SIDUS FINANCIAL PRESENTSV.A. LOANS

ONE BEDFORD FARMS, SUITE 100, BEDFORD, NH 03110

AgendaBenefits Page 2VA Programs ___ ________ Page 3Eligible Properties Page 4Loan Limits Page 5-6Who is Eligible Pages 7-8Certificate of Eligibility Pages 9-13VA Funding Fee Pages 14-16Allowable Closing Costs Page 17Seller Concessions Page 18Ratio vs. Residual Pages 19-20Pre-qual vs. VA Loan Analysis Pages 21-25Compensating Factors Page 26Automated Underwriting Page 27Income & Employment, Assets, Credit Pages 28-33Appraisals Page 34Pest Inspections Page 35Refinancing Pages 36-39Jumbo Pages 40-41Forms at Application Page 42VA Processing Steps Page 43Submission Checklists Pages 44-46CAIVRS Page 47Ordering Appraisals ______ Page 48Condo Approval Pages 49-50Energy Efficient Improvement Loans Page 51-52VA Regional Office & Useful Links _____ Pages 53-52

What You Need to Know About…VA Loans

Benefits of a VA Loan• No Down Payment, 100% up to $417,000* on 1 – 4 Unit Properties.• No Monthly Mortgage Insurance Premiums.• 100% Gift Funds Allowed• Only One Ratio – 41%• Automated Underwriting and Traditional Manual Underwriting• VA Mortgages are Assumable• No Reserve Requirements (1 unit only) • Cash-Out Refinances to 100%• Streamline Refinances with no Appraisal or Credit Check• No Fico Requirements• Secondary Financing Allowed• Temporary Buy downs Allowed• Approved DAPs Allowed• Seller Can Pay Allowable Closing Costs Plus 4%• 75% of Rents Allowed for Qualifying on Multi Families*• 2 years on BK Discharge• 1 year into Chapter 13 pay out.• The Benefit is Restorable

Commonly Used VA Programs

• 30 Year Fixed Rate• 15 Year Fixed Rate• Buy-Down, Qualify at Note Rate• 1 YR ARM Underwritten at Note Rate Plus 1%• 3/1, 5/1, 7/1, 10/1 Hybrid ARMs Underwritten at the Note

Rate• Caps: 1% and 5% Lifetime• Index: 1 Year US Treasury• Margin: Set by Lender• May be used for all Property Types• Energy Efficient Improvement Loans (EEIs)

Property Eligibility (Owner-Occupied Only)

• Existing 1 -4 Family Properties- (A home which has been previously occupied or had all onsite & offsite improvements fully completed for one year)

• New Construction – Completed Less Than One Year & Never Occupied- (Covered by a one-year VA builder’s warranty or a 10 year HUD insured protection plan)

• Proposed or Under Construction- (See Chapter 5, page 23 of the VA Loan Production 2009 Training Guide for Lenders at: http://www.vba.va.gov/ro/manchester/lgymain/lp/loanprocessing.htm)

• Condominiums- (Must be VA or FHA approved. Condexes are ok. No spot loans)

• Manufactured or Modular Housing- (Must be classified as real property and properly fixed to a permanent foundation on its own land)

Loan Limits

• The Department of Veterans Affairs’ Loan Guaranty program does not impose a maximum amount that an eligible veteran may borrow using a VA-guaranteed loan. However, the following county “limits” must be used to calculate VA’s maximum guaranty amount for a particular county.

• These limits apply to all loans closed January 1,

2009 through December 31, 2009. The maximum guaranty amount (available for loans over $144,000) is 25 percent of the 2009 VA Limit shown below. For all counties other than those listed below, the 2009 Limit is $417,000.

Loan Limits

State County Maximum Loan Amount

CT FAIRFIELD $ 556,250.00

MA BARNSTABLE $ 441,250.00

MA BRISTOL $ 463,750.00

MA DUKES $ 736,250.00

MA ESSEX, MIDDLESEX, NORFOLK, PLYMOUTH & SUFFOLK

$ 506,250.00

MA NANTUCKET $1,094,625.00

NH ROCKINGHAM & STRAFFORD $ 506,250.00

NY BRONX, KINGS, NASSAU, NEW YORK, PUTNAM, QUEENS, RICHMOND,

ROCKLAND,SUFFOLK, & WESTCHESTER

$ 747,500.00

RI BRISTOL, KENT, NEWPORT, PROVIDENCE & WASHINGTON

$ 463,750.00

•NOTE: These limits include the financed VA funding Fee

Borrower EligibilityEligible Borrower is a Veteran, Reserve or National Guard Member who:

• Served in the military – honorably discharged

• Served less than the required time at the convenience of the military

• Is the unmarried spouse of a deceased Veteran who diedwhile in service or of service connected issues.

• Only the spouse of Veteran is eligible to co-borrow with the Veteran on a VA home loan. No other person may co-borrow,

i.e. brother, sister, parent, aunt, uncle, significant other, etc.

• Two Veterans or VA eligible borrowers can purchase together. (Must be submitted directly to VA as a prior approval).

QUICK REFERENCE CHARTS FOR ELIGIBILITY

ERA DATES MINIMUM SERVICE* CODE

WWII 09/16/40 - 07/25/47 90 continuous days 01

Peacetime 07/26/47 - 06/26/50 181 days 08

Korean 06/27/50 - 01/31/55 90 days 02

Post-Korean 02/01/55 - 08/04/64 181 days 03

Vietnam 08/05/64 - 05/07/75 90 days 04

Post-Vietnam 05/08/75 - 09/07/80 181 days 09

Post-Vietnam 09/08/80 - 08/01/90 2 years 09

Persian Gulf 8/2/90 - undetermined 2 years 10

Current Active Duty Service Personnel

Currently on fully time active duty*

90 days 10

Restoration of Benefit (not a duplicate for an IRRRL)

Above Above 05

Unmarried Surviving Spouse Adjudication determination required

n/a-veteran died on active duty or as the result of a service-connected disability

06

IMPORTANT: The following data is submitted for your information only. Lenders are not expected to make eligibility determinations for veterans. Please do not attempt to use this data to determine if a veteran qualifies for the VA Home Loan Benefit, there are exceptions due to disability, etc. Only VA should make a final determination as to whether a veteran qualifies for this benefit or not.

