Bulletin 2021-116 VA Overlay Removals and Updates

VA Transactions Overlay Removals and Guideline Updates

Topic

Current Guideline

New Guideline

Product Profile Updates

Purchase

AUS Approve/Accept

• 700 to $1,500,000 to 100% LTV/CLTV, DTI per AUS
• 580 to $1,000,000 to 100% LTV/CLTV, DTI per AUS

AUS Approve/Accept

• 720 to $2,500,000 to 95% LTV/CLTV, 45% DTI
• 700 to $2,000,000 to 100% LTV/CLTV, 45%¹ DTI
• 680 to $1,500,000 to 100% LTV/CLTV, 45%¹ DTI
• 580 to $1,000,000 to 100% LTV/CLTV, 60%² DTI

¹ DTI ≤ 55% DTI requires 250% residual income

² DTI > 60% requires

• 720 credit score
• 0x30x12
• 250% Residual Income

Manual Underwrite

• 50% DTI

Manual Underwrite

• 55% DTI

Cash-out Refinance

AUS Approve/Accept

• 700 to $1,500,000, DTI per AUS
• 580 to $1,000,000, DTI per AUS
• 90% LTV/CLTV

AUS Approve/Accept

• 720 to $2,500,000 to 95%¹ LTV/CLTV, 45% DTI
• 700 to $2,000,000 to 100%¹ LTV/CLTV, 45%² DTI
• 680 to $1,500,000 to 100%¹ LTV/CLTV 45%² DTI
• 640 to $1,000,000 to 100%¹ LTV/CLTV, 60%³ DTI
• 580 to $1,000,000 to 90% LTV/CLTV, 55% DTI

¹ Loan terms 16-to 30-year fixed rate LTV > 90%

² DTI ≤ 55% requires 250% residual income

³ DTI > 60% requires the following:

• 720 credit score
• 0x30x12
• 250% Residual Income

Manual Underwrite

• 700 to $1,500,000, DTI per AUS
• 580 to $1,000,000, DTI per AUS
• 90% LTV/CLTV

Manual Underwrite

• 700 to $1,500,000 to 100%¹ LTV/CLTV, 55% DTI
• 580 to $1,000,000 to 90% LTV/CLTV, 55% DTI

¹ Loan terms 16-to 30-year fixed rate LTV > 90%

Interest Rate Reduction Refinance Loans (IRRRL)

Portfolio

• Primary Residence
  • 580 credit score
  • LTV/CLTV per VA
  • 50% DTI
  • No loan amount limit
• Non-owner Occupied
  • 620 credit score
  • LTV/CLTV 100%
  • 50% DTI
  • No loan amount limit

• Maximum 105%/125% LTV/CLTV
• Primary residence and non-owner occupied properties

Non-Credit Qualifying

• 720 to $2,500,000
• 700 to $2,000,000
• 680 to $1,500,000
• 580 to $1,000,000
• No DTI

Credit Qualifying

• 720 to $2,500,000, 45% DTI
• 700 to $2,000,000, 45%¹ DTI
• 680 to $1,500,000, 45%¹ DTI
• 580 to $1,000,000, 50% DTI

¹ DTI ≤ 55% requires 250% residual income

Interest Rate Reduction Refinance Loans (IRRRL)

Manufactured Housing LTV/CLTV

Per VA

105%/125% LTV/CLTV

West Virginia DTI

Properties in West Virginia must be credit qualified

Properties in West Virginia do not need to be credit qualified

Seasoning

Silent

The following types of loans with no payments being refinanced are exempt from the six-month payment seasoning requirements

• Balloon Mortgages
• Reverse Mortgages
• Non-mortgage Debt (e.g., tax liens, mechanics liens)
• Construction to permanent loans

The following is exempt from the 210-days seasoning

• Construction to Permanent loans

Types of Financing

• Type 1 Cash-out Refi
• Type 2 Cash-out Refi

Added definition of Type I and Type II Cash-out Refinance transactions

• Type 1 Cash-out Refi: The loan amount of the new loan is less than or equal to 100% of the payoff amount of the loan being refinanced.
• Type 2 Cash-out Refi: The loan amount of the new loan is greater than 100% of the payoff amount of the loan being refinanced.

