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VA Cash-Out Guideline Update

(Applicable to Wholesale Channel)

Dear Licensed Partner,

Sun West Mortgage Company, Inc. will be updating its product guidelines for VA Cash-Out Refinance transactions based on the requirements outlined in the VA Circular 26-18-30 and VA Circular 26-18-30 - Change-1. The following guidelines are effective for all VA Cash-Out refinances with an application date on or after February 15, 2019.

Summary of Changes:

Particulars Guidelines
Type of Cash-Out Refinance Dept. of VA has introduced two types of cash out refinances:
  • Type I: A refinancing loan in which the loan amount (including VA funding fee) does not exceed the payoff amount of the loan being refinanced.
  • Type II:A refinancing loan in which the loan amount (including VA funding fee) exceeds the payoff amount of the loan being refinanced.
Loan-to-Value (LTV) calculation LTV will be calculated based on the total loan amount (including funding fee if financed into the loan). The maximum LTV may not exceed 100% of the reasonable value of the property.
Net Tangible Benefit Test All cash-out refinance loans must satisfy at least one of the eight NTB requirements mentioned in this VA circular.
Disclosure on Net Tangible Benefit and Loan Comparison A disclosure must be provided to the borrower within three business days of application which, at a minimum, must:
  1. Disclose the benefit to the borrower identifying at least one of the eight NTB tests as outlined in the VA circular.
  2. Provide a comparison of the key characteristics of the loan as mentioned in the VA circular.
  3. Provide an estimate of the home equity being removed from the home as a result of the refinance and explain how the removal of home equity may affect the Veteran.
Seasoning Requirement A loan is considered seasoned if the Note date of the new loan is the later of the date that is:
  • 210 days after the first monthly payment is made, and
  • Six monthly payments have been made on the loan. Sun West requires seasoning to be met for all cash-out refinances (including Type I and Type II Cash-Out refinances).
Months to Recoup Applicable to only Type I refinance loans made to refinance an existing VA-guaranteed home loan:
  • The recoupment period of all fees, closing costs, expenses (other than taxes, escrow, insurance, and like assessments), and incurred cost must not exceed 36 months.
  • To calculate recoupment period, divide all fees, closing costs, expenses, and incurred costs (excluding taxes, escrow, insurance, and like assessments), by the reduction of the monthly principal and interest payment as a result of the refinance. If the loan being refinanced has been modified, the principal and interest reduction must be computed/compared to the modified principal and interest monthly payment.

For additional questions not answered by the guideline, please email Sun West’s Underwriting Scenario Desk at uwscenarios@swmc.com for more information.

If you have any questions, please call our Underwriting Hotline at (800) 241-7113.


Sincerely,

Sun West Mortgage Company, Inc.

6131 Orangethorpe Avenue, Suite 500
Buena Park, CA 90620
Phone: (800) 453-7884



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This information is provided to licensed brokers/lenders only and may not be copied or distributed to customers or potential customers. All loans are subject to approval. Certain restrictions may apply. Listed pricing is a morning indication only. Program rates, prices, guidelines, fees, costs, terms and conditions are subject to change without notice.

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