QUICK REFERENCE FOR ELIGIBILITYFULL TIME ACTIVE DUTY SERVICE

QUICK REFERENCE FOR ELIGIBILITYRESERVE OR NATIONAL GUARD SERVICE

ERA MINIMUM SERVICE* CODE

Released from service 6 years of actively drilling 11

Currently in Reserves/National Guard 6 years of actively drilling* 11

Currently or previously served in support of a war time operation, i.e. Noble Eagle under Title 10

90 days Issue the COE in compliance with full time active duty service personnel-the chart above. Use a green certificate, not code 11

Restoration of Benefit (not a duplicate for and IRRRL)

Above 05

*See the notation regarding Reserve/Guard member currently serving or previously called up to active duty in support of a war effort; you should always ask a Reserve/National Guard member if they fall into this category.

(Note: Must be an expressly honorable discharge)

Certificates of Eligibility

• There are actually three types of Certificate of Eligibility (COE):

• Regular / Full-Time / Active Duty

(see example)

• Reservist / National Guard(see example)

• Annotated for Unmarried Surviving Spouse

Entitlement & Certificate of Eligibility

• Veteran to provide Certificate of Eligibility (COE)

• When the Veteran does not have his or her COE, the brokershould first try to obtain it through VA’s on-line system, WebLGY, ACE (Automated Certificate of Eligibility) which can be found at: https://vip.vba.va.gov .

• Scroll down the left-hand side of the page until you seeApplication’ and ‘WebLGY’. Click this and choose ‘Eligibility’ from the main menu.

• Choose Automated Certificate of Eligibility.Input veteran’s name as it appears on DD214 (discharge papers).

• ACE cannot make all determinations. Some types of cases thatcannot be processed through ACE include:

– Persons whose service was or is in the Reserves/National Guard.– Persons who may have had prior VA loan(s) that went to foreclosure.– Persons who did not serve the minimum required length of service

and were not discharged for an authorized exception.– Persons who were discharged under conditions other than honorable.– Persons seeking restoration of previously used entitlement.– Unmarried surviving spouses.

Entitlement & Certificate of Eligibility Cont.

• If you can not obtain the COE directly through ACE; • You can either submit an application electronically or mail a request to the Winston-Salem

Eligibility Center (mailing directions are listed below.) If you choose to submit an application electronically:

– Click on the “Electronic Application” link in that particular record (be sure to write down the reference number)

– Input the required information which is based on data required by VA Form 26-1880– Scan any supporting documentation you have and upload it for submission with the

electronic application; data may include DD-214, Reserve Point Statement, HUD-1 from the sale of REO, etc.

– Provide your e-mail address so you can be notified when the application has been processed

– Check the Status of a Pending COE: Eligibility → Search → Enter reference # and name or SSN.

• Prior Loan Validation (Can be used in lieu of a COE for an Interest Rate Reduction Refinance Loan): Eligibility → Prior Loan Validation → Enter veteran’s SSN or previous VA loan number and name.

• You may also obtain the COE by using the postal mail service. It is strongly suggested that the form be sent with proof of military service, if possible. For the COE to be returned directly to the lender, make sure to list your firm in box 5 of the 1880. In either case if a property was recently sold, proof of payoff of the mortgage should also be included. VA Form 26-1880 can be obtained on-line at www.va.gov/vaforms/ . The Eligibility Center may be reached at 888-244-6711, press 1-1-2, or NCELIGIB@va.gov:

Standard Mailing Address PO Box 20729, Winston-Salem, NC 27120

Overnight Mailing Address 251 N. Main St., Winston-Salem, NC 27155

Entitlement & Certificate of Eligibility Cont.

• A COE does not expire. It can be re-used again and again if it is properly re-stored. In order to restore entitlement, the property must be sold and the VA mortgage paid off. An exception to this is if the property is being sold to another Veteran who will be substituting his eligibility.

• A once in a life time restoration is allowed if the mortgage is paid off.

• If a Veteran holds a valid COE, you can assume she/he has the appropriate length and character of service. Sometimes, the COEis annotated for individuals currently serving in active duty.

• Lenders (secondary) require at least 25% of the loan to be guaranteed by VA.

• The current maximum amount of entitlement available to eacheligible veteran is $36k. For Purchases, VA increases the amountof guaranty to 25% of the current FHLMC conforming limits. Forour purposes, the guaranty will be $104,250, which is 25% of $417,000.

• FOR MORE DETAILED INFORMATION REGARDING THE COE, GO TO CHAPTER 3, PAGES 11 -15 OF THE VA LOAN PRODUCTION TRAINING GUIDE FOR LENDERS AT:

http://www.vba.va.gov/ro/manchester/lgymain/lp/loanprocessing.htm

VA Funding Fee• The Funding Fee is a charge that most Veterans pay to use the VA Loan Guaranty

Program.

• The Funding Fee is calculated on the full loan amount.

• The following Veterans are exempt from paying the fee.Always ask:

- Is the Veteran receiving VA compensation for service-connected Disabilities?- Would the Veterans be entitled to receive compensation for service-connected disabilities if they did not receive retirement pay?

- Is there a surviving spouse of the Veteran who died in service or from service related disabilities?

• Verify exempt status by obtaining:- A properly completed and signed VA Form 26-8937, Verification of VA Benefits Form, sent to and processed by VA.

• For a Veteran who elected service retirement pay instead of VA compensation, a copy of the original VA notification of disability rating and documentation of the veteran’s service retirement income along with the 26-8937 form completed.

• Indications on the Certificate of Eligibility that the borrower is entitled as an unmarried surviving spouse of a veteran who died in war or of war related injuries.

VA FUNDING FEE SCHEDULECaution: Funding Fees are calculated based upon the borrower’s entitlement

code as noted on their COE, not their current status with a Reserve/National Guard Unit.

Purchase and Regular Refinance Loans

Veteran Type Down Payment % for First-Time Use % for Subsequent Use

Always code 5

Regular Military None 2.15% 3.3%

Never code 11 for first time use

5% or more 1.50% 1.50%

10% or more 1.25% 1.25%

National Guard/Reserves None 2.4% 3.3%

Always code 11 for first time use

5% or more 1.75% 1.75%

10% or more 1.5% 1.5%

Please note there is no down payment on refinance loans; equity is not considered a down payment by VA.

