VA Lenders Handbook (VA Pamphlet 26-7), Chapter 4, Topic 6 — Additional documentation for a borrower(s) employed in building trades

VA Lenders Handbook (VA Pamphlet 26-7), Chapter 4, Topic 6 — Additional documentation for a borrower(s) employed in building trades

Effective 2019-02-22 · publisher's stamp for this provision

Topic 6. Debts Owed to the Federal Government Change Date: February 22, 2019 This Chapter has been revised in its entirety. a. Title Search Requirements The lender is responsible for obtaining the necessary title search to ensure there are no encumbrances that would preclude the borrower from obtaining a loan. b. VA Form 26-8937, Verification of Benefits The lender is responsible for obtaining the necessary title search to ensure there are no encumbrances that would preclude the borrower from obtaining a loan. Generally, VA Form 26-8937, Verification of VA Benefits, is not needed unless the COE or new IRRRL case number indicates to submit the form to VA before closing. However, ask the Veteran and any Veteran co-obligors (including spouse if a Veteran) if he or she: will be discharging within the next 6 months from the military and has completed a PEB or MEB and will be filing for VA disability while still on active duty, has recently filed for VA disability and compensation, or VA pension, and VA has not yet made a determination, would be entitled to receive VA disability benefits, but in receipt of retirement pay, has received VA disability benefits in the past, or is an unmarried surviving spouse of a Veteran (has applied and/or in receipt of DIC who died on active duty or as a result of a service-connected disability. If the Veteran falls under one of the above categories, follow the procedures discussed in Topic 2, subsection m of this chapter. When VA returns the form to the lender and the form indicates that the borrower has any of the following: an outstanding indebtedness of VA overpaid education, compensation, or pension benefits, an education or direct home loan in default, an outstanding indebtedness resulting from payment of a claim on a prior VA home loan, or a repayment plan for any of these debts that is current, Then one of the following must accompany the loan package: evidence of payment in full of the debt, or evidence of a current payment plan acceptable to VA and evidence that the Veteran executed a promissory note for the entire debt balance. VA may find a repayment plan acceptable if: the Veteran has been satisfactorily making payments on a repayment plan in effect prior to the lender’s inquiry, the Veteran’s overall credit history and anticipated financial capacity after the proposed loan is made indicate a reasonable likelihood that the repayment plan will be honored and the outstanding amount of indebtedness is not so large that it would prevent payment in full, within a reasonable period (approximately 1 year), or the case involves unusually meritorious circumstances. Examples Consideration would be given to a Veteran with an outstanding/excellent credit history and adequate income whose debt balance is too large to be reasonably paid out in less than 18 months to 2 years. VA will offer special consideration to a Veteran’s claim that he or she was not previously aware of an overpayment of benefits. c. What is the Credit Alert Verification Reporting System (CAIVRS) CAIVRS is a Department of Housing and Urban Development (HUD) maintained computer information system which enables participating lenders to learn when a borrower has previously defaulted on a federally-assisted loan. More information can be found at: http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/caivrs The database includes default information from the Department of Agriculture, Department of Education, Department of Justice, HUD, Small Business Administration, Federal Deposit Insurance Corporation, and VA. The VA default information included in the database relates to: overpayments on education cases, overpayments on disability benefits income, and claims paid due to home loan foreclosures which resulted in a debt of the government (Generally type 2 VA loans). CAIVRS Procedures A CAIVRS inquiry must be performed for all borrowers and co-borrowers (Veteran or non- Veteran) on all VA loans, including IRRRLs. The one exception to this policy is that CAIVRS is not required for non-purchasing spouses in community property states. VA assigns a 10-digit VA lender identification number (ID) to each new lender, then automatically forwards the ID number to HUD with a request to grant the lender CAIVRS access. The lender can begin accessing CAIVRS usually between 7 to 10 business days after receiving its VA ID number assignment. To register for CAIVRS access for first time users, please use the following link: https://entp.hud.gov/idapp/html/f57register.cfm. Please direct questions concerning problems encountered with accessing CAIVRS to caivrs_admin@hud.gov. If the borrower(s) is found to have a delinquent federal debt through CAIVRS, the validity and delinquency status of the debt should be verified by contacting the creditor agency using the contact phone number and case number reflected on the borrower’s CAIVRS report. The creditor agency that is owed the debt can verify that the debt has been resolved. Documentation should be included in the loan file and an explanation must be provided on VA 26-6393, Loan Analysis. It is not necessary for CAIVRS to update the number if documentation is included in the loan file. Once screening is complete, enter the CAIVRS confirmation code on VA 26-6393, Loan Analysis, in the space to the right of the “no” block in item 46 for purchase and refinances. For IRRRLs, enter the code on VA Form 26-8923, IRRRL Worksheet, in the Notes section. d. Borrower with Presently Delinquent Federal Debts When CAIVRS or another source indicates that the borrower has a delinquent Federal debt, the following steps must be taken: Suspend processing of the loan application to determine the reason for the non “A” number. Give full consideration to the CAIVRS information, and any subsequent clarifying information or documentation provided, in applying VA credit standards. Any non “A” number received does not automatically disqualify a Veteran from using their home loan benefit; however, the lender must document and justify the approval. See Topic 7, subsection b of this chapter for documentation and explanation requirements. If a previous VA loan is involved that resulted in a debt to the government (due to foreclosures, short sale, deed in lieu, or other), the borrower may contact the VA Debt Management Center at 1-800-827- 0648 or at dmc.ops@va.gov to make arrangements to repay the debt. Generally, only type 2 VA loans (fifth digit of the VA loan number) result in a debt to VA and are reported. The Veteran’s entitlement cannot be restored until the debt to VA is paid in full. If the fifth digit of the previous loan number is a type 6 VA loan, there is generally a loss to the government and the loss is not reported to CAVIRS. A loss to VA does not need to be repaid; however, the Veteran’s previously used entitlement to guaranty the previous VA loan is not restored until the loss is paid in full. Each agency has their timeliness requirements before removing a non “A” CAVIRS finding. This does not preclude the Veteran or borrower from receiving a VA loan if credit standards are met for VA loans. See Topic 4.07b (13 and 14) of this Chapter for guidelines after a bankruptcy or foreclosure. Example: A borrower suffered a loss on a FHA loan home loan 2 years ago. While HUD has not removed the CAIVRS finding as the 3-year waiting period has not passed for FHA, the lender is eligible to continue processing a VA loan without an “A” CAIVRS finding due to the borrower(s) meeting VA credit guidelines for foreclosures and documented in the loan file. CAIVRS information is only for the lender’s and borrower’s use in processing the loan application. Only those persons having responsibility for screening borrowers and/or co- borrowers may use CAIVRS. Any other use is unauthorized. e. Treatment of Federal Debts A borrower(s) cannot be considered a satisfactory credit risk if he or she is presently delinquent or in default on any debt to the Federal Government until the delinquent account has been brought current or satisfactory arrangement have been made between the borrower and the Federal agency. Example: A borrower has delinquent taxes and payments have not been made for several years. The establishment of a payment plan after the CAVIRS finding has been addressed may not be sufficient to show a satisfactory payment arrangement to repay the obligation. A borrower(s) cannot be considered a satisfactory credit risk if he or she has a judgment lien against his or her property for a debt owed to the Government until the judgment is paid or otherwise satisfied.

Source: VA Lenders Handbook (VA Pamphlet 26-7), Chapter 4, Topic 6 — Additional documentation for a borrower(s) employed in building trades · source URL · snapshot f57e3f56f604f5a3