I might get fired for posting this, but its worth it to me to explain to Veterans what is happening in the mortgage industry and specifically what so called new requirements many of the Nation’s Top Lenders are requiring to approve VA streamline refinances. One of the main benefits of getting a VA loan is the option or ability to do a streamline refinance. Basically a streamline refinance is where a Veteran gets a new mortgage at a lower rate without going through the hassle of credit check, appraisal and income verification.
HERE IS THE VA’S DEFINITION OF A STREAMLINE or IRRRL
“A Veteran who obtained a VA loan may refinance it with a VA guaranteed loan at a lesser interest rate without using additional entitlement.” They go on the list restrictions and instructions with this refinance. Here they are:
1. The new loan must be at a lesser interest rate than the old VA loan EXCEPT when refinancing an existing ARM with a new fixed rate mortgage.
2. The dollar amount of guaranty applicable to the prior VA loan is transferred to the new loan.
3. Although no underwriting IS REQUIRED, approval of new credit may be required by the trustee in a Chapter 13 BK
4. NO APPRAISAL IS REQUIRED.
5. The Veteran may not obtain cash proceeds.
6. The new loan is limited to the balance of the old loan, the funding fee, up to $6000 of energy efficient improvements, and allowable closing costs including not more than 2 discount points.
7. The term of an IRRRL any not exceed the original term of the loan being refinanced by more than 10 years.
The one that I want to draw attention too is number 4. The no appraisal option is what makes this one of the best ways for a Veteran to refinance his/her home. Some Lenders have taken upon itself to overwrite the VA’s policy and start instituting appraisals on VA streamline refinances starting July 1st. Here is the email I received from them:
Non-XXXXXXX (lender name removed) VA Interest Rate Reduction Refinance Loan (IRRRL) Transactions
May Require A Conventional Appraisal – Effective 7/1/09
In an effort to mitigate the risk of declining home values on VA IRRRL transactions, effective with registrations on and after July 1, 2009, for non-XXXXXXX serviced VA IRRRLs, XXXXXX Wholesale Lending will require the Broker to obtain and deliver to XXXXXXX:
• A conventional appraisal that supports the total loan amount (appraised value >= base loan amount plus VA funding fee), or AVM that supports <=95% LTV
Note: Conventional appraisals ordered for non-XXXXXX serviced VA IRRRL transactions are not subject to Home Valuation Code of Conduct (HVCC) requirements. Additional comments and/or reminders:
• If a conventional appraisal is not in the loan file upon receipt, XXXXXX will order an AVM to verify the value. AVMs are not allowed for condominiums, manufactured homes, multi unit properties (2-4 unit), investment properties and second homes. If the AVM does not return an acceptable result, XXXXX will condition for a full appraisal. • It will be the responsibility of the broker to order the full conventional appraisal. VA has indicated this appraisal should not be ordered with the case number assignment through VA’s The Appraisal System (TAS) and should not be submitted to VA with the guaranty package.
o VA’s Jurisdictional Maximum VA Appraisal Fee Chart must be met. The Veteran may not be charged an appraisal fee exceeding VA’s maximum.
o The 1004 MC (Market Conditions) form is required when an appraisal is required.
o XXXXXX Appraisal Policy applies (Broker Guide Section 300).
This change in policy (even though VA does not require it) will limit thousands of Veterans from refinancing their homes. Look at what is happening in the market today. Job loss is at an all time high, taxes are going up, inflation will be a huge factor. Right now people need to save money more than ever. I also find it interesting that the Federal Government which VA is a part of, is dumping so much money in the market to help with rates and stimulation, yet the biggest bank is instituting this which will keep our VETERANS WHO FOUGHT FOR THIS COUNTRY unable to refinance to better their situation. Who now days has equity in their home? I don’t. Wells Fargo states that “in an effort to mitigate the risk of declining home values on VA IRRRL transactions”. Give me a break. What’s more important to a Veteran – equity in their home, or risk losing their home because of a financial situation change when a lower monthly payment is needed.
My advice is to all Veterans – write your congressman and contact the Dept of Veteran Affairs and let them know your feelings. Hopefully if enough people respond the 100 pound gorilla (XXXXXX) will wake up and realize they are not doing anybody any favors.
To Contact your Congressman CLICK HERE
To Contact the VA via email CLICK HERE
To Call your VA office CLICK HERE