VA FUNDING FEE SCHEDULE CONTINUED

Type of Loan Percentage for Either Type of Veteran

Interest Rate Reduction Refinance (IRRRL) .50%

Loan Assumptions .50%

Other Loans

Allowable Closing Costs• The Veteran can pay:• A 1% Origination Fee, plus:• Reasonable discount points. (Max of 2 on IRRLS).• Appraisal, recording, credit report, flood certificate and survey/plot plan fee.• Pre-paid items, taxes, assessments and insurance.• Recording Fees• Hazard Insurance Premium• Title Insurance and title exam• VA Funding fee• VA Compliance Inspection Fees• Courier Fee on refinances• Charges for housing programs/grants approved by VA prior to closing• MERS (Mortgage Electronic Registration System Fee• Fraud detection report• Veteran can’t pay escrow, processing, document, underwriting, termite

report and repairs, tax service, attorney or notary fees or any broker fees.

Seller Concessions What Can the Seller Pay?

• The Seller Can Pay For:• The entire veteran buyer’s closing costs. • Points as appropriate to the market. Example: If it is customary that lenders are

charging two discount points to obtain the average on going interest rate, than 2 discount points would be appropriate to the market.

• The Seller Typically Pays For:• The Wood Destroying Insect Inspection (if required by the NOV). VA regulations

prohibit the veteran from paying this fee; however, it may be paid by the seller or a third party.

Is There Anything Else The Seller Can Pay For?

• The seller can pay for the following items providing the total of these do not exceed 4% of the Reasonable Value of the property as established by the VA fee appraiser.

• Payment of the veteran-buyer’s funding fee.• Payment of the veteran-buyer’s prepaids (pro-ration of real estate tax and hazard

insurance)• Payment of points above what is appropriate to the market.• Gifts such as television sets, cars, etc.• Payment of points to provide for a temporary buy down.• Pay off of credit balances or judgments on behalf of the veteran.

Ratios and Residual Income• DTI = 41%

• May exceed ratio if run through DU with “Approve/Eligible”, or LP with, “Accept”.

• When the DTI is > 41%, the residual income* should be at least 20% over the stated guideline. See Residual Table for required

amounts.

• Residual income is calculated based on the “total” number of dependents and the number of persons residing in the household.

• RESIDUAL INCOME IS DISCRETIONARY INCOME LEFT OVER AFTER THE MONTHLY HOUSING EXPENSE, MONTHLY DEBTS & OBLIGATIONS, MONTHLY ESTIMATED MAINTENANCE & UTILITIES AND FEDERAL AND/OR STATE TAXES ARE PAID

Residual Income Guidelines

Family Size Northeast

Residual/+ 20%

1 $390 $468

2 $654 $785

3 $788 $946

4 $888 $1,066

5 $921 $1,105

Over 5 Add $75 for any other members up to a

family of 7

Family Size Northeast Residual/+ 20%

1 $450 $540

2 $755 $906

3 $909 $1,091

4 $1,025 $1,230

5 $1,062 $1,274

Over 5 Add $80 for any other member up to

a family of 7

TABLES OF RESIDUAL INCOMESFor loan amounts of $79,999 and below For loan amounts of $80,000+

Visit the VA website www.homeloans.va.gov for“Key to Geographic Regions” used on the above tables.

PREQUALIFICATION WORKSHEETProposed Loan Amount $ 183,600 Household Size (all members of the household): 3

1. GROSS MONTHLY INCOME $4,843.00 (1)

2. Monthly Housing Expense (PITI)a. Principal and Interest 6.75%** $1191.00b. Property Taxes $ 183.00

c. Homeowners Insurance $ 45.00 TOTAL $1,419.00 (2)

3. Monthly Debts and Obligationsa. Car Loan(s) $ 450.00b. Revolving Charge Accounts $ 80.00c. Other Installment Loans $ 0d. Child Care Expenses, Child Support or Alimony $ 325.00TOTAL $855.00 (3)

4. Monthly Estimate Maintenance & Utilities of the Home $140.00 (4) Please use 14¢ times the subject property’s gross living area.

For a 1000 sq. ft. dwelling this would total $140.00..

PREQUALIFICATION WORKSHEETCONTINUED

5. Monthly Income Taxesa. Federal Income Tax $ 251.00b. State Income Tax (works in NH) $ 0c. Social Security/Medicare 7.65% - $106,800

(15.3% if self employed) $ 370.00TOTAL $621.00 (5)

6. Residual Income a. Amount required by family size $909.00 Count all members of the veterans household regardless of the nature of the relationship. Use the “Tables of Residual Incomes” on page 27 or online at http://www.warms.vba.va.gov/pam26_7.html Chapter 4, Topic 9.

b. From worksheet (1) minus (2,3,4,5) $1,808.00

7. Debt to Income Ratio (2) + (3) divided by (1) (ideal 41%) 47%

What Meets VA Standards?

Generally speaking if the veteran meets the residual guideline and the ratio is 41% or less, or if the ratio is greater than 41%, the veteran should at least meet residual plus 20%. This one easily qualifies income wise with almost double the residual requirement!. Veteran must have acceptable credit with sufficient and stable income.

PREQUALIFICATION WORKSHEET

Proposed Loan Amount $ _________ Household Size (all members of the household): _________

1. GROSS MONTHLY INCOME $_________(1)2. Monthly Housing Expense (PITI)

a. Principal and Interest ___% $__________ $__________b. Property Taxes $__________

c. Homeowners Insurance $__________ TOTAL $_________(2)

3. Monthly Debts and Obligationsa. Car Loan(s) $__________b. Revolving Charge Accounts $__________c. Other Installment Loans $__________d. Child Care Expenses, Child Support or Alimony $__________TOTAL $_________(3)

4. Monthly Estimate for Maintenance & Utilities of the Home (14¢) $_________(4)

5. Monthly Income Taxesa. Federal Income Tax $__________b. State Income Tax $__________c. Social Security/Medicare 7.65% $106,800

(15.3% of self employed) $__________TOTAL $_________(5)

6. Residual Incomea. Amount required by family size $__________b. From worksheet (1) minus (2,3,4,5) $_________

7. Debt to Income Ratio (2) + (3) divided by (1) (ideal 41%) _________%

Loan Analysis Worksheet – Form 26-6393

This is where everything comes together. There are six sections as follows:

1. Loan Data2. Borrower’s Personal and Financial Status3. Estimated Monthly Shelter Expenses4. Debts and Obligations5. Monthly Income and Deductions6. Disposition of Application and Underwriter Certification.

