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VA_Guidelines.txt
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caf8a820-77ab-41f3-b419-cc1fd08551c5
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., subchapter 3710(b)(7)(B), VA may also guarantee a loan to refinance the unpaid balance under a land sale contract for the purchase of improved residential property, provided: · the Veteran will obtain title to the property described in the contract upon closing of the loan, and · the obligation to be guaranteed is in the form of a mortgage note or bond secured by a mortgage or other acceptable
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VA_Guidelines.txt
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a8a110f1-3816-4320-af8a-2c23101e1cfd
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or bond secured by a mortgage or other acceptable form of security instrument other than the existing land sale contract
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VA_Guidelines.txt
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0110b2af-ec90-409d-8d67-547ce8c68148
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. c.
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VA_Guidelines.txt
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d5de7f08-5bbf-4625-b1ed-d09ed5588aef
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Eligibility of Option Contracts Option contracts are not eligible for guaranty; however, VA may guarantee a loan made for the unpaid purchase price of residential property when the option is exercised
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VA_Guidelines.txt
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e6c48f33-f7d6-4fb5-b9b8-f0d6e6bea7f2
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. 9-7 VA Lenders Handbook M26-7 Chapter 9: Legal Instruments, Liens, Escrows, and Related Issues Topic 5: Secondary Borrowing Change Date: July 30, 2019 · This chapter has been revised in its entirety. a.
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VA_Guidelines.txt
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8862066e-c9a5-4b65-828f-c43a20e5c059
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What is Secondary Borrowing For purposes of this topic, secondary borrowing refers to the Veteran obtaining a second mortgage simultaneously with a VA-guaranteed first mortgage, both secured by the same property.
This does not include HAPs (see Topic 9, Item 13 of this chapter). b.
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VA_Guidelines.txt
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c02bff62-92f8-4b6a-a107-3276783a6c86
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Policy Secondary borrowing is acceptable as long as: · the Veteran is not placed in a substantially worse position than if the entire amount borrowed had been guaranteed by VA, · the loan (in conjunction with the first mortgage) may not exceed the NOV, and · the requirements detailed below are met.
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VA_Guidelines.txt
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Continued on next page 9-8 VA Lenders Handbook M26-7 Chapter 9: Legal Instruments, Liens, Escrows, and Related Issues Topic 5: Secondary Borrowing, continued c.
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VA_Guidelines.txt
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4bdd9a68-1970-4520-b0e3-9fb1b2af1340
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Requirements The second mortgage must meet the following requirements: Table 1: Secondary Borrowing Requirements Factor Requirement Documentation The lender must submit documentation disclosing the source, amount, and repayment terms of the second mortgage and agreement to such terms by the Veteran and any co-borrowers.
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VA_Guidelines.txt
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570ca6a2-db0e-44de-87fa-0d7df10e3fd5
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Lien Position The second mortgage must be subordinated to the VA-guaranteed loan, that is, the second mortgage must be in a junior lien position relative to the VA loan.
Allowable Purposes Proceeds of the second mortgage may be used for a variety of purposes, including, but not limited to: • closing costs, or • a downpayment to meet secondary market requirement of the lender.
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VA_Guidelines.txt
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6435eac6-e1bf-4723-9528-3a019a357890
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But may not be used to cover any portion of a downpayment required by VA to cover the excess of the purchase price over VA’s reasonable value.
Cash back There can be no cash back to the Veteran from the VA first mortgage or a second mortgage obtained simultaneously, except any cash the Veteran paid in the transaction.
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VA_Guidelines.txt
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f482965b-1eaa-426e-8547-30a9cbe32dac
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Underwriting The Veteran must qualify for the second mortgage which is underwritten as an additional recurring monthly obligation.
Interest Rate The rate on the second mortgage may exceed the rate on the VA- guaranteed first; however, it may not exceed industry standards for second mortgages.
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VA_Guidelines.txt
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2089dc19-f20a-4f41-a45b-38763bf7c408
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Assumability The second mortgage should not restrict the Veteran’s ability to sell the property any more than the VA first mortgage.
