Previously, we had made a non-IRRRL version of our “VA Refinance Loan Comparison” disclosure (Cx14501) to support the new Type I and Type II Cash-Out Refinance Loan net tangible benefit requirements published by the VA.
Since that announcement, the VA has published updated guidelines and a sample form for complying with these requirements. Continuing with our policy to use forms published by authoritative bodies, we are pleased to announce the creation of our own copy of the sample form found in VA Circ. 26-19-5 Exhibit A. Our new “VA Non-IRRRL Refinance Comparison Certification” (Cx22999) will be configured to print under the following circumstances:
- Application Date On or After 02/15/2019 = Yes
- Base Type = VA
- Document Package Type = Initial Disclosure
- Document Package Type = Redisclosure
- Document Package Type = Closing
- Loan Purpose = CashOutOther
- Loan Purpose = NoCashOutOther
- VA Interest Rate Reduction Refinancing Loan (IRRRL) = No
The instructions in the sample form will print in Cx22999. The first page (Sections I through III) will print if “Document Package Type” does not equal “Closing” or “Pre-Closing”. The second page (Sections IV through VII) will print when “Document Package Type” equals “Closing” or “Pre-Closing”. This is done per VA Circ. 26-19-5 and the instructions to the form, including the provisions that “lenders are encouraged, but not required, to continually update the disclosure as additional, and more accurate, information becomes available throughout the origination process.”
Please note that the new regulations require the lender to “explain that the removal of [] home equity may affect the borrower’s ability to sell the home at a later date” (38 C.F.R. § 36.4306[a][3][iii]). While we included language to this effect in Cx14501, the VA’s sample form simply compares the amount of home equity remaining in both the existing loan and the new loan. Nevertheless, VA Circ. 26-19-5(4)(c)(3) states the following (cited in relevant part):
“. . . The disclosure must also explain to the Veteran how the removal of home equity may affect the sale or refinance of the home in the future. . . . VA has provided a sample disclosure in Exhibit A that includes both the loan comparison and home equity provisions stated in this Circular.”
Thus, we will not be adding any additional provisions to the sample form concerning home equity.
The sample form also does not include the lender’s certification regarding the recoupment of fees specifically required under 38 C.F.R. § 36.4306(b)(1). We will be providing this certification in a separate, new document. New “VA Non-IRRRL Loan Recoupment Certification” (Cx23000) will print under the following circumstances:
- Application Date On or After 02/15/2019 = Yes
- Base Type = VA
- Document Package Type = Closing
- Loan Purpose = NoCashOutOther
- VA Interest Rate Reduction Refinancing Loan (IRRRL) = No
- VA Prior Loan Type = VA – ARM/HARM
- VA Prior Loan Type = VA – Fixed
The content of this document will be the same as that used for the similar certification we created in Cx14501.
We are removing Print Condition 2 for Cx14501, effectively causing this document to only print for IRRRL loans, as it did previous to our changes in January 2019. We are also creating a global mapping for Field “VA Interest Rate Reduction Refinancing Loan (IRRRL)” (FI 38642) to automatically set it to “No” if it is not otherwise set to “Yes”. This will help to ensure that either Cx14501 or Cx22999 and Cx23000 print, depending on whether a VA refinance loan is an IRRRL or not.
In addition, we are modifying some of the related VA Data Integrity Checks. All of the DI Checks being modified have the same error message:
“The P&I portion of the mortgage payment is equal to or higher than the loan being refinanced, or the number of months to recoup closing costs is more than 36 months. VA requires that all fees and incurred costs to be recouped within 36 months after closing for all Type I loans (a no-cash-out refinance) which refinance a previous VA loan. (See 38 C.F.R. § 36.4306[b][1], and VA Circ. 26-18-30.)”
The change will be in the triggering for the DI Checks. Previously, this message triggered for both IRRRL and non-IRRRL VA refinances. However, following the new instruction for non-IRRRL refinances, the closing costs recouped for non-IRRRL VA refinances will no longer have the VA Funding Fee added as part of the closing costs [see VA Circular 26-19-5(4)(e)(1)]. Since new fields needed to be created for the recoupment calculation that excluded the VA Funding Fee, new DI Checks were also created that use the new fields in the triggering logic. Both IRRRL and non-IRRRL VA refinances will continue to receive the above Data Integrity message, but the fields used will be specific to each type of loan.
Finally, we have also made minor text modifications to our existing interim non-IRRRL Net Tangible Benefit Disclosure (Cx14501) to provide more clarity. For example, the row titled “Total of Borrower Principal, Interest, and Insurance Payments” will now be titled “Total Remaining of Borrower Principal, Interest, and Mortgage Insurance Payments”, and the “Remaining Loan Term” row will print “months” in each column to clarify that the Loan Term disclosed is in months. In addition, the new non-IRRRL recoupment fields have been added to the recoupment calculation section. As mentioned above, please note that the non-IRRRL version of Cx14501 will no longer print after our new VA Non-IRRRL Refinance Comparison Certification (Cx22999) and VA Non-IRRRL Loan Recoupment Certification (Cx23000) are pushed to Production servers.
The minor text changes to the non-IRRRL version of Cx14501 will be pushed immediately, as will the global mapping on Field “VA Interest Rate Reduction Refinancing Loan (IRRRL)” and the changes to the Data Integrity checks. The new documents, our VA Non-IRRRL Refinance Comparison Certification (Cx22999) and VA Non-IRRRL Loan Recoupment Certification (Cx23000), will be in Production environments on March 13, 2019. These new documents, and the configuration change for Cx14501, are available on Stage servers for testing. If you have any questions or concerns about these changes, please contact Client Support at 1.800.497.3584.
DR 283824