Sections A and B• Section A: Loan Data• Section B: Borrower’s Personal and Financial Status

Sections C and D• Section C: Estimated Monthly Shelter Expense.• Use monthly P&I, taxes and insurance, any HOA dues, and Maintenance and

Utilities amount of $0.14 per square foot.

Section D: Debts and Obligations• Add child care expense• Need child care letter in file, if applicable.

Loan Analysis WorksheetSection E: Monthly Income and Obligations• Compute federal and state income taxes and deductions, either with charts

(http://www.vba.va.gov/ro/manchester/lgymain/lp/loanprocessing.htm State Tax Charts) or online with www.paycheckcity.com

• Determine the appropriate deductions for• Social Security/Medicare which is 7.65% of gross monthly income up to $106,800 per

individual per year• Do not use deductions on pay stubs, use actual number of dependents, i.e. married

couple with 2 children is 4 exemptions.• Add non-taxable income. (Do not gross up non-taxable income here).• Total Income, Lines 37-39• Subtract Obligations, Line 40 in Section D, to compute Total Net Effective Income,

Line 41.• Subtract Estimated Monthly Shelter Expense from Section D• (include maintenance & utility) to compute Balance Available for• Family Support, Line 43. fill in Guideline from Residual Income Chart.• Compute Ratio by adding Lines 15-18 (excluding maintenance & utilities), plus Line

20 & Line 40 and then divide the sums of Lines 31 and 38. You can gross up Line 38 to calculate the ratio.

Compensating Factors

Compensating factors include, but are not limited to:

• Excellent credit history.• Conservative use of consumer credit.• Minimal consumer debt.• Long-term employment.• Significant liquid assets.• Sizable down payment.• Little or no increase in shelter expense.• High residual income.• Low Debt to Income Ratio

Automated Underwriting• VA has approved FNMA’s DO/DU, FHLMC’s LP, pmiAura System

for VA, CLUES System and Zippy as automated underwriting systems. These systems incorporate VA’s credit standards.

• A finding of “Approve/Eligible” or “Accept”, can reduce the amount of documentation requirements, and underwriting time of a loan file.

• Absence of the above positive findings does not provide a basis for denying a loan application. Manual underwriting permitted.

• BY LAW, VA MAY ONLY GUARANTY A LOAN WHEN IT IS POSSIBLE TO DETERMINE THAT THE VETERAN IS A SATISFACTORY CREDIT RISK HAS STABLE AND SUFFICIENT INCOME TO ALLOW REPAYMENT OF THE LOAN NOW AND IN THE FORSEABLE FUTURE

Income and Employment• Wages - require 2 year history. Less than 2 years considered case

by case.• Obtain a VOE or 30 days of original paystubs, 2 year’s W2s and a

telephone cert.• Overtime income and 2nd job income generally needs 2 year

history, less than 2 years considered case by case.• Commission – 2 year history, unless previous related employment

or specialized training – 1040s required (watch for 2106 expenses).• Self Employment averaged 24 months, 1040’s required. YTD P&L• Alimony and Child Support must be verified and stable. Copies of

the divorce decree are required• Document in accordance with AU findings.• Seasonal jobs and unemployment may be averaged with 24 month

history of both; it is considered “Normal” for the field the borrower is in.

• Other Income, pension, retirement, disability, etc. must be verified.

Income and Employment Cont’d• Active Military income – consider base pay as stable & reliable unless

applicant is within 12 months of release of active duty.• Leave and Earnings Statement is required (LES). If re-enlisting, letter from

commanding officer & the veteran stating may/will re-enlist.• Military quarters allowance and Basic Allowance Subsistence (BAS) can be

considered income. Both non-taxable.• Other Military allowances – obtain verification of type and amount and

length of receipt.• Income from Reserves or National Guard can be considered if the length of

total service indicates a strong probability of continuance.• Primary Rental Income: 75% of rental income may only be used if they have

prior experience managing rental properties or have a one year agreement with a property management company. Six months reserves PITI are required.

• Other Rental Property. Tax returns documenting income plus three month’s reserves PITI

• Current single family home. Obtain a lease and wash the debt and take a loss if necessary. No reserves required.

Assets• Verify all liquid assets to the extent they are needed to close the

loan.• Funds needed to pay the difference between sales price and

appraised value (if lower) must come from veteran’s own funds.• Verify earnest money has cleared account.• Obtain corresponding Bank Statement to show availability of funds.• Obtain copy of earnest money check and evidence funds have

cleared.• VODs or 2 months bank statements not older than 120 days• Gift letters and receipt, etc.• Seller concessions are 4%, plus allowable closing costs. Seller may

pay off debt for Veteran, provided it within the 4% maximum concession. Seller may pay for the VA funding fee. (Partial payment not acceptable).

Credit • Perform a CAIVRs Inquiry on all borrowers (see instructions).• RMCR or MCR (3 files merged) reports are acceptable.• Current Rent &/or Mortgage history, if required by AUS or to strengthen file.• Non-purchasing spouse: Monthly obligations are considered in community property

state. A credit report and credit consent form are required on all non-purchasing spouses. Credit history is also considered.

• Collections may not necessarily be required to be paid, upon review of explanation and any supporting documentation by borrower; this is considered on a case by case basis.

• Judgments and federal or state debts must be paid• Open collections are considered “Recent Derogatory Items” regardless of age.• Lates in the last year are of major concern and may be reason for declination unless

isolated. Obtain credit explanation even if not required by AUS.• All inquiries in the last 90 days must be explained• Obtain a satisfactory rental or mortgage history via a VOM, cancelled checks or credit

report• Non traditional credit is okay• Consumer credit counseling must have a 12 month history and approval from the

credit counselor unless borrower entered prior to delinquency

Credit - Continued

• Chapter 13 Bankruptcy. 12 month satisfactory repayment and approval by the court

• Chapter 7 Bankruptcy. Two years from discharge with re-established credit. 12 months from discharge with re-established credit if it was beyond the borrower’s control.