That is, it should be assumable by creditworthy purchaser(s).
Grace Period There should be a reasonable grace period before.
A late charge comes due, or commencement of foreclosure proceedings in the event of default.
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Continued on next page 9-9 VA Lenders Handbook M26-7 Chapter 9: Legal Instruments, Liens, Escrows, and Related Issues Topic 5: Secondary Borrowing, continued d.
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VA_Guidelines.txt
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88c302bb-d9ba-4bdf-8b73-7e76accc206c
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Unusual Terms Second mortgages bearing unusual terms, interest rates, etc., are sometimes offered by parties such as: · federal, state, or local government agencies, · non-profit organizations, · private individual, · builders, or · sellers. e.
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VA_Guidelines.txt
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f59f5605-391a-4cce-b69f-2eb87ecb4103
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VA Standards Consult a VA RLC with jurisdiction over the state where the property is located if it is unclear whether the terms of the second mortgage meet VA standards or if there may be a reasonable basis for VA to make an exception to the standards detailed in this topic
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VA_Guidelines.txt
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2572904a-9152-47ce-a970-f20688a20791
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. 9-10 VA Lenders Handbook M26-7 Chapter 9: Legal Instruments, Liens, Escrows, and Related Issues Topic 6: Purchase of Property with Encumbrances Change Date: July 30, 2019 · This chapter has been revised in its entirety. a.
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VA_Guidelines.txt
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dcd8888a-4733-4621-acc0-0b850e54ee07
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Policy Pursuant to 38 U.
S.
C. § 3703(d)(3)(A), a VA-guaranteed loan must be secured by a first lien on the realty.
Lenders are responsible for properly securing the first-lien position of a VA- guaranteed loan.
Any existing liens on the property must be paid off or subordinated to the VA loan. b.
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VA_Guidelines.txt
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ad758be0-96e9-442b-a8bc-cac728d79ca1
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Eligibility A loan to purchase property subject to unpaid delinquent taxes, special assessments, prior mortgage indebtedness, or other obligations secured by effective liens that the Veteran agrees to pay or which constitute encumbrances on the property is not eligible for guaranty, if the loan amount, plus these unpaid obligations, exceeds VA’s reasonable value of the property
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VA_Guidelines.txt
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91888dff-dcfe-41f7-a0ea-9772dbb66ca6
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. 9-11 VA Lenders Handbook M26-7 Chapter 9: Legal Instruments, Liens, Escrows, and Related Issues Topic 7: Liens Covering Community-Type Services and Facilities Change Date: July 30, 2019 · This chapter has been revised in its entirety. a.
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VA_Guidelines.txt
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e8898f5d-b837-4ca9-a8b0-729786ff7da6
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Policy Loans for the purchase and construction of homes will be first liens, subject only to taxes, special assessments, and ground rents.
VA will not approve superior liens in favor of private entities unless they: · are legally or practically necessary, and · result in no prejudice to the Veterans or the Government. b.
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VA_Guidelines.txt
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a31ac981-d38b-4b4b-924e-6c709f56ead4
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Requirements The lender must obtain VA prior approval of liens held by private parties which are superior to VA home mortgage liens.
Liens held by mandatory membership home associations in planned unit developments are not addressed in this topic.
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VA_Guidelines.txt
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8a9bcda9-f68a-4b4f-aa14-b9717e46229a
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The lender must demonstrate that: · it is not legal or practical to subordinate the superior lien to the VA mortgage, · there is a viable rationale for not subordinating the superior lien, · the superior lien will not prejudice Veterans or the Government, and · if periodic charges or assessments are involved, the amounts are reasonable and limits on the amounts have been established. c.
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VA_Guidelines.txt
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4fe936cb-1a06-4f09-9c7c-c30f2eb9ea2c
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VA Approval Always obtain VA approval before the lien is recorded.
Builders and developers should be aware that if they plan to market properties through VA financing, covenants creating superior liens should not be recorded without VA approval.
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VA_Guidelines.txt
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367dea93-20ed-4058-828b-0953e760cec8
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Continued on next page 9-12 VA Lenders Handbook M26-7 Chapter 9: Legal Instruments, Liens, Escrows, and Related Issues Topic 7: Liens Covering Community Type Services and Facilities, continued d.
