion of the loan

o For joint loans on which two or more veterans use entitlement, each funding fee is calculated separately for each veteran’s portion of the loan

 Funding fee may be financed

o The funding fee must be fully financed or fully paid in cash at closing

o The funding fee may not be financed and paid in cash by the veteran, seller, lender or any other party

 Funding fee is non-refundable

FUNDING FEE TABLES

 Funding fee tables at:

o http://www.benefits.va.gov/homeloans/documents/docs/funding_fee_table.pdf

GEOGRAPHIC RESTRICTIONS

ELIGIBLE LOCATIONS

 Properties may be located in all U.S. states, District of Columbia and U.S. Virgin Islands

COMMUNITY PROPERTY STATES

The following states are community property states:

Arizona Louisiana Texas Alaska California Nevada Washington

Idaho New Mexico Wisconsin

 Unless the loan is an Interest Rate Reduction Refinancing Loan, a credit report is required for all non-borrowing spouses

 CAIVR verification is required for non-borrowing spouses

o Federal debts of non-borrowing spouses in community property states must be satisfied prior to closing the new VA loan

VA Correspondent Manual

Version 4.0 - Effective 9-29-2014

Table of Contents

4506-T

APPRAISAL

ACREAGE

APPRAISAL VALIDITY

PROPERTY ADDRESSES

APPRAISAL MANAGEMENT COMPANIES

(A Lenderlive FHA Requirement)

INTEREST RATE REDUCTION REFINANCING LOANS

(IRRRL’s)

VA APPRAISER ASSIGNMENT – PURCHASE AND CASH-OUT

TRANSACTIONS ONLY

APPRAISAL INVOICE

FORM REQUIREMENTS

PHOTOGRAPHS

ASSETS

EARNEST MONEY DEPOSITS

LARGE DEPOSITS

SAVINGS AND CHECKING ACCOUNTS

PROCEEDS FROM THE SALE OF REAL ESTATE

SALE OF A PERSONAL ASSET

SAVINGS BONDS

RETIREMENT SAVINGS

STOCKS AND/OR BONDS

RENT CREDIT

SWEAT EQUITY

AUS

DATA INTEGRITY

BORROWERS

APPLICATION

ELIGIBLE BORROWERS

INELIGIBLE BORROWERS/LOANS

CASH RESERVES

CERTIFICATE OF ELIGIBILITY

ELIGIBILITY DETERMINATION

OBTAINING A CERTIFICATE OF ELIGIBILITY

INTEREST RATE REDUCTION REFINANCING LOANS

CERTIFICATE OF ELIGIBILITY RESOURECES

CLOSING COSTS

ALLOWABLE CLOSING COSTS

NON-ALLOWABLE BORROWER-PAID CLOSING COSTS

CLOSING REQUIREMENTS

PROPERTY ADDRESSES

CLOSING REQUIREMENTS

ESCROW STATES

NOTARY POLICY

CO-BORROWERS

COMPENSATING FACTORS

CONDOMINIUMS

CONDOMINIUM RESOURCES

CONFLICT OF INTEREST

CREDIT HISTORY

CREDIT INQUIRIES

DEBTS EXCLUDED FROM THE CREDIT REPORT

FORECLOSURES

SHORT SALES

CHAPTER 7 BANKRUPTCIES

CHAPTER 13 BANKRUPTCIES

CREDIT COUNSELING

JUDGMENTS

DEFAULTED CAIVR NUMBERS

CREDIT REPORTS

AGE OF CREDIT REPORTS

CREDIT SCORES

MEDIAN CREDIT SCORE (REPRESENTATIVE CREDIT

SCORE)

MINIMUM CREDIT SCORES

DECLINING MARKETS

DISCLOSURES/FORMS

REQUIRED DISCLOSURES AND FORMS

DOWN PAYMENT

DOWN PAYMENT ASSISTANCE

EMPLOYMENT/INCOME

INCOME DOCUMENTATION

NON-MILITARY INCOME

CURRENT EMPLOYMENT < 12 MONTHS

JOB CHANGES

AUTO ALLOWANCES