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Financial Services Law Insights and Observations

VA consolidates and clarifies IRRRL guidance

Agency Rule-Making & Guidance Federal Issues Ginnie Mae Refinance IRRRL EGRRCPA

Agency Rule-Making & Guidance

On August 8, the Department of Veterans Affairs (VA) issued Circular 26-19-22, which consolidates and clarifies guidance related to Section 309 of the Economic Growth, Regulatory Relief, and Consumer Protection Act, Public Law No. 115-174, and updates guidance regarding loan seasoning requirements based on the “Protecting Affordable Mortgages for Veterans Act of 2019,” Public Law No. 116-33. (Covered by InfoBytes here and here.) The Circular states that a lender (broker or agent included), a servicer, or issuer of an Interest Rate Reduction Refinance Loan (IRRRL) must, among other things:

  • Recoup Fees. Certify that certain fees and costs of the loan will be recouped on or before 36 months after the loan note date;
  • Net Tangible Benefit. Establish that when the previous loan had a fixed interest rate (i) the new fixed interest rate is at least 0.5 percent lower, or (ii) if the new loan has an adjustable rate, that the rate is at least 2 percent lower than the previous loan. In each instance, the lower rate cannot be produced solely from discount points except in certain circumstances;
  • Loan Seasoning. Follow a seasoning requirement for all VA-guaranteed loans. A loan cannot be refinanced until (i) the date on which the borrower has made at least six consecutive monthly payments on the loan being refinanced, and (ii) the date that is 210 days after the first payment due date of the loan being refinanced; and
  • Disclosure. Present a comparison of the refinance loan to the original loan within two business days from the initial loan application and again at closing that includes information about the overall cost of refinance. The Circular offers a sample comparison statement in Exhibit C.
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