Examples VA may find the following types of superior liens acceptable (38 C.
F.
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VA_Guidelines.txt
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8aefb662-3949-4a5b-8929-60480093c671
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R. 36.4356): · Liens for taxes, assessments, and ground rents. · Liens by private entities to secure assessments or charges for municipal- type services and facilities which: □ are clearly governmental in nature, and □ a municipality could support out of public tax revenue if it provided the service, but the municipality does not provide them
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VA_Guidelines.txt
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76b1a45c-24f2-4a35-9ce8-d11e9142441d
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. · Liens to implement or augment a service or facility if the government’s provision of such service or facility is inadequate. · Liens for services or facilities in locations where the services or facilities are adequately supplied by local government generally will not be approved by VA
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VA_Guidelines.txt
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73ded3b5-5f73-4ce9-8a86-2fcce55492ab
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. · Liens created by recorded covenants in favor of private entities to secure the homeowner’s share of the costs of the management, operation, maintenance, services, or programs for the benefit of a development
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VA_Guidelines.txt
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1a903f97-8dd2-4949-9ca3-fd93dff5e350
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. · Liens (on existing properties) previously retained by trustees, improvement associations or other nongovernmental entities for community-type services and facilities in a given area or subdivision, such as maintenance of streets, parkways, playgrounds, water systems, sewage systems, police and fire protection, or street lighting
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VA_Guidelines.txt
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665da024-2f1f-43ef-8a1e-db56370bf1e3
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. 9-13 VA Lenders Handbook M26-7 Chapter 9: Legal Instruments, Liens, Escrows, and Related Issues Topic 8: Power of Attorney (POA) Change Date: July 30, 2019 · This chapter has been revised in its entirety. a.
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VA_Guidelines.txt
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a69cf189-b3d0-4dcf-9d33-18d194491da8
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Policy VA will allow a Veteran to use an attorney-in-fact to execute any documents necessary to obtain a VA-guaranteed loan.
This enables active duty servicepersons stationed overseas, and other Veterans who cannot be present to execute loan documents, to obtain VA loans. b.
Requirements The Veteran must execute a general or specific POA which is valid and legally adequate.
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VA_Guidelines.txt
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80401290-fc0c-41d2-90d3-15a01993e470
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The Veteran’s attorney-in-fact (as specified in the POA) must use this POA to apply for a Certificate of Eligibility (COE) and initiate processing of a loan on behalf of the Veteran.
A military POA is considered a general POA and is only valid during the Active Duty Servicemembers’ (ADSM) period of deployment, not to exceed 1 year.
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VA_Guidelines.txt
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e024cb86-bc0d-4f94-9919-ea94ea69048c
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To complete the loan transaction using an attorney-in-fact, ensure that the general or specific POA complies with state law to the extent that: · the mortgage can be legally enforced in that jurisdiction, and · clear title can be conveyed in the event of foreclosure.
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VA_Guidelines.txt
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d2dcc5dc-4ea3-453b-8895-cb0095782479
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To complete the loan transaction using an attorney-in-fact, VA also requires the Veteran’s written consent to the specifics of the transaction either through a general POA or a specific POA.
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VA_Guidelines.txt
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30b06e7d-3aaa-481c-ab52-6c1d9850f566
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General POA - The Veteran’s signature on both the sales contract and the Uniform Residential Loan Application, as long as the Veteran’s intention to obtain a VA loan on the particular property is expressed somewhere in those documents.
Specific POA.
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VA_Guidelines.txt
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b48b59a4-152e-40c5-b257-67c6500975cf
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A specific power of attorney or other document(s) signed by the Veteran, which encompasses the elements below. · Entitlement: A clear intention to use all or a specified amount of entitlement. · Purpose: A clear intention to obtain a loan for purchase, construction, repair, alteration, improvement, or refinance. · Property Identification: Identification of the specific property
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VA_Guidelines.txt
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7047a1f8-ccfc-4c79-82ab-85545c23ea39
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. · Price and Terms: The sales price, if applicable, and other relevant terms of the transaction. · Occupancy: The Veteran’s intention to use the property as a home to be occupied by the Veteran (or other applicable VA occupancy requirement or spouse and/or guardian for dependent child(ren)).
