PresentingVA Interest Rate Reduction

Refinancing Loans(IRRRLs)

Fran WagnerNational Trainer

5151 Corporate DriveTroy, MI 48098

1 (800) 945-7700Wholesale.Flagstar.Com

03-11-2009

Today’s Agenda

• Definition and Purpose• Borrower Eligibility• Case Number Assignment• Funding Fee• Calculating the Loan Amount• Underwriting Requirements• Power of Attorney• Old vs. New Loan Statement• Documentation and Disclosures

Definition and Purpose

• Refinance of an existing VA loan into another VA loan that– Lowers the Interest Rate

If loan being refinanced is an ARM loan, interest rate reduction requirement is waived

AND– Reduces the Principal and Interest Payment

If loan being refinanced is an ARM or new loan shortens the loan term, principal and interest payment reduction requirement is waived

• Credit qualification is required when payment increases 20% or more

Eligible Borrowers• Original veteran alone, even if loan being refinanced was joint

with previous spouse or other non-veterans – Veteran must be

obligated on the existing loan and must still be owner of

record – If veteran is still married to spouse who was co-

borrower, the spouse must remain on the loan

• Original veteran and different spouse

• Original veteran and new spouse

• Surviving spouse – Must be obligated on the loan being

refinanced

• New veteran with sufficient entitlement – New veteran’s

entitlement substitutes for the existing veteran’s entitlement,

which is restored

Ineligible Borrowers

• Veteran holding a conventional loan

• Veteran without spouse if the spouse was a co-borrower

on the loan being refinanced

• Veteran’s previous spouse when divorced and previous

spouse now owns home as a result of the divorce

settlement

• Veteran’s widow or widower who is not a borrower on

loan being refinanced

• Non-veteran

Prior Loan Validation• In lieu of Certificate of Eligibility, obtain Prior Loan

Validation through WebLGY

Web site - https://vip.vba.va.gov

Select “WebLGY”

Log-in

Select “Eligibility” link

Select “Prior Loan Validation”

Enter veteran’s Social Security Number and last

name

System should produce veteran’s active loan

information – Print screen for loan being

refinanced and use as certificate of eligibility

Prior Loan Validation, Cont’d

• Provides the following information– VA case number – Make certain that prior loan validation is

for the loan being refinanced and not other VA loans– Guaranty date– Guaranty amount– Guaranty percentage– Status (Must be “guaranty issued”)– Loan amount

Case Number Assignment

• Obtain a new VA case number through The Appraisal

System (TAS)

– Do not order an appraisal

– If you do not have a log-in, complete Flagstar Form

#9701 – VA Case Number/Appraiser Assignment and

fax to Government Lending Department – Indicate

that loan is an IRRRL and no appraisal is

required or requested

Entitlement

• Entitlement charged for the IRRRL will be the

same amount charged for the loan being

refinanced, regardless of new loan amount:– If the entitlement charged to the loan being

refinanced was $50,000, the new entitlement is

$50,000

Funding Fee• .50%

– Veterans exempt for any of the following reasons do not pay the funding fee:

• Veteran received disability benefits in the past• Veteran is eligible to receive disability benefits but

receives retirement pay instead• Veteran currently receives disability benefits• Borrower is the surviving spouse of a veteran who died

while on active duty or from a service-connected disability

– VA Form 26-8937 – Verification of VA Benefits required

• Send fully-executed form to VA Regional Loan Center that has jurisdiction over the state in which the property is located

Maximum Loan Calculation

• Non-Flagstar to Flagstar IRRRL loans for manufactured homes

are not permitted:

• Complete Interest Rate Reduction Refinancing Loan Worksheet

and include in file – The completed form must mirror the way

the loan is closed

– Link to worksheet is contained in Flagstar Document #9005

– VA Form – Interactive pdf format - http://www.vba.va.gov

/pubs/forms/26-8923fill.pdf

– Prints from Loan Origination Systems (Calyx, etc.)

Maximum Loan Calculation, Cont’d

– Maximum Mortgage may include all of the following: • Existing VA loan balance, including late charges – If late

payments are included in the loan amount, VA must underwrite the file and borrower must be credit qualified

• Allowable fees and charges, including up to