VA Issues Additional Lender Guidance In View of COVID-19

On May 20, 2020, the U.S. Department of Veterans Affairs (VA) issued Loan Guaranty Circular 26-20-19, dated May 19, 2020, to provide additional guidance to lenders regarding VA policies during the COVID-19 emergency.

Renewal Applications.  The VA reminds lenders to timely submit their annual renewal applications and fees. For the period from March 13, 2020 through June 13, 2020, deadlines for applications, renewals, and fees are automatically extended by 60 days. For example, if a lender’s renewal fees and financial documents were due on May 1, 2020, the due date is extended to June 30, 2020 without penalty. The VA cautions that, if there is a lapse in VA approval/registration of any company or individual because of the failure to submit timely annual renewal applications and fees, this may result in life of loan indemnification for applicable loans.

VA-Approved Underwriter.  VA notes that while non-supervised automatic lenders must have a VA-approved underwriter, it recently has observed a number of loans underwritten by (1) individuals who are not registered with the VA, or (2) individuals who were registered with the VA for a former employer but not for their current employer (VA underwriter approval does not carry over from the old employer to the new employer). VA advises that loans underwritten by underwriters not registered with VA as an employee of their current lender, or by underwriters whose approval has lapsed, as of the date of loan closing are subject to indemnification for the life of the loan.

IRS Form 4506-T.  The VA advises that the use of IRS Form 4506-T, which is for requesting a transcript of a tax return, is not required by VA guidelines. The VA acknowledges that the VA Lenders Handbook references IRS Form 4506-T in documentation guidelines that apply when using automated underwriting under certain conditions. Nevertheless, the VA states that “[i]t is important to note that even if this condition exists, it would be considered an investor or lender overlay exceeding the guidelines established by VA.”

Copyright © 2020 by Ballard Spahr LLP.
www.ballardspahr.com
(No claim to original U.S. government material.)

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, including electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of the author and publisher.

This alert is a periodic publication of Ballard Spahr LLP and is intended to notify recipients of new developments in the law. It should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own attorney concerning your situation and specific legal questions you have.