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VA_Guidelines.txt
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e6a4d18a-37c8-49ab-9fb3-270bf4af9d49
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Continued on next page 9-14 VA Lenders Handbook M26-7 Chapter 9: Legal Instruments, Liens, Escrows, and Related Issues Topic 8: Power of Attorney (POA), continued c.
Veteran’s Status as Alive and not MIA The lender must always verify that the Veteran is alive at the time of loan closing, whether or not the Veteran is an ADSM in the military.
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VA_Guidelines.txt
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09c98d5f-ff0f-4f98-b658-a5a8b2bb5de9
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If on active military duty, the Veteran must not be missing in action (MIA).
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VA_Guidelines.txt
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efe2ca1e-cce1-43ff-8c0c-ced17134fa27
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The lender must make the following certification at the time of loan closing: “The undersigned lender certifies that written evidence in the form of correspondence from the Veteran or, if on active military duty, statement of his or her commanding officer (including statement of person authorized to act for said officer), affirmatively indicating that the Veteran was alive and, if the Veteran is
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VA_Guidelines.txt
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26851859-251b-413e-9047-0371c91efab7
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that the Veteran was alive and, if the Veteran is on active military duty, not missing in action status on (date), was examined by the undersigned and that the said date is on or subsequent (not prior) to the date the note and security instruments were executed on the Veteran’s behalf by the attorney-in-fact
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VA_Guidelines.txt
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7db74630-ccba-4de3-b873-d1a35e5a0dd1
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.” VA may deny guaranty on a loan if the lender failed to properly verify the Veteran’s status and the Veteran was deceased (or MIA) at the time the loan was closed. d.
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VA_Guidelines.txt
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2cb7670c-f6cf-4e74-8847-f3cdda86ccb5
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Digital Signature Digital signatures can be accepted as an original signature or wet signature as defined by the Electronic Signatures in Global and National Commerce Act, commonly referred to as the E-sign Act. e.
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VA_Guidelines.txt
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f6053c81-5f27-465d-8635-aee504af25fc
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Prior Approval Loans VA will issue a Certificate of Commitment only if the Veteran has executed a valid and legally adequate POA and consented to the specific transaction (as described under the “Requirement” heading).
If VA has information that the Veteran is MIA or deceased, VA will not issue a commitment.
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VA_Guidelines.txt
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07f20d31-6754-4457-b286-6fbfee5cb94d
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The Certificate of Commitment issued in POA cases contains the condition indicated under “Conditional Commitments” in Chapter 5 of the Lender’s Handbook. f.
Hardship Exceptions VA may consider an exceptional case if serious hardship may result due to the time or other pertinent factors involved in obtaining the Veteran’s consent to the specific transaction.
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VA_Guidelines.txt
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dadd6679-df4f-4a71-86e0-81b5a0ebbdc0
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Submit the facts of the case to the VA RLC where the property is located for a determination. 9-15 VA Lenders Handbook M26-7 Chapter 9: Legal Instruments, Liens, Escrows, and Related Issues Topic 9: Lender Review of Sales Contracts on Proposed Construction Change Date: July 30, 2019 · This chapter has been revised in its entirety. a.
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VA_Guidelines.txt
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e5e0e948-4907-4c56-aec6-073a9eec9777
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Procedures Prior to requesting an appraisal of proposed construction, the lender must review the sales contract or purchase agreement on the property.
The lender must determine whether the contract: · is acceptable, and · does not contain unfair contractual provisions. b.
Revisions The lender must request revisions of an unacceptable contract by the parties to the transaction.
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VA_Guidelines.txt
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57e9eeb3-8a68-4e47-a75b-b127d9a1b4be
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The lender should report unacceptable contract practices by a VA program participant (such as a builder) to VA if: · the program participant is engaged in practices which seriously prejudice the interests of Veterans or the Government, or · the program participant repeatedly uses unacceptable contracts or contracts containing unfair contractual provisions, and is uncooperative in changing such
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VA_Guidelines.txt
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provisions, and is uncooperative in changing such practices
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.
