VA Lender’s Handbook Chapter 17 Summary
Chapter 17 covers all “program participants”, and also covers actions that are not considered fraudulent but are still “detrimental to the VA loan guaranty program”. We’ll be giving you a summary of the information provided in Chapter 17 so you can decide if you want to research it more thoroughly by reading through all of our articles on the chapter or by reading the chapter directly from the Handbook itself. We’ll touch on most of the information that’s important for borrowers to know here.
Number One: The VA Does Respond
It may come as a strong comfort to many borrowers that the VA does, in fact, have the authority to respond to any program participants that are guilty of detrimental actions against the VA loan program and impose sanctions on those parties. Program participants include lenders (of course), builders, and management brokers. As a borrower, you are not considered a program participant, so you don’t have to worry about getting slapped with VA sanctions. The types of actions that the VA is likely to respond to include fraud, significant deficiencies in performance, ongoing disregard for VA requirements, and the like. The sanctions that the VA may impose can, of course, be partial or full exclusion from participating in the VA loan program either temporarily or permanently, but they can also come in the form of civil money penalties. Either type of sanction is pretty effective in minimizing the number of cases in which sanctions must be imposed.
Sanctions can be against a company, but they can also be against specific individuals. The participants can be lenders, employees of lenders, loan holders, loan servicers, builders, real estate brokers or agents, management brokers, repair contractors, compliance inspectors, fee appraisers, salespersons, and manufactured home manufacturers, dealers, or park operators. As mentioned above, a borrower is not considered a program participant, and a VA-eligible borrowers ability to obtain a VA loan is not affected by whether that borrower is also a program participant in another capacity and has sanctions imposed on him/her. On all program participants, a full or partial exclusion from participating in the VA loan program may be used as a sanction, and they are added to a list which is available to other program participants so they can know if they are doing business with an excluded party.
Since this information is coming out of the VA Lender’s Handbook, and as a borrower you do most of your interactions with the VA loan program through a lender, we are going to focus on the sanctions that might be imposed on a lender and how that affects their ability to offer VA loans and how it might affect your VA loan application process. Lenders may be sanctioned in specific ways based on what they did in order to get sanctioned. If they make a false lender certification, for example, they may be charged a civil money penalty. The lender certification is a statement that must be included on all loan applications that states the lender complied with all VA requirements and the law. Depending on the severity of the falsification or if it’s the first time, the lender may also have their automatic authority revoked or be fully or partially excluded from making VA loans.
How Sanctions Affect You
They affect borrowers in two main ways. First, they keep the field of lenders fairly clear of snakes so you can trust your lender. However, if you’re working with a lender that has had their automatic authority revoked for some reason, it means that your loan application is probably going to take longer to process, because it has to be sent to the VA for prior approval before it can be closed on. Depending on your lender and loan officer, you may or may not be informed that that is taking place. Lenders can also be hit with sanctions if it becomes apparent that they intentionally led the veteran to choose less-than-ideal terms by incorrectly advising that those terms were excluded by VA requirements. This sort of thing can happen in a number of ways, and if you’re interested in learning more, we would encourage you to read our detailed articles on Chapter 17.