• Foreclosure, Deed-in-Lieu or Short Sale follow BK guidelines above

Debts and Obligations• Must verify alimony and child support via the divorce decree• Student loans scheduled to begin within 12 months of the Note Date will be counted.• Loans secured by deposited funds are not counted.• Installment debts with less than 10 months remaining do not necessarily need to be

included in credit qualifying. Large payments should be considered. Do not omit these debts in the AUS system.

• Always “populate” liabilities in AUS.• 401(k) loans are not used against in debt calculation.• Loan Pay advances (primarily seen on LES statement of in-service veterans) are

used against and must be documented.• A child care expense letter must be in all files where there are dependent children

including AU files. A letter from the veteran should state whether there is a cost or not. If there is none, an explanation as to why will be needed. If there is a cost, the veteran will need to provide the cost and name and address of the provider and this will need to be listed on the Loan Analysis as a debt.

• If a loan is co-signed and there is no evidence to believe the applicant will have to repay the loan, then the underwriter may exclude the payment.

Appraisals • The general rule regarding VA Minimum Property Requirements (MPRs) is that the

property must be Safe, Sound (structurally), and Sanitary. The complete VA MPRs can be found in Chapter 12 of the VA Lender’s Handbook. Appraisals are ordered and assigned thru TAS.

• The following list is a condensed list of the most commonly asked about MPRs:

– Each living unit must have the space necessary to assure suitable living, sleeping, cooking/dining accommodations, and sanitary facilities.

– There must be a mechanical heating system– Potable water supply and a safe method for sewerage disposal. If public water and

sewer are available, the property must be connected – The crawl space must have adequate access, be clear of all debris, and be properly

vented. – The floor joists must be sufficiently above the highest level of the ground to provide

access for maintenance and repair of ductwork and plumbing.– If any portion of a property is designed or used for nonresidential purposes, that

property is eligible only if the nonresidential use does not impair the residential character of the property, or exceed 25% of the total floor area.

– Conditions which impair the safety, sanitation, or structural soundness of the dwelling will cause the property to be unacceptable until the defects or conditions have been remedied and the probability of further damage eliminated. Waivers can be requested by the veteran and will be accepted on a case by case basis, though value could be impacted.

– Escrows for repairs at 1.5 times the cost to cure may be accepted.– No part of any residential structure may be located within a high pressure gas or

liquid petroleum pipeline easement. No part of any residential structure may be located within a high voltage electric transmission line easement.

– Water tests are required on private wells. Private septic is ok unless noted by the appraiser

Pest InspectionsVA requires pests inspections on the Wood Destroying Insect Report Form

NPMA-33 on all existing construction cases in the following areas:

State Counties

Connecticut Required in all counties.

Maine Not required in any county.

Massachusetts Required in all counties

New Hampshire Required in the counties of Belknap, Cheshire, Hillsborough, Merrimack, Rockingham, Strafford, & Sullivan only.

New York Required in all counties south of Broome, Delaware, Greene, & Columbia.

Rhode Island Required in all counties.

Vermont Required in the counties of Bennington & Windham only.

Pest Inspections must be within 90 days of closing. If treatment is required, the date of treatment may count towards the 90 days. Cannot be paid by the veteran

VA LoansRate/Term & Cash Out Refi

Loan Amount 100% of NOV plus funding fee and up to $6,000 for EEI with full entitlement

1. Appraised Value $2. Appraised Value x $75% $3. Entitlement ($36,000 max) $4. Total of Lines 2 + 3 $5. Appraised Value x 100% $6. Base Loan Amount (lesser of 4 or 5) $7. *Add VA Funding Fee $8..Add EEI $9. Final Loan Amount (total of 6,7 & 8) $(Round down and cannot exceed $417,000) *VA Funding Fee is calculated on base loan amount as follows unless veteran is exempt:a) Regular Military: 2.15% first time use; 3.3% subsequent use.b) Reservist/National Guard: 2.4% first time use; 3.3% subsequent use.10. GNMA Coverage $Equity (Line 1 minus Line 6) + Entitlement (Line 3)divided by Appraised Value = VA Guaranty** ** VA Guaranty must be at least 25% to be eligible

IRRRL(Interest Rate Reduction Refinance)

• Loan limit is $417,000 unless in a designated area• Interest Rate – Must be lower than rate on current VA loan, except

ARM to Fixed.• Term – Existing VA loan term plus 10 years, not to exceed 30 years.• Payment – The P&I must be less than the P&I on the current loan

unless: the IRRRL is refinancing an ARM, or the term of the IRRRL is shorter than the term of the current loan, or Energy Efficiency improvements are included in the IRRRL.

• If the PITI increases by 20% or more, Veteran must credit qualify.• Credit – Loan must be current. Credit Report required. Must have

rating on current mortgage. Any derogatory credit since loan origination will be previewed by underwriting to determine acceptability.

• If the loan is delinquent, it must be sent to VA for underwriting

IRRRL Continued• Documentation requirements:• NO Appraisal• Prior Loan Validation required. Order through TAS.• Rate Reduction Refinancing Worksheet, VA 26-8923• VA Benefits Form (if applicable) VA 26-8937• Initial Loan Application & Addendum signed by borrower and LO.• VA Old versus New worksheet• Mortgage Rating• Copy of Note & Deed on Existing Loan• Copy of payoff demand from Title• Preliminary Title Report• Veteran’s Nearest Living Relative (Name, Address, Phone Number

and Relationship). (Or completed on Form 26-1820)

Refinance ComparisonRegular Refinance

(Cash-out Refinance)

IRRRL

VA Streamline Refinance

Cash out allowed? Yes No

Loan limit 100% of NOV + funding fee + up to $6,000 for energy efficient improvements*

Payoff of previous VA loan + allowable closing costs + funding fee + up to $6,000 for EEI

Must veteran own property? Yes Yes

Must veteran occupy home? Yes No (previously occupied is okay)

Maximum loan term 30 years Existing VA loan term + 10 years (not to exceed 30 years).