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VA_Guidelines.txt
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bb90d11e-c130-4846-b5a2-416355446e38
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Continued on next page 9-16 VA Lenders Handbook M26-7 Chapter 9: Legal Instruments, Liens, Escrows, and Related Issues Topic 9: Lender Review of Sales Contract on Proposed Construction, continued c.
Closing The closing of the loan indicates that the lender has determined the contract is acceptable. d.
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VA_Guidelines.txt
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c9926b90-c6b3-4594-b58e-4d8df6d54e3d
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Examples of Unfair Contract Provisions or Features Table 2: Description of Unfair Contract Provisions or Features Example Unfair Contract Provision or Features 1 Provisions allowing the downpayment or earnest money of the purchaser to be forfeited or retained as liquidated damages if the purchaser cannot obtain VA financing
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VA_Guidelines.txt
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19c7042f-2638-452c-8083-c4ffcc676fa7
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. 2 Inclusion in a lump-sum contract of an “escalator clause” which obligates the purchaser to pay a higher price in the event of increased costs for labor, material, or other items prior to delivery of title unless accompanied by a proviso which gives the purchaser the option of canceling the contract and obtaining a refund of the moneys paid, if the increased price is not acceptable to the
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VA_Guidelines.txt
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if the increased price is not acceptable to the buyer/Veteran
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VA_Guidelines.txt
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9b1e135c-5793-4b7d-a96d-5625b15b7346
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. 3 Provisions which infringe upon the usual or customary freedom or right of an owner to sell a property, except as allowed under 38 C.
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VA_Guidelines.txt
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3b8f908a-2c8c-42a3-9acf-dc0e58fbf7c9
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F.
R. 36.4308(e) and 36.4354(b)(5).
For example, a provision that the purchaser will give a stated real estate agency an exclusive listing if he or she resells the property within 2 years after acquisition, or will give the seller or another a first option to buy other than in a cooperative housing project or as provided in 38 C.
F.
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VA_Guidelines.txt
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3cbbea19-a26e-4fb4-8e08-f01ecf3cd49d
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F.
R. 36.4354(b)(5). 4 A requirement that purchasers waive or release any claim or right for nonperformance by the builder under the contract.
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VA_Guidelines.txt
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95a5690e-a256-4e45-95ae-563ea8545551
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This does not prevent a builder from obtaining a statement from the purchaser at closing that he or she has inspected the house and has not observed any unsatisfactory construction, nor does it prevent the builder from obtaining a release from the purchaser in settlement of a bona fide dispute 5 Omission of an accurate property description
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VA_Guidelines.txt
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8e82e54c-8ac0-4814-9009-f8caec9c3a13
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. 6 Omission of a provision specifying whether the builder or the Veteran is to be charged with any special assessments or improvement bonds.
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VA_Guidelines.txt
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60b70d5c-d392-4a66-bc21-1e8bfb98741d
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This includes those assessments or bonds which are payable in the future, for improvements included in the plans and specifications or commenced or completed at the time of closing, such as streets, sidewalks, curbs, gutters, and sewers
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VA_Guidelines.txt
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c0192746-1382-43d1-9fc8-9a66e13868c1
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. 7 Omission of a date for completion of proposed construction or failure to give the Veteran the option of canceling the contract and obtaining a refund of the deposit if the dwelling is not completed on a specified date or within a reasonable time
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VA_Guidelines.txt
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f3eee384-1f14-468e-bec0-d2137a9c05da
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. 8 Failure of a contract covering proposed construction to obligate the seller to complete the dwelling in substantial accordance with identified and definite plans and specifications
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VA_Guidelines.txt
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366999bc-f9ec-4671-8839-77656716b033
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. 9-17 VA Lenders Handbook M26-7 Chapter 9: Legal Instruments, Liens, Escrows, and Related Issues Topic 10: Escrow for Postponed Completion of Improvements Change Date: July 30, 2019 · This chapter has been revised in its entirety. a.