Housing Payment History

Cash-out Refinance: follow VA

• Type 1 Cash-out Refi: 1x30x12
• Type 2 Cash-out Refi: 0x30x12

Housing Payment History
Forbearance

IRRRL Non-Credit Qualify

• Borrowers with a forbearance must have exited forbearance and made three (3) payments within the month due

IRRRL Non-Credit Qualify

Non-Delegated Clients

• Borrowers with a forbearance must have exited forbearance and made six (6) payments within the month due

Delegated Clients: Follow VA policy

Cash-out Refinance

• Non-Delegated Clients:
  • Must have exited forbearance and made one payment within the month due prior to application
• (Delegated Clients): Follow VA

Employment/Income

Colorado

• Income must be stated on the application
• Verification or analysis of income not required

Removed requirement

Non-Occupant Co-Borrower

All borrowers must occupy the subject property

Clarified that the Veteran-borrower must occupy the subject property. Non-occupant borrowers may be eligible per VA Joint Loan policy

Tax Transcripts

Required for self-employment and income documented with tax returns prior to closing

Removed requirement for tax transcripts prior to closing

VA Underwriting Guide

Certificate of Eligibility (COE)
Chapter 3A Eligibility

Required for all transactions

A COE is not required on IRRRL transactions, however the loan information listed in the IRRRL case number assignment screen must be consistent with the current IRRRL application including the Veteran name, Veteran Funding Fee Exempt Status, and property address.

New Construction
Chapter 3B Transactions

Enter new construction in WebLGY as a purchase

It is best practice that VA new construction properties are structured as a purchase transaction and reflected in WebLGY as a purchase.

If structured as a purchase the VA Funding Fee may be reduced based on equity in land if owned by the Veteran more than one year.

Ineligible Property Types
Chapter 3D Property Types

Silent

3D printed homes are not allowed

Joint Access Letter
Chapter 3G Assets

Joint Accounts require an access if the parties are unrelated, or the spouse is not on the loan.

Removed requirement

Cryptocurrency
Chapter 3G Assets

Not permitted

Cryptocurrency is not an eligible asset; however, proceeds from the liquidation of cryptocurrency may be eligible for down payment, closing costs or reserves.

Source of Funds from Outside the U.S.
Chapter 3G Assets

Silent

Source of funds from outside the U.S. is permitted:

• The funds must be available to the borrower;
• All documents of foreign origin must be completed in English. If not in English, a written translation, attached to each document must be provided;
• Translations must be completed by a disinterested third party; artificial intelligence translations are not acceptable. If the state requires the document to be notarized, the translation will need to be completed in a live environment in order to complete the notarization; and
• All foreign currency amounts must be converted to U.S. dollars.

Conversion of a Primary Residence to an Investment Property

Chapter 3I Employment and Income

• Rental income from a primary residence converted to an investment property may be used to offset the mortgage payment on the rental property.
• Rental income may not be included in effective income.

Mortgage Credit Certificates

Chapter 3I Employment and Income

Not permitted

Permitted. Payment must be made to the borrower and not the servicer.

Verbal Confirmation of Employment

Chapter 3I Employment and Income

Verbal confirmation of employment 10 days prior to closing is required

Removed requirement

Marijuana Related Businesses and Hemp

Chapter 3I Employment and Income

Not permitted

Federal, state, and local laws restrict marijuana related activities therefore income or assets from these sources are not allowed for qualifying purposes.

Hemp income or assets derived from Hemp may be eligible in states where Hemp is legal. The borrower must:

• Provide a written attestation by the hemp grower that they are validly licensed, or
• Obtain a copy of such license.

Hemp income and/or assets are eligible in all states except the following:

• Washington, D.C.
• Idaho
• Mississippi