Maximum interest Negotiated Rate Rate must be lower than rate on present VA loan, unless refinancing ARM to fixed rate.

Lien of record required? Yes Yes

OK to refinance other liens? Yes No

Appraisal required? Yes No

Credit package required? Yes No, unless 30 + days past due

OK for automatic processing? Yes, automatic lenders Yes, all lenders, unless existing VA loan is 30 + days past due

Jumbos

Loans > max loan limit to $1MM is permitted subject to the following:

• Owner Occupied, 1unit, Purchase transactions only.• No mortgage lates permitted in last 12 months and

2 months cash reserves required.• No BK or foreclosure permitted in last 7 years.• Down payment funds must be provided.• Veteran owner must have full entitlement.• Max loan amount to $1MM including VA funding fee if

financed.• Only permitted on a 30 year Fixed.• No Buy Downs allowed.• Secondary financing is not permitted.

VA Loans “Jumbo” LoansVA Loans “Jumbo” Loans (Purchase)Loan Amount > max loan limit to $1,000,000 (including funding fee) with full entitlement1. Lesser of Sales Price or Appraised Value $2. Line 1 x 75% $3. Entitlement (25% of Line 1 not to exceed $104,250) $4. Base Loan Amount (Line 2 + Line 3) $5. Down Payment (Line 1 minus Line 4) $6. Down Payment % (Line 4 divided by Line 1) %7. VA Funding Fee % (based on down payment)* % 8. VA Funding Fee (Line 4 x Line 7) $9. Final Loan Amount (Line 4 + Line 8) $(Round down & cannot exceed $1,000,000) *VA Funding Fee is based on the following unless veteran is exempt:Veteran Type Down Payment % For 1st Time Use % For Subsequent UseRegular < 5% 2.15% 3.30%Military > 5 < 10% 1.50% 1.50%> 10% 1.25% 1.25%Reserves/Nat Guard < 5% 2.40% 3.30%> 5 < 10% 1.75% 1.75%> 10% 1.50% 1.50%10. GNMA CoverageEntitlement (Line 3) + down payment (Line 5) $divided by Line 1 = VA Guaranty %

VA Forms at Application• Interest Rate & Discount Disclosure Statement

• IRRRL Certification (if applying for a streamline refinance)

• ARM Certification (if applying for an ARM loan)

• VA Option Clause (signed with P&S)

• Certificate of Eligibility Review

• Ask if any VA benefits are currently being received. If so complete Verification of VA Benefits Form 26-8937

• If Active Duty, complete Counseling Checklist for Military Homebuyers, VA Form 26-0592

• Child Care Expense Letter

• Nearest Living Relative Letter

VA Processing Steps• Pre-qualify or qualify using the VA Loan Analysis is a loan amount is

known

• Originate Loan Application with all applicable VA forms and disclosures.

• Order Certificate of Eligibility if not provided

• Review COE

• Order Verification of VA Benefits (if applicable).

• Order Appraisal & Case Number

• Run CAIVRS

• Run Automated

• Process file and check for all VA forms.

• Submit to Lender for underwriting.

• Receive approval and fund your VA loan.

VA Forms and Disclosures ChecklistCHECKLIST FOR AUDIT PACKAGES OF AUTOMATIC LOANS

PURCHASE & REGULAR REFINANCE

When automated underwriting is involved, follow the feedback sheet for credit, income and asset requirements.

Lender's cover letter with VA case number and person to contact (optional)VA Loan Summary Sheet, VA Form 26-0286, fully completed, NOTE the form has been revised POST CLOSING go to http://www.va.gov/vaforms/ to obtain the latest copyCertificate of Eligibility or ACE - Check SSN versus credit report, need active duty certification on VAForm 26-1820 if box is checked.Funding Fee Receipt or proof that the veteran is exempt POST CLOSINGLoan Analysis, VA Form 6393 - Must have CAIVRS data, be completed and signed.Report and Certification of Loan Disbursement, VA Form 26-1820, check for completeness, signatures, property address, check occupancy cert., active duty certification, if applicable, and POA. POST CLOSINGBasic Lender Certification Automated Underwriting? Need the complete/latest feedback sheet; check to assure the data is up to date and accurateVerification of VA Benefits, VA Form 26-8937 if needed HUD Settlement Statement - Check for allowable fees, seller concessions or cash back allowed? POST CLOSINGRequirements of NOV (termite report, water analysis, repairs, etc.)Request for waiver of late reporting, reason for delay and certification the loan is current, if not reported within 60 days from the closing date POST CLOSING

VA Forms and Disclosures Checklist

Interest Rate and Discount Disclosure StatementCounseling Checklist for Military Homebuyers, VA Form 26-0592, for active duty applicants.Uniform Residential Loan Application with VA Form 26-1802a - make sure signed by all parties and notes the final terms of the loan. Check 1802a for signatures, final terms & items 23 & 25.Credit Reports) - All credit reports, SS numbers, credit explanation needed?VOM or Rental Verification Form or cancelled rent checks (front & back) covering the previous 12 months if not on credit report.Verifications) of Employment Form- cover past two years, compare YTD earnings with current wages. If stable income may use alternative docs; 1) telephone certification from employer 2) paystubs covering 30 days 3) past 2 years W-2’sPay-stubs - Examine for deductions such as loan allotments or garnishments. If military personnel, Leave and Earnings Statement (Examine for ETS date, advance pay/debts & assure BAH is for the proper area.) Additional income - VA compensation, retirement pay, SS income, child support Self-Employed Borrowers - Two years signed tax returns, YTD profit & loss statement and balance sheet Verifications of Deposit Form- Should show past two months average balance and document sufficient funds to close. Alt docs-2 months bank statements are also acceptable. Support large increases with source and look for overdrafts, etc.Purchase and Sales Agreement with the VA option/escape clauseBlanket Signature Authorization Form if applicable.Children care expenses must be considered and documented Copy of the appraisal and NOVARM Disclosure, if needed

VA Forms and Disclosures ChecklistCHECKLIST FOR AUDIT PACKAGES OF AUTOMATIC LOANS – IRRRL GURANTY SUBMISSION VA LOAN# ______________________________VETERANS NAME SS# __________________________