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VA_Guidelines.txt
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d9cad985-7118-4ceb-95ca-33e87ecd6b4a
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Policy In some instances, it may not be possible to complete certain items before the Veteran wishes to move into the property.
The escrow of funds can permit the Veteran-purchaser to gain occupancy of the dwelling prior to completion of certain items which must be postponed due to weather conditions or other circumstances.
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VA_Guidelines.txt
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18202a36-f7eb-44b9-ac25-72d20b95e8bf
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Such items include, but are not limited to: · walkways, driveways, and retaining walls, · exterior painting, · landscaping, and · garages. b.
Escrow of Funds to Complete Unfinished Work VA may permit the escrow of funds necessary to complete the unfinished work later, and still issue evidence of guaranty.
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VA_Guidelines.txt
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a953d4a3-4ced-4414-8e69-3b27e24ab2af
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An escrow involves the following: · withholding 1 1/2 times the dollar amount necessary to complete the postponed items (as estimated by a third party) from the proceeds due the seller at closing, · holding the escrowing funds in a proper, secure manner, and · releasing the funds once the postponed items have been satisfactorily completed. c.
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VA_Guidelines.txt
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68880163-af3e-4dbd-a257-e665e34b7da7
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Establishing an Escrow Fund To establish an escrow, the following must apply: · construction of the dwelling must be complete and the house must be suitable for immediate occupancy, · postponement of the improvements must be beyond the control of the builder/seller, · the duration of the postponement must not be unreasonable (usually 90 to 120 days), and · the amount escrowed must be at least 1
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VA_Guidelines.txt
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3511ee42-00ea-45bf-bf2b-d98ac77505e2
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and · the amount escrowed must be at least 1 1/2 times an estimate of the amount needed to complete the work
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VA_Guidelines.txt
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bdacb4d1-168b-4155-82ad-a96db275c2e2
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.
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Lenders are not required to escrow funds when: · the incomplete work is limited to the installation of landscaping features due to inclement weather (lawns, shrubbery, etc.), · the estimate of the cost to complete the work is not greater than $2,500, and · there is adequate assurance that the work will be completed timely and satisfactorily (usually 90 to 120 days).
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Continued on next page 9-18 VA Lenders Handbook M26-7 Chapter 9: Legal Instruments, Liens, Escrows, and Related Issues Topic 10: Escrow for Postponed Completion of Improvements, continued d.
General Procedures No prior approval of VA is required to escrow funds.
Lenders are responsible for establishing escrows in accordance with the guidelines presented in this topic.
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VA_Guidelines.txt
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0791ceaa-8bb9-44b4-85f9-a2971ef94df7
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Lenders are also responsible for assuring that the postponed work is completed.
Once the loan closes, VA will randomly monitor cases to ensure completion of escrowed items.
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VA_Guidelines.txt
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562097e2-6174-45d8-b3b8-31dd6a6266d0
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Table 4: Procedures for Escrows for Postponed Completion of Improvements Step Action 1 Close loan and escrow the required funds. 2 Upload the closed loan package into WebLGY for issuance of guaranty with: · lender evidence of an escrow agreement, or · a completed VA Form 26-1849, Escrow Agreement for Postponed Exterior Onsite Improvements
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VA_Guidelines.txt
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f13d28a2-e5b6-4281-9ce8-2ba0a9077a4b
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. 3 Release escrowed funds when work is satisfactorily completed, as evidenced by doing the following: · Complete VA Form 26-1839, Compliance Inspection Report, indicating the postponed work has been satisfactorily completed, or · if the postponed work is minor, uncomplicated, and not involving structural issues, provide written certification from the lender indicating the work has been completed,
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VA_Guidelines.txt
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86383c6b-71c5-4e7c-bd2f-5678f1cdc172
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lender indicating the work has been completed, and a statement from the Veteran- purchaser that he or she is satisfied with the work
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VA_Guidelines.txt
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462a579c-2f48-475e-bd0e-d54db62cfbc1
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. e.
