VA Refinance Cash Out Updates Review March 13, 2019 Note, these are informational webinars only and should be considered best practices for doing business with Note, these are informational webinars only and should be considered best practices for CMS and should not be relied upon for legal or compliance advice. Please contact your CMS Account Executive 866.453.2400 | www.CarringtonWholesale.com doing business with CMS and should therefore not be relied upon for legal or compliance with any questions. advice. Please contact your CMS Account Executive with any questions. 1 Confidential & Proprietary Internal Use Only All Rights Reser serve ved. d. Carr rrington gton Mort rtgage gage Holdi ldings, gs, LLC and its affiliat ates
OPENING NOTES Before We Get Started To ask a question, Use the numbers on please use your Questions Panel your panel Ask a Question in the GoTo Panel We will hold all questions until the end! 866.453.2400 | www.CarringtonWholesale.com 2
Webinar HOSTS Karen O’Brien Vice President, Credit Karen Weidenbach Director, Training and Development Mike Suchy Regional Sales Manager Patty Cochran Sr. Account Executive 866.453.2400 | www.CarringtonWholesale.com 3
OBJECTIVES • Review Recent Changes to VA Cash Out Rules • Break Down Net Tangible Benefit Updates • Review the New Required Comparison Certification Disclosure 866.453.2400 | www.CarringtonWholesale.com 4
VA Announcement of Changes Ensures Veterans have access to responsible credit options for refinancing and to provide Veterans with sufficient information on the impact of a refinance loan on their current and future financial position. 866.453.2400 | www.CarringtonWholesale.com 5
What Has Changed? Ref. Circular 26-18-30 Effective for all VA Cash-Out Loan Applications Taken On or After February 15, 2019 VA Announced New Policies to Guarantee Cash Out Refinance Loans • Clarified three specific categories of refinance loans • LTV can no longer exceed 100% for refinances • Net Tangible Benefit requirements are updated (Cash Out is no longer a NTB!) • New comparison certification must be provided no later than the 3 rd business day after the application date, and at closing • Loan Seasoning Required for all Refinance Loans (Ginnie Mae Criteria) • Fee Recoupment rules apply to for VA to VA Rate/Term Refinance 866.453.2400 | www.CarringtonWholesale.com 6
Loan Categories Clarified 1 . VA IRRRL Rate Reduction VA to VA Refi • Not impacted by these changes – future changes are possible • 2. Type I Cash Out Refinance New Loan Amount (including VA FF) does NOT exceed payoff amount of current loan • Essentially Rate/Term Full Doc • Less than 1% of VA’s volume • Impacted by these changes • 3. Type II Cash-Out Refinance New Loan Amount (including VA FF) DOES exceed payoff amount of current loan • Impacted by these changes • 866.453.2400 | www.CarringtonWholesale.com 7
TLTV Changes and Calculation TLTV Can Not Exceed 100% of the Reasonable Value of the Property This includes VA Funding Fee and any Financed Fees and Charges • Calculation: Divide the total loan amount (including VA FF, if applicable) by the reasonable value on the Notice of Value of the property Must be Less than or Equal to 100%! 866.453.2400 | www.CarringtonWholesale.com 8
Seasoning Rules CMS will Apply to All VA Refinance Loans Changed – Loans Being Refinanced within 1 year from closing date: • 1 Year Payment History Required (if seasoned under 1 year) o New Lender must obtain a payment history/ledger from the existing servicing lender documenting all payments o Credit Report Supplement acceptable if detailed payment history Not Changed – All VA Refi Loans Minimum Seasoning: • A loan is considered seasoned on the later date of: o 210 days after the first monthly payment is made o Six monthly payments have been made on the loan Ginnie Mae Requirement – CMS will Apply to all VA Loan Types 866.453.2400 | www.CarringtonWholesale.com 9
Fee Recoupment Rule Type pe I Ca I Cash sh Ou Out V t VA to V to VA Ref efi i Onl nly All fees, expenses, & closing costs included in the loan amount and paid outside of closing: • Must be recouped through lower principal and interest (P&I) payments • Within 36 months from the date of closing The lender must certify to VA that the fee recoupment requirement is met 866.453.2400 | www.CarringtonWholesale.com 10
Net Tangible Benefit Break Down • All cash-out refinancing loans must satisfy at least one of the following 8: o Eliminate monthly mortgage insurance o Decrease the loan term o Decrease monthly (P&I) payments o Reduce the interest rate o Refinance from an adjustable-rate loan to a fixed-rate loan o New TLTV equal to or less than 90% ( New ) o Refinance an interim construction loan ( New ) o Increase monthly residual income ( New ) * Only Need 1 to qualify - but Must Include ALL that Apply of the 8 for VA (No More One and Done) 866.453.2400 | www.CarringtonWholesale.com 11
*Increased Residual Income NTB Notes: “Increased Monthly Residual Income” Means: The Veteran is reducing consumer debt, resulting in improved residual income If the veteran is increasing their mortgage balance to pay off consumer debt, w we must show an improved residual income with the increased PITI Note! Example: Current PITI = $1000 Current Monthly Consumer Debt = $1500 New Loan PITI = $1200 New Monthly Consumer Debt = $1000 w/Pay Offs Difference PITI = $200 Reduced Monthly Consumer Debt = $500 Paying off other debt with monthly payments of $500 improved residual income by $300 866.453.2400 | www.CarringtonWholesale.com 12
VA Cash-Out Comparison Certification (New Disclosure) Must be Provided within 3 Biz Days of Loan Officer 1003 Signature AND at Closing 1. “Estimated” delivered with Initial Disclosures must be returned signed prior to FCI * 2. “Final” delivered with Closing Package must be signed at closing Both must show at least 1 Net Tangible Benefit to the Veteran! Purpose: To clearly identify all possible NTBs, and compare to the existing loan ! The following information must be compared for the existing and new loan for all cash-out refis: New Loan amount vs. Payoff amount Payment Amount Loan type Interest rate Loan term Total amount the Veteran will have paid after making all payments as scheduled LTV Home equity being removed from property 866.453.2400 | www.CarringtonWholesale.com *FCI = Final Conditions In 13
VA Cash-Out Comparison Certification “Estimate” Date within 3 Business Days of 1003 Application (LO Signature Date) “Final” or “Estimate” Indicated on Compares Existing Loan to New Loan Fillable PDF Defines All Possible Benefits “Estimate” must be in the file signed prior to Final Conditions In “Final” must be signed at closing 866.453.2400 | www.CarringtonWholesale.com 14
Certification Fillable PDF for CMS Partners Wholesale Brokers Scroll! 866.453.2400 | www.CarringtonWholesale.com 15
Certification Fillable PDF for CMS Partners Correspondent Sellers 866.453.2400 | www.CarringtonWholesale.com 16
Questions! Now is the Time… To ask a question, Use the numbers on please use your Questions Panel your panel Ask a Question in the GoTo Panel 866.453.2400 | www.CarringtonWholesale.com 17
THANK YOU 866.453.2400 | www.CarringtonWholesale.com 18
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