___Signed 1003 VA Loan Summary Sheet, VA Form 26-0286 POST CLOSE **Certificate of Eligibility-benefit should be tied**(A COE or an WebLGY-Prior Loan Validation print

out showing an active loan) Acknowledgment of Funding Fee or proof the veteran is exempt POST CLOSE

****IRRRL Loan Comparison Statement -(must include the following items)*****Old & new PITI payments-look for a PITI reduction unless ARM or term reduction or EEIThe term of the NEW LOAN cannot increase by more than 10 yearsOld vs. new interest rate/assure the rate is being reduced unless old loan was an ARM Length of time to recoup the closing costs (financed and POC)-not required if there is no reduction in payment due to

an EEI loan or converting an ARM to a fixed rate or, decreasing the term Statement must be signed by the veteran

If there is an increase in payment by more than 20% underwriter must certify the veteran qualifies for new loan *****Interest Rate Reduction Worksheet, VA Form 26-8923-make sure CAIVRS is listed in the note section***** Report and Certification of Loan Disbursement, VA Form 26-1820 POST CLOSE

Check for completeness, signatures, need waiver for late reporting?, check occupancy certification. HUD-1 Settlement Statement - Check for allowable fees and charges. Discount points financed cannot be more

than 2%. If subordination recording charge-get a copy of the agreement. Subordination processing is not an allowable fee. Also if credit report and appraisal listed, a copy must be sent. POST CLOSE

**** Federal Collection Policy Notice, VA Form 26-0503, or 1802a**** Lender certification that the prior VA loan was current at the time of closing for loans POST CLOSE ARM disclosure if needed

For Priors (IRRRL) any loans where the existing VA backed loan is more than 30 days delinquent: Explanation for delinquency with documentation to the problem has been resolved. Credit Report, in file is acceptable Current pay stub, W-2 and telephone certification of current employment or documentation concerning income

CAIVRS– CAIVRS (Credit Alert Interactive Voice Response System) is a HUD maintained

system to determine if the borrower has defaulted on any federally-assisted loan.– A CAIVRS inquiry must be performed on all borrowers.– HUD offers online access for CAIVRS to current FHA lenders, and to VA lenders

with registration. https://vip.vba.va.gov (Veterans Information Portal).– Consider all obligations appearing in CAIVRS when qualifying.

To complete the CAIVRS check, access the HUD website: http://www.hud.gov/offices/hsg/sfh/sys/caivrs/caivrs.cfm . All lenders will have to have a coordinator to authorize individual employees who will be allowed to access the site. The coordinator will need your firm's VA lender identification number when initially registering those selected. Access is not immediate and can take up to 10 days so assure to plan accordingly. After access for the company is granted, individual employees will have to request their own access and when completed, will be assigned their own log-in and password. Employee access is again not immediate. Detailed instructions can be found on the HUD site noted above. Please note, VA can not assist you with access issues. Lenders must deal with SFADMIN@hud.gov for issues in accessing the CAIVRS site.

Once you have been granted a log-on and password, you are ready to check for any federal debts your borrower may have. You will need the applicant(s) social security number when calling to check for a federal debt. Upon confirmation of a debt or no debt, you will be given a CAIVRS number (the CAIVRS confirmation code) which should be written in either box 46 or 47 of the Loan Analysis form (VA F26-6393). If there is a debt, proof that it has been paid in full or the terms of repayment, which must be noted as a debt, must be included in the file. Each applicant should have their own CAIVRS confirmation code. Please see VA Lenders Handbook, Chapter 4, Topic 6 for more detail

Ordering Appraisals

• Appraisals are ordered by the broker, via the VA appraisal system (TAS).

• If the broker is not already registered, please direct them to thefollowing website: https://vip.vba.va.gov .

• From the US Dept of Veterans Affairs homepage, click on “The Appraisal System (TAS)” (Third option from the bottom on left hand side).

• Click on “Register” (Left-hand side of screen).

• Register with VA. When registering, use your Broker ID Number.

• Use your lender’s number as your “Sponsor”. Obtain the VA ID Number from your Account Executive.

• Order appraisal by choosing “LAPP”. Do not order as a “IND” appraisal.

• On IRRLs no appraisal is required. Order a “Case Number Only”

• GO TO http://www.vba.va.gov/ro/manchester/lgymain/lp/loanprocessing.htm AND CLICK THE VA LOAN PRODUCTION FOR LENDERS 2009 AND GO TO PAGES 25 &26 FOR MORE DETALS

Documents Required for VA Condo Approval

• This list is provided as a reference only. VA’s Lender Handbook, http://www.warms.vba.va.gov/pam26_7.html, and the Valuation Staff can provide you with the latest changes and/or clarification as needed.

• All questions concerning documentation should be directed to Valuation• Best method of contact: nh.appr@vba.va.gov

Or• Call 800-827-6311 (Option 6)• Fax: 603-222-5861• All condominiums MUST be VA approved prior to closing. This includes condexes,

stand alone, and complexes. VA does not require PUDs to be approved anymore.• FHA Approved Condominium• A condo that is FHA approved can be added to the VA approved list by submitting the

following items:• Evidence that the condo is FHA approved.• A copy of the current budget.• Copies of the minutes of the two most recent home owners association meetings.• Upon satisfactory receipt of these items a short review will be completed and the

condo will be added to the VA approved list. You can see if a condo is FHA approved by going to the web site www.hud.gov .

Documents Required for VA Condo Approval Cont’d

• Condominiums That Are Not VA/FHA Approved

• Condos that are not VA or FHA approved can be submitted to VA for approval. Condos can fall into two categories, existing and new. The following table displays the documents that are required to be submitted for approval for either category of condos.