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Letter of Credit A commercial letter of credit may be used in lieu of a cash escrow provided: · the dollar amount of available credit is at least 1 1/2 times the estimated cost of the postponed work, · a trust agreement describing the duties, obligations, and responsibilities is submitted (VA Form 26-1849 may be used), · the letter of credit is irrevocable and a valid and binding obligation on
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VA_Guidelines.txt
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56a7032d-0e4b-4cba-96ff-5611d1c0cbb8
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irrevocable and a valid and binding obligation on the issuing bank and extends at least 6 months beyond the date for completion of improvements, and · a copy of the letter of credit and trust agreement is furnished to the appropriate VA office so a control can be maintained on the available credit
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VA_Guidelines.txt
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4f7d7766-f204-45a7-ae3e-e8b200d160c0
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. 9-19 VA Lenders Handbook M26-7 Chapter 9: Legal Instruments, Liens, Escrows, and Related Issues Topic 11: Hazard Insurance Change Date: July 30, 2019 · This chapter has been revised in its entirety. a.
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VA_Guidelines.txt
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a6f5bc33-fdae-4e0c-ade4-492844cead9f
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General Requirements The lender is responsible for ensuring that hazard insurance is obtained prior to loan closing, and maintained for the term of the loan.
It must be of an insurance type or types and in an amount sufficient to protect the property against risks or hazards to which it may be subjected in the locality.
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VA_Guidelines.txt
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6b14475d-e550-41ed-8687-3d60d32fcf16
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Generally, the type(s) and amount of insurance coverage customary in the locality will satisfy this requirement.
Policies must provide that all amounts payable, including unearned premiums, shall be payable to the holder, or to a trustee or other person for the holder.
All policy payments received for insured losses must be applied to the restoration of the security or to the loan balance. b.
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VA_Guidelines.txt
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252abf3e-81d9-405d-8e4d-339ec2f65859
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Flood Insurance Requirements The lender is responsible for ensuring that flood insurance is obtained and maintained on any building or personal property that secures a VA loan if the property is located in a special flood hazard area (SFHA), as identified by the Federal Emergency Management Agency (FEMA).
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VA_Guidelines.txt
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2b49d7c3-5184-4168-a0c7-0b032ad10843
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The following flood insurance considerations may apply: · The lender/holder’s responsibility extends through the entire term of the loan, and includes insuring any secured property that becomes newly located in a SFHA due to FEMA remapping
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VA_Guidelines.txt
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0213680d-6f84-4e8c-90f5-45f6fc08062d
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. · The VA appraiser’s opinion on whether the property is located in a SFHA does not relieve the lender from responsibility for ensuring flood insurance coverage on a property which is in fact located in a SFHA. · Personal property requiring coverage can include a manufactured home and its appliances, carpet, etc. if they secure the loan
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VA_Guidelines.txt
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b95d1f49-f200-4311-8824-df0aa81e3c62
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. if they secure the loan. · The amount of flood insurance must be equal to the lesser of the outstanding principal balance of the loan or the maximum limit of coverage available for the particular type(s) of property under the National Flood Insurance Act. · Contact local property insurance agents or brokers, or FEMA regional offices, for current information on maximum available coverage.
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VA_Guidelines.txt
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58680ea4-d1d1-4a46-bab8-9f50a7195f29
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Note: VA cannot guarantee a loan if the security is located in a SFHA and flood insurance is not available.
Continued on next page 9-20 VA Lenders Handbook M26-7 Chapter 9: Legal Instruments, Liens, Escrows, and Related Issues Topic 11: Hazard Insurance, continued c.
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VA_Guidelines.txt
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a10ef5ad-81fc-4c60-8c96-ce6e9c1be403
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Consequences of Uninsured Losses VA may reduce a future guaranty claim based on the lender’s noncompliance with VA hazard/flood insurance requirements which results in uninsured losses (unless a waiver has been granted).
The lender must determine the minimum insurance coverage needed to meet the requirements of 38 C.
F.
R. 36.4329 for a specific loan.
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VA_Guidelines.txt
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8ecaddb3-6bb3-4d0d-8f71-541bfb09cc7f
|
F.
