Written By: Bonnie Wilt-Hild, Op-Ed Writer
Just want to bring to everyone's attention something that could be extremely useful in the market today and that is the VA cash out refinance program. As we are all aware, FHA lowered the maximum LTV on cash out refinance transactions beginning for all case numbers ordered on or after April 1, 2009 to 85% from 95% which caused some low groans in the industry. VA on the other hand is still out there allowing 100% LTV on cash out refinance transactions and better than that, investors in the secondary market are still purchasing them.
In addition, VA has moved to guarantying 25% of the Freddie Mac conforming loan limit for the county in which the property is located so there are no longer and crazy calculations to appease the investors in the secondary market where these types of transactions are concerned. Considering this, if a lender has the ability to originate VA insured mortgages a 100% cash out refinance transaction for eligible veterans should not be a hard sell.
When calculating the maximum mortgage under these circumstances, a lender can lend up to 100% of the appraised (NOV) value plus any EEM improvements as well as the VAFF. In others words the borrower would have the full benefit of 100% of the appraised value and the VAFF would be financed on top of the for a total LTV of say 103.30% assuming the case was a subsequent use case. Processing procedures are the same for this type of transaction, full or alternative documentation standards as are all government loan transactions so there are no additional items that need to be addressed. In short, if your firm has an investor who will purchase them, they any approved VA broker or lender can originate them.
Further guidance where the 100% LTV guidelines are concerned can be found in the VA Lenders Handbook, which is located on VA’s website. Be sure however to check with your investors to make sure that they will purchase them. Most of the investors that I am working with at this point still have the minimum 620 credit score requirement in place for the VA as well as FHA and the rule appears to apply to the 100% cash out transactions as well so make certain you review any other additional guidelines that might impede your ability to get them sold.
For those of you brokers out there that are not signed up with VA yet, well now might be a good time to get the ball rolling. Broker approval where VA is concerned is actually pretty simple, you just need a sponsoring lender to provide you with evidence (a letter) indicating that they will be sponsoring you where the VA Home Loan Guaranty program is concerned and you mail this off with a $100.00 check as a couple of other things and you should have your approval in about a month. Hope the heads up was helpful and as always, happy underwriting.
About The Author
Bonnie Wilt-Hild - As an op-ed writer, Bonnie has held many mortgage underwriting positions, including Senior FHA DE Underwriter for a major lending institution. With over 25+ years of senior-level FHA/VA Government underwriting experience, Bonnie is considered the "Queen of FHA Loans".