VA Lender Qualifications – A Summary of Chapter 1
The VA Lender’s Handbook is the empirical source of information on the VA loan program published and periodically updated directly by the VA. If you have a question on the VA loan program and are getting conflicting answers, often you can settle the question by consulting the VA Lender’s Handbook. However, the Handbook can be difficult to navigate if you’re not familiar with it or aren’t sure where the answer to your question might be. That is why we will be providing a short, handy summary of each chapter of the VA Lender’s Handbook in our blog posts. This is a summary of the first chapter. The first chapter primarily covers the requirements the VA has for lenders to become VA-approved and what automatic authority is and why it matters. It covers other things, but they don’t matter much to a VA borrower, so we won’t cover them here.
VA Requirements for Lenders to Become VA-approved
In order to start offering VA loans, a lender has to submit an application packet to the VA with a great deal of information. They need to send in signature cards of anyone in their office who will be signing anything related to VA loans, the VA Equal Opportunity Lender Certification, and a letter that identifies the lender’s corporate address, the lender’s owners, any of their lending personnel or officers that the VA or HUD ever debarred or took adverse action against, and a list of all the branch offices the lender has that will be involved in VA lending. As if that wasn’t enough, the VA may also order a credit report on the lender or interview the principal officers of the lender. Unless the lender is supervised and periodically audited by an approved Federal entity, then even after the lender has become VA-approved, they still need to send all of their loan applications (except for IRRRLs) to the VA for prior approval unless they apply and are approved for what is called “automatic authority”.
Automatic Authority – What it is and Why it Matters
Now, allow me to preface this section by saying that probably around 99% of all VA loans are closed by lenders with automatic authority. While that’s not a specific statistic, it’s relatively rare for a VA loan to be closed by a lender that does not have automatic authority. That being said, you still should know the difference. Automatic authority is something that the VA gives to lenders who it feels confident and trusting enough in to not worry that they’re going to break the rules or abuse the authority. Supervised lenders are automatically approved for automatic authority because, presumably if they do something against the rules, they’ll get caught. Lenders that are considered nonsupervised, however, have to apply separately for automatic authority, and they do so by filling out the Application for Authority to Close Loans on an Automatic Basis-Nonsupervised Lenders. Some of the requirements for VA lenders to get automatic authority are at least two years experience and have properly closed and submitted at least 10 VA loans in the last two years, or less than two years but at least 25 VA loans properly submitted, and a resume showing the loan officers’ mortgage lending experience.
Automatic authority is an important thing for a VA lender to have. Having to submit a loan application to the VA for prior approval adds unnecessary time to how long it takes to get your loan closed. It can add time, expense, and annoyance to the process, and not having automatic authority can be an indicator of an inexperienced VA lender that may not do your VA loan properly.
Chapter 1 is full of information about how lenders become VA approved and how they can get automatic authority. This article is just a summary of some of the important things that come out of Chapter 1. If you want to get all the information straight from the source, then we encourage you to check out the link above to go to the VA Lender’s Handbook on the VA’s website. Also, feel free to contact us here on our website or via phone with any questions.