Required Document New Project Existing Re-sales

1 Declaration of Covenants, Conditions and Restrictions

Yes Yes

Documents Required for VA Condo Approval Cont’d

Required Documentation New Project Existing Re-sales

2 Bylaws for HOA Yes Yes

3 Articles of Incorporation for HOA If Applicable If Applicable

4 “Umbrella” projects, Declaration, Bylaws and Articles of Incorporation, as above

If Applicable If Applicable

5 Plat, map and/or air lot survey of project Yes Yes

6 Plat, map and/or air lot survey of unit(s) If Applicable If Applicable

7 Development plan and schedule Yes If Declarant Controls

8 Information or Public Offering Statement Yes If Declarant Controls

9 Grant/deed/leasehold agreement form Yes If Declarant Controls

10 State reviewing agency’s report If Applicable If Applicable

11 Annexation documents If Applicable If Applicable

12 Cross-easement(s) If Applicable If Applicable

13 Facility Leases If Applicable If Applicable

14 Management agreement If Applicable If Applicable

15 Service contract(s) (either form of or actual) If Applicable If Applicable

16 HOA budget (existing or proposed) Yes Yes

17 Current financial statements and reserves of project

If Applicable If Applicable

Documents Required for VA Condo Approval Cont’d

Required Documentation New Projects Existing Re-sales

18 Special assessments/litigation statement Yes Yes

19 Minutes of last two HOA meetings Yes Yes

20 Registered architect/engineer statement on project condition (conversions only)

If Declarant Controls If Declarant Controls

21 Recorded documents Yes Yes

22 Recorded annexation document for subject phase (expandable projects only)

Yes Yes

23 Evidence recreational facilities completed and common area conveyed to HOA

Yes Yes

24 Statement on adequacy of utilities serving site (conversions only)

If Declarant Controls If Declarant Controls

25 Evidence common area title free of financial encumbrances

Yes If Applicable

26 Evidence of final local authority approval and final VA inspection (Low/High Rises and Conversions only)

Yes No

27 Lender’s certification that pre-sale requirement met (70%)

Yes Yes

NOTE – The review of these documents takes approximately fourteen days after receipt of all required documentation

Energy Efficient Improvement Loans (EEIs)

• Eels are loans to cover the cost of making energy efficiency improvements to a dwelling. Funds for energy efficiency improvements are considered part of the total loan. The escrow for the work must be made at the time of the purchase or refinance. Note: The funding fee must be calculated on the full loan amount, including the cost of the energy efficient improvements.

• The mortgage may be increased by:

Up to $3,000 based solely on the documented costs of the energy improvementsORUp to $6,000 provided the increase in monthly mortgage payment does not exceed the documented likely reduction in monthly utility costs; (Documentation of reduction is reviewed and accepted by the underwriter. It may be in form of an energy audit or information from a utility company website; it is up to that underwriter’s judgment.) ORMore than $6,000 subject to a value determination by VA. (This option is not available with an IRRRL)

• If the labor is to be performed by the veteran, the loan increase will be limited to the amount necessary to pay for materials. See VA Lender’s Handbook, Chapter 7 for full details.

EXAMPLES OF ENERGY EFFICIENT IMPROVEMENTS

• Solar heating and cooling systems• Furnace replacement or efficiency modifications• Clock thermostats• New or additional ceiling, attic, wall and floor insulation• Water heater insulation• Storm windows and/or doors/vapor barriers• Heat pumps

All questions concerning what is acceptable as an EEI should be directed to the Valuation (appraisal) Department.

VA REGIONAL OFFICE • The Manchester Regional Loan Center (RLC) is one of nine nationwide locations handling

Loan Production (underwriting & closing), Valuation (appraisal) and Loan Administration (servicing & claims) activities. The Manchester RLC provides services for seven states of:

• * Connecticut * Maine• * Massachusetts * New Hampshire• * New York * Rhode Island * Vermont

• Our office is under the direction of William F. Dallmann, Loan Guaranty Officer.

• Departments, Staffing and How to Reach Us:

• Loan Production handles questions on eligibility, processing of loans, credit standards/underwriting, guarantees and assumptions. Telephone number is (800)827-6311, option 7, fax 603-222-5862. E-mail address is nh_lp@va.gov .

• Staff:

– Anne Keller, Loan Specialist– Barbara Croman, Loan Specialist– Gerri Casey, Loan Specialist– Jimmy Clark, Loan Specialist– Monique Beaudoin, Loan Production Officer

• Valuation (formerly known as C&V, commonly known as the Appraisal Department) handles all questions concerning what properties VA would accept; i.e., construction requirements, condo approval, appraisal issues, use of/logging into TAS, and water and/or pest inspections. Telephone number is (800)827-6311, option 6, fax 603-222-5861. E-mail address is nh_appr@va.gov .

VA Web Site Links• www.homeloans.va.gov/ls.htm • VA’s home page specifically for lenders. This link gives them information on training,

what’s hot, and how to contact all the RLCs plus a link to the Portal (for TAS, WebLGY, etc.), and VA Lender’s Handbook.

• www.homeloans.va.gov • The national home site for Loan Guaranty that offers information to lenders and

veterans; i.e. VA’s Lender Handbook, circulars, forms, online training, etc.• http://www.vba.va.gov/ro/manchester/lgymain/loans.html • Manchester’s website which lists upcoming training, local releases and you can even

download updates of this guide.• http://vip.vba.va.gov/ • website address to access VA’s Portal. The portal allows you to access:• TAS (the appraisal system) to order case numbers, appraisers, find out the status of

a case, issue or print an NOV • E-Appraisals is the Web-based application that allows appraisers to upload URAR

documents online and other interested parties to retrieve these for review or hard copy printing

• Condo/PUD/Builder provides a customized list of VA registered Condominiums and Builders (search tip: search by state and then choose by alphabet or if selecting a city use an * in lieu of a project name)

• WebLGY allows you to obtain a certificate of eligibility (or copy of one issued by VA), check the status of a prior approval loan, or obtain a guaranty online

VA Web Site Links Cont’d

• http://www.va.gov/vaforms • To download various VA forms • www.homeloans.va.gov/eligibility.htm • Provides information and the necessary form to obtain a certificate of

eligibility• http://condopudbuilder.vba.va.gov/2.2/frames.html• Provides a list of VA approved condominiums, planned unit developments

and builders. You may also access this list directly from the Portal by logging on then selecting CPB under Applications.

• www.warms.vba.va.gov/pam26_7.html;• Direct access to VA Lender’s Handbook• www.homeloans.va.gov/contact.htm • Website to E-mail various VA offices• www.paycheckcity.com/netpaycalc/netpaycalculator.asp • Paycheck deduction calculator:

THANK YOU!