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VA Implements New Act

Dear Valued Clients –

VA announced in Circular 26-19-23 the implementation of the Blue Water Navy Vietnam Veterans Act of 2019, which was signed by the President on June 25, 2019. Provisions of the Act will apply to all loans closed on and after January 1, 2020. 

Summary of Policy Changes: 

  • Adjustment of Loan Limit:The Act expands maximum guaranty amounts for purchase, construction, and cash-out refinance loans greater than the Freddie Mac conforming loan limit (CLL), in certain circumstances. However, the Act does not change the maximum amount of guaranty entitlement available to Veterans for loans equal to or less than $144,000 regardless of the Freddie Mac CLL.
    • Freddie Mac CLLs are no longer a factor for Veterans with full entitlement. For Veterans with full entitlement, the maximum amount of guaranty for a loan above $144,000 is 25 percent of the loan amount, regardless of the Freddie Mac CLL.
      • Example: Veteran has full entitlement available and the loan amount is $1,200,000.
        • $1,200,000 x 25% = $300,000 [Maximum Guaranty and Entitlement Available] 
    • For Veterans who have previously used entitlement and such entitlement has not been restored, the maximum amount of guaranty is the lesser of 25 percent of the loan amount OR the maximum amount of guaranty entitlement available. The maximum amount of guaranty entitlement is 25 percent of the Freddie Mac CLL, reduced by the amount of entitlement previously used (not restored) by the Veteran.
      • Example: Loan amount is $765,000; Entitlement used (not restored) is $70,000; Freddie Mac CLL is $724,000.
        • $765,000 x 25% = $191,250 [25% of Loan Amount]
        • ($724,000 x 25%) - $70,000 = $111,000 [Guaranty Entitlement Available]
        • $111,000 / $765,000 = 14.51% [Maximum Guaranty]
    • Interest Rate Reduction Refinance Loans (IRRRLs). VA will continue to guarantee 25 percent of the loan amount without regards to the Veteran’s available entitlement and/or Freddie Mac CLLs. See Lenders Handbook, M26-7, Chapter 6 for additional information. 

  • Adjustment of Loan Fees: The Act amends 38 U.S.C. § 3729(b)(2) by replacing the loan fee / funding fee table. The below table summarizes funding fee rates for the most common types of loans for all Veterans (Regular Military, Reserves, and National Guard) for loans closed on or after January 1, 2020, and before January 1, 2022.  

Type of Loan

Downpayment

Percentage for First Time Use

Percentage for Subsequent Use

Purchase and Construction Loans

None

5% but less than 10%

10% or more

2.30%

1.65%

1.40%

3.60%

1.65%

1.40%

Cash-Out Refinance Loans

n/a

2.30%

3.60%

IRRRLs

n/a

0.50%

0.50%

Loan Assumptions

n/a

0.50%

0.50%

  • Waiver of Fees for Purple Heart Recipients: The Act amends 38 U.S.C. § 3729(c) by adding a waiver of the VA funding fee for members of the Armed Forces who are serving on active duty and provide, on or before the date of loan closing, certificate or military orders of having been awarded the Purple Heart. Further guidance on what additional evidence may establish eligibility for the waiver and the process for obtaining a COE with funding fee exempt status will be discussed in the final Circular to be published later this calendar year. 

  • VA Appraisals: The Act amends 38 U.S.C. § 3731(b) by authorizing VA to establish policies that enable VA-designated appraisers to rely on third-parties for appraisal related information. VA Fee Panel appraisers are not authorized to use third-party information before policy is established by VA. Any VA Fee Panel appraiser found not personally reviewing the subject property is in violation of VA policy and Uniform Standards of Professional Appraisal Practice (USPAP) and may result in disciplinary action, including removal from the panel. 

  • VA System Enhancements: VA will incorporate the requisite changes to the VA portal to support the Act. VA system enhancement release notes will be published prior to the implementation date of the enhancement. 

  • Rescission: This Circular is rescinded October 1, 2020. 

For more information, see VA Blue Water Maximum Loan Amount and Entitlement Worksheet Instructions.

Please contact your Regional Account Manager should you have any questions related to this Client Announcement.

 

 

 

 

 

2019-12-13