In regards to the form and content of legal instruments, the Department of Veteran’s Affairs (VA) only stipulates that “lenders may use any note and mortgage forms they wish for VA loan” and that such instruments meet four criteria, as set forth in VA Lender’s Handbook ch. 9, 1. A, in order for a loan to be guaranteed by the VA.
We have been providing modified copies of the FNMA uniform notes and security instruments for VA loans, with amended language in order for the documents to meet the criteria set forth by the VA. The multi-state fixed rate promissory note used for VA loans (Cx58), is a modified copy of FNMA Form 3200. The most common multi-state adjustable rate promissory note (Cx3148) is a modified copy of FNMA Form 3501.
At a customer’s suggestion, we will be enhancing the language of Section 4 (concerning prepayments) of both documents so that they more closely align with the VA’s rules concerning prepayments, as set forth in VA Servicing Guide ch. 1.07. This enhanced language will include specifications concerning the minimum amount which must be paid for a partial prepayment, as well as explain how full and partial prepayments will be credited to the borrower’s account.
In addition, we will be modifying the last sentence in Section 4(D) of Cx3148 to specify that the interest rate will never be more than a certain percentage points higher or lower than the initial interest rate, to make the provisions of this Subsection more consistent with those found in 38 CFR § 36.4312(d)(4)(i).
We will also be enhancing the language of Section 4(B) to specify that if the index for the loan is no longer available, a new one prescribed by the Department of Veterans Affairs will be chosen by the Note Holder, which is based upon comparable information (currently, no reference is made to the Department).
This change will take effect on July 15, 2013. If you have any questions or concerns about this change, please contact Client Support at 1.800.497.3584.
July 9, 2013