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Clarification & Policy Updates: VA IRRRL loans

(Applicable to Wholesale channel)



Dear Licensed Partner,

On August 08, 2019, VA released circular 26-19-22 clarifying the guidance on Months to recoup, Net Tangible Benefit, Appraisal & LTV requirement (when discount points are charged), Loan Seasoning and VA comparison statement applicable on VA IRRRL loans. Sun West has updated its government product guidelines for VA IRRRL loans. Given below is the summary of the clarification / update included by Sun West in its policy and must be adhered with immediate effect.

Months to recoup
  • Recoupment guideline applies to all VA IRRRL loans including when new payment is increasing, term is reducing and ARM to Fixed rate.
  • If the new payment (P&I) is lower, months to recoup closing costs (all closing cost except prepaid in escrow and funding fee) must not exceed 36 months.
  • If the new payment (P&I) is same or higher, Veteran cannot be charged any fees except prepaid (amount held in escrow) and funding fee. This must be a no cost loan to Veteran except that you can finance the funding fee and escrow account.
Net Tangible Benefit
  • Fixed Rate to Fixed Rate IRRRLs – Interest rate of the new loan should be at least 50 basis points lower than the interest rate of the loan being refinanced
  • Fixed-to-ARM IRRRLs – Initial Interest rate of the new loan should be at least 200 basis points lower than the interest rate of the loan being refinanced.
Discount Points
  • Discount point may be charged for Fixed-to-ARM IRRRLs as below:
    • Discount point > 1% – Max LTV is 90%
    • Discount point ? 1% – Max LTV is 100%
  • LTV is determined by Drive by or Full appraisal report. Appraisal report is required only when the refinance is from Fixed Rate to ARM and discount points are being charged. The appraisal report need not be ordered via VA portal.
Loan Seasoning
  • All IRRRL loans must meet following seasoning requirements:
    • The due date of the first monthly payment of the loan being refinanced is 210 days or more prior to the closing date of the refinance loan; and
    • Six consecutive monthly payments have been made on the loan being refinanced.
  • Example: The loan being refinanced closed on March 8, 2019. The first payment is due on May 1, 2019. If the Veteran makes six consecutive monthly payments, the loan being refinanced will be seasoned on November 27, 2019.
Loan Comparison Disclosure and Veteran Certification
  • Veteran must receive the loan comparison statement/disclosure within 3 business days from the initial date of the loan application and again at loan closing. For example, the Veteran completed/submitted the loan application on August 5, 2019. Sun West must present the comparison statement to the Veteran no later than August 8, 2019.
  • Loan officer must get details regarding loan being paid off at the time of application in order to provide borrower timely and accurate disclosure. Typical information needed about existing loan to generate information for recoup and comparison are case number, loan amount, loan term, monthly payment, interest rate, and name of all the borrowers on the loan.
  • The loan file must contain documentation certifying that the Veteran has received the comparison statements, e.g. via written letter, e-signature, email from the Veteran certifying receipt, etc.

Program guidelines are available in AllRegs (Wholesale).

For any additional questions on the program, please email Sun West’s underwriting scenario desk at uwscenarios@swmc.com or 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 mortgage professionals only and not for distribution to consumers. Please visit https://www.swmc.com/disclaimer.php or refer to www.nmlsconsumeraccess.org to see where Sun West Mortgage Company, Inc. (NMLS ID 3277) is a licensed lender and servicer. All Rights Reserved. We are not accepting applications from Georgia or Massachusetts residents. We are purchasing mortgages secured by Massachusetts properties but not Georgia. Sun West Mortgage Company, Inc. (NMLS ID 3277) holds a Financing Law License (#6030119) [Loans made or arranged pursuant to a California Financing Law license], licensed by the California Department of Business Oversight, Phone: (866) ASK-CORP and has a DRE Real Estate Corporation License Endorsement (#00793885), licensed by the California Department of Real Estate, Phone: (877) 373-4542.

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