R. 36.4329 for a specific loan.
If the required amount of coverage is maintained, no future guaranty claim can be reduced due to inadequate coverage provided there has been no change in the nature, value, or use of the security that would require new or additional coverage (based on what is customary in the locality) since VA’s determination was made. d.
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VA_Guidelines.txt
|
900932c9-2667-4bfe-b8be-9759b89b9233
|
Special Considerations with Homeowners Associations Condominiums and many townhouse homeowners associations (HOAs) maintain blanket or master policies on common areas, including common mechanical and structural elements.
The limits of coverage should be described in the policy, and may also be referred to in the organizational documents.
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VA_Guidelines.txt
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8eccaa73-de39-4396-8809-e432a31e338c
|
Lenders should be aware that policies maintained by some HOAs may not provide adequate coverage.
Condominium HOAs may protect only the shell of the structure.
|
VA_Guidelines.txt
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b32d38ea-e84f-4f2b-abb6-bed23769151e
|
These “studs out” policies do not cover: · interior walls, · flooring, · plumbing or electrical fixtures, · cabinets, · heating, ventilation, and air conditioning (HVAC) equipment, · appliances, and · other items considered part of the real property.
|
VA_Guidelines.txt
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ff297375-49f1-4e57-bac4-17411304ac7d
|
Carefully review the terms of each blanket policy, or confirm with the HOA that adequate coverage is in effect (and check periodically for any changes in coverage).
|
VA_Guidelines.txt
|
ffb4b62e-63cf-4e8e-8773-74770fefb35b
|
If coverage is inadequate, the homeowner can be held responsible through the terms of the loan instruments, for maintaining coverage on the portions of the real property not covered by the master policy
|
VA_Guidelines.txt
|
743b2aea-f42f-4803-ad47-ce20c2d7f409
|
. 9-21 VA Lenders Handbook M26-7 Chapter 9: Legal Instruments, Liens, Escrows, and Related Issues Topic 12: Escrow for Taxes and Insurance Change Date: July 30, 2019 · This chapter has been revised in its entirety. a.
|
VA_Guidelines.txt
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d174c8f6-1db1-4dd0-8b4f-89afef641b67
|
Requirements VA does not require the lender to establish escrow accounts for the collection and payment of property taxes, hazard insurance premiums, and similar items.
It is the lender’s responsibility to ensure that property taxes and hazard insurance premiums are paid timely.
|
VA_Guidelines.txt
|
647c6aa1-1b47-46c1-afde-0884c004de4c
|
A lender who chooses to escrow for taxes and insurance must comply with applicable laws, including the Real Estate Settlement Procedures Act (RESPA). 9-22 VA Lenders Handbook M26-7 Chapter 9: Legal Instruments, Liens, Escrows, and Related Issues Topic 13: Homebuyer Assistance Program (HAP) Change Date: July 30, 2019 · This chapter has been revised in its entirety. a.
|
VA_Guidelines.txt
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3f2565a3-1fd0-4763-830d-a796bd2b350f
|
General Information VA permits Veteran purchasers to utilize HAP services when obtaining a VA home loan.
Both government and private entities administer HAPs. · Lenders are not required to obtain VA approval of such programs before closing the loan.
Homebuyer assistance programs that are administered by a state, county, or municipal government entity have blanket approval for use with VA loans.
|
VA_Guidelines.txt
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df6049e2-5f90-413e-a1ed-ab73e7cf40a1
|
These state and local programs are not to be confused with the Department of Defense HAP. · HAPs that do not fall under the blanket approval, should forward the documentation to the VA RLC with jurisdiction over property state. b.
|
VA_Guidelines.txt
|
6c62c80e-46c5-49cf-925d-0670d9d4d1f9
|
Requirements Lenders making VA loans involving HAPs must ensure the following: · the borrower(s) meet(s) VA credit standards, · the lender obtains a VA appraisal, and · the property must meet VA minimum property standards.
If the sale price of the property exceeds the VA reasonable value of the property, VA will only allow HAP assistance in the form of a grant to pay the difference.
|
VA_Guidelines.txt
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