As announced on our website, the VA published VA Circ. 26-19-22 (available at: https://www.benefits.va.gov/HOMELOANS/resources_circulars.asp) providing preliminary guidance from the VA and the correlation between Interest Rate Reduction Refinance Loans (“IRRRL”) and the “Economic Growth, Regulatory Reform, and Consumer Protection Act” (113 Stat. 1038 [2019]).
Part of VA Circ. 26-19-22 requires the full amount of closing costs and corresponding recoupment months to be disclosed to the borrower in the comparison statement provided for IRRRL’s at the time of Initial Disclosures and Closing:
“To complete the recoupment calculation for the purposes of the comparison statements:
(a) Add the following items from the Loan Estimate (initial disclosure) or Closing Disclosure (final disclosure): origination charges, services you cannot shop for, services you can shop for, taxes, other government fees, and the VA funding fee.
(b) Subtract any lender credits.
(c) Divide that amount by the decrease in monthly PI payment. Please note that the monthly PI payment is calculated using the total loan amount, including any financed VA funding fee and EEM improvements.
Note: If the IRRRL results in the same or increased monthly PI payment, the lender should still complete paragraphs (a) and (b) and present the Veteran with the total costs associated with the IRRRL.”
The “VA IRRRL Loan Comparison Statement” (Cx14501, renamed from “VA Refinance Loan Comparison”) has been modified as follows:
- Updated the title at the top of the document to “VA Interest Rate Reduction Refinancing Loan Comparison Statement”.
- Matched the labeling and format of the “Previous Loan”, “Proposed Loan”, and “Time to Recoup Closing Costs” sections found in Exhibit C of VA Circ. 26-19-22.
- Populated “Total closing Costs” with the field printing in “J. Total Closing Costs” of the corresponding Loan Estimate or Closing Disclosure.
- Populated “Recoup closing Costs ____Months” with one of two new fields calculated based on “J. Total Closing Costs”:
- VA Comparison Statement LE Months to Recoup Total Closing Costs (Field 134809)
- VA Comparison Statement CD Months to Recoup Total Closing Costs (Field 134810)
- Added the following sentence above the borrowers’ signatures for Closing packages:
“I/We also certify that I/We received a similar comparison statement that was mailed or delivered within three business days from the initial date of loan application, in addition to this comparison statement provided at loan closing.”
- Removed the Lender Certification section, since the borrower may no longer recoup the “Total closing Costs” disclosed on Cx14501 within 36 months.
These changes are ready for testing on ConformX Stage Servers. Although the text and format has been changed for all clients, the custom field logic from the previous version of Cx14501 has been kept. This means stated or custom payment, closing costs, and recoupment fields were left in place unless clients requested otherwise. No custom documents have been modified.
These edits to Cx14501 are deemed to be the most time-sensitive changes from VA Circ. 26-19-22 and will take effect on August 17, 2019. Additional updates related to VA Circ. 26-19-22 are still in process, including:
- Modifying “VA IRRRL Lender Certification” (Cx14500) to add a section that outlines the statutory recoupment calculations, along with a recoupment certification or no closing costs certification, as applicable.
- Reviewing the content of “VA IRRRL Net Tangible Benefit Form” (Cx22343) when the amortization type of the previous loan being refinanced is ARM.
- Modifying data integrity checks to follow the statutory recoupment requirements outlined in VA Circ. 26-19-22.
If you have any questions or concerns about this change, please contact Client Support at 1.800.497.3584.
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Update: In order for the usage of “Monthly Payment” as used in the Sample Comparison Statement in Exhibit C to remain consistent throughout the document, the payment populated and the associated label on our Comparison Statement (Cx14501) will reflect the Principal and Interest only. The language found in Section 3(d)(2)(c) of the Circular specifically calls for the use of the monthly PI payment in the calculation of the Time To Recoup Closing Costs, and our document is being modified accordingly.
This change will be in effect on August 27, 2019. If you have any questions or concerns about this change, please contact Client Support at 1.800.497.3584.
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