VA Updated Guidance for Borrowers Affected Financially by COVID-19

VA Guidelines for Covid-19

Income Verification

Lenders may continue to use good judgement and flexibility when verifying a borrower’s income and determining whether that income is stable and reliable and will follow standard VA guidelines.

Third-party services may be used to provide employment and income verification (please note additional fees associated with these services cannot be charged to borrower).

Note: The VOE flexibilities previously announced by VA have not been extended and did expire 04/01/2021.

Income Analysis

VA’s guidelines generally require income to be stable and reliable for 2 years. However, borrowers’ income impacted by COVID-19 may continue to be reviewed as follows:

Any period in a borrower’s income (i.e. furlough, curtailment of income, etc.), should not be considered a break in employment or income provided they have returned or anticipated to return to work in the same capacity and income levels. In addition to standard verification documentation Borrower's should provide furlough letters where applicable.

VA continues to encourage proactive measures in documenting and obtaining evidence of their analysis and justifications for all Borrower's, especially borderline cases.

 This may proactively address questions that VA may otherwise ask and prevent a loan level audit of a loan.
Remote Online Notarization (RON)

Additionally, ensure that the VA-guaranteed home loan is secured by a first lien on the property being used as collateral.

COVID-19, Kentucky VA Home Loan Benefits

VA Announces Special Relief for those Potentially Impacted by COVID-19

VA issued Circular 26-20-7: Special Relief for those Potentially Impacted by COVID-19 (Circular). Per the Circular, loan holders are encouraged to extend forbearance to borrowers in distress as a result of COVID-19. Servicers should work with impacted borrowers who are unable to make their mortgage payments to ensure they are evaluated for VA Loss Mitigation options. In addition, servicers are encouraged to suspend credit bureau reporting and to adopt policies that waive late charges for affected loans.

Special Relief for those Potentially Impacted by COVID-19

1. Purpose. The Department of Veterans Affairs (VA) is working with other federal partners to assess next steps in response to recent reports of cases of Coronavirus Disease 2019 (COVID-19) in the United States. To keep Veterans and stakeholders safe while continuing the mission of VA Home Loan Program, VA is providing the following information. Please note, VA is continuing with normal program operations and information will be shared as updates are made available regarding the VA Home Loan program.

2. Veterans. If you have an in-person appointment scheduled with your lender, servicer, appraiser, or VA staff and answer “yes” to any of the following questions, please call the point of contact before your scheduled appointment.
a. Are you having flu-like symptoms, such as fever, cough, or shortness of breath?
b. In the last 14 days, have you traveled to a high-risk area for transmission of COVID-19?
c. Have you been in close contact with someone confirmed to have COVID-19 or who is being evaluated for COVID-19?

In lieu of conducting a face-to-face meeting, VA will make every effort to conduct meetings by telephone. However, VA may have to postpone the meeting or Veterans may request to have a meeting postponed based on circumstances.

3. Lenders and Servicers. Lenders should have continuity of operation plans in place to support ongoing ability to conduct business operations in the event of an interruption to business operations and processes. Servicers may employ the following relief for Veterans impacted by COVID-19:

a. Forbearance Request. VA encourages holders of guaranteed loans to extend forbearance to borrowers in distress as a result of COVID-19. We understand the impact may be temporary, but it is still a hardship.

 Servicers should work with impacted borrowers who are unable to make their mortgage payments to ensure they are evaluated for VA Loss Mitigation options outlined in Chapter 5 of the VA Servicer Handbook M26-4, https://www.benefits.va.gov/WARMS/M26_4.asp. VA encourages the proper use of authorities granted in VA regulations to provide assistance in appropriate cases.

For example, Title 38, Code of Federal Regulations (CFR), section 36.4311 allows the reapplication of prepayments to cure or prevent a default. Also, 38 CFR 36.4315 allows the terms of any guaranteed loan to be modified without the prior approval of VA, provided conditions in the regulation are satisfied.

Circular 26-20-7 March 16, 2020


b. Late Charge Waivers. VA believes that many servicers plan to waive late charges on affected loans and encourages all servicers to adopt such a policy for any loans that may have been affected.

c. Credit and VA Reporting. In order to avoid damaging credit records of Veteran borrowers, servicers are encouraged to suspend credit bureau reporting on affected loans. Please contact the appropriate Regional Loan Center (RLC) with any questions.

4. Appraisers. Appraisers should continue to conduct business as outlined in Chapter 10 of the M26-
7, Lender’s Handbook, https://www.benefits.va.gov/WARMS/pam26_7.asp.

If you have an appointment scheduled and answer “yes” to any of the following questions, please contact the RLC of jurisdiction or the point of contact for the scheduled appointment to determine whether the appointment needs to be rescheduled or whether the assignment should be reassigned.

a. Are you having flu-like symptoms, such as fever, cough, or shortness of breath?
b. In the last 14 days, have you traveled to a high-risk area for transmission of COVID-19?
c. Have you been in close contact with someone confirmed to have COVID-19 or who is being evaluated for COVID-19?

The Centers for Disease Control and Prevention has advised the best way to prevent illness is to take preventative measures. When onsite, appraisers are encouraged to observe the following measures to help prevent the spread of respiratory diseases including the novel COVID-19:

a. Before and after exiting the home, use an alcohol-based hand sanitizer with at least 60 percent alcohol.
b. Avoid close contact with individuals who may be present in the home which includes no handshakes or fist bumps.
c. Avoid touching your eyes, nose, and mouth.
d. Cover your cough or sneeze with a tissue, then throw the tissue in the trash and immediately clean your hands with a hand sanitizer that contains at least 60 percent alcohol.

Please contact the RLC of jurisdiction if you have been impacted by COVID-19 and are unable to complete your appraisal assignments. The email addresses for each of the RLCs are available at: https://www.benefits.va.gov/HOMELOANS/contact_rlc_info.asp.

Kentucky VA Mortgage Guidance for Covid-19 in regards to Appraisals and Income.

Reference:
VA Circular 26-20-10, Lender Guidance for Borrowers Affected by COVID-19

VA Circular 26-20-11, Valuation Practices during COVID-19

Kentucky Mortgages for VA published guidance for lenders during the current market environment.:

Appraisal Guidance

VA’s temporary appraisal flexibilities announced in Circular 26-20-11. If appraisal flexibility is needed, when placing the appraisal order, the originator (broker or other) must make a public note in WebLGY and send an email to the appraiser once assigned that states that a Desktop Appraisal will be accepted by the lender. Originators should review and become familiar with the specific criteria to take advantage of the flexibilities.

Income Guidance

VA loans to take advantage of the alternative reverification forms as stated below only.

• Email from the employer’s work email address that identifies the name and title of the verifier and the borrower’s name and current employment status in lieu of the verbal OR
• YTD paystub from the pay period that immediately precedes the Note date OR
• Payroll deposit on the bank statement evidencing the payroll deposit from the pay period that immediately precedes the Note date