Deciphering the VA Lender’s Handbook Chapter 17 Part 5
Much the way we covered automatic authority in the last article, we’ll be covering LAPP authority in this article. We’ll do a quick refresher on what LAPP authority is, why it’s great, how lenders get it, and how lenders can lose it. We’ll also bring it home and talk about how it can affect you if the lender either does not have LAPP authority or gets it revoked. LAPP stands for Lender Appraisal Processing Program and is another way (like automatic authority) for lenders to shorten and simplify the VA loan approval process. LAPP authority is granted to lenders completely at the VA’s discretion, and lenders maintain LAPP privileges by complying with all the VA requirements for LAPP lenders.
So what is LAPP? As stated above, LAPP stands for Lender Appraisal Processing Program. Being part of LAPP allows a lender to have their own appraisal reviewer on staff to process appraisals on their VA loans. The appraisal is still conducted by an official VA appraiser, but the appraiser sends the report directly to the lender’s Staff Appraisal Reviewer (SAR) for processing rather than to the VA. Having an SAR process appraisal reports saves the lender a lot of time in processing a VA loan, especially if any issues need to be worked out with the appraiser. Lenders that are part of LAPP are also ones that focus more exclusively on VA loans, which means they are also more likely to have VA loan experts on their teams that know the ins and outs of the program well enough to make sure their borrowers get the best loan.
Obviously, granting a lender approval to be a part of LAPP is a gesture of significant trust in the lender from the VA; processing appraisal reports is one of the way that the VA can keep an eye on lenders and make sure they are complying with all the rules of the VA loan program. If the VA allows a lender to process their own appraisals, this implies that the VA trusts that the lender will comply with all of their rules without needing that extra level of oversight. The VA can withdraw LAPP authority for what they deem to be a proper cause, and the authority can be withdrawn for a specific time period or indefinitely. So what are we talking about when we say proper cause?
The Handbook provides the following list of examples of things that it would deem proper cause for withdrawing LAPP authority. The Handbook also specifies that this list does not include everything that might cause LAPP authority to be withdrawn:
- Technical Incompetence
- Conduct demonstrating insufficient knowledge of industry-accepted appraisal principles, techniques and practices and/or the inability to adequately apply them in reviewing appraisal reports and making value determinations for VA purposes.
- Substantive or Repetitive Errors
- A substantive error is one which significantly involves the value determination or condition of the property. In the aggregate, nonsubstantive errors which are frequently repeated may also indicate that LAPP case reviews are being performed in a careless or negligent manner.
- Disregard for VA requirements
- Continued disregard for the VA requirements and procedures outlined in VA regulations, guidelines, instructions or applicable laws, after the problem has been brought to the lender’s attention.
- Failure to meet qualification requirements
- The lender or the lender’s staff appraisal reviewer (SAR) no longer meets the basic LAPP qualification requirements.
- Civil Judgments and convictions
Usually, the VA will provide 30 days’ notice to the lender if their LAPP authority is being withdrawn. However, the VA is not obligated to provide this notice if the government’s interest are exposed to immediate risk from the lender’s activities. Once LAPP authority has been withdrawn, the VA must make all of the determinations of reasonable value for the lender, and issue all Certificates of Reasonable Value.
So how does this affect you as the borrower? Much like a lender losing automatic authority, if a lender loses their LAPP authority, your VA loan is going to take longer to process. Most likely, no additional documents or information will be required from you; it will simply take longer to process than it would otherwise.