The Department of Veterans Affairs (VA) recently issued Circular 26-20-16, instituting additional periodic reporting obligations on lenders with respect to IRRRLs with application dates on or after May 25, 2019, that the VA considers non-compliant based on Circular 26-19-22, issued last August. The VA also issued a list of Frequently Asked Questions as Exhibit A to the Circular.
The current Circular builds upon prior guidance by the VA, which required lenders to take steps to cure deficiencies in VA Interest Rate Reduction Refinance Loan (IRRRL) applications between May 25, 2018, and August 8, 2019. The Economic Growth, Regulatory Relief, and Consumer Protection Act (the Act) made some changes to IRRRL eligibility. WBK’s previous coverage of this issue is available here.
The VA is now directing lenders to submit a list of all VA-guaranteed IRRRLs with application dates on or after May 25, 2019, that do not meet the Act’s requirements. Reports must be submitted by the first of each business quarter (January 1, April 1, July 1, and September 1). A lender does not need to submit a report if all IRRRLs in a given quarter are compliant, but is required to “include all currently non-compliant IRRRLs with application dates on or after May 25, 2019, that have not been cured, regardless of whether they were reported in prior quarters.”
Reports will include a certification that the lender has cured or is in the process of curing all noncompliant IRRRLs. Lenders must also provide detailed information to support the actions the lender has taken to cure any defect in the IRRRL. Descriptive examples are provided in the Circular. The VA also warns that it will audit non-complaint IRRRLs, notify lenders of any deficiencies in the lender’s cure, and will provide the lender with an opportunity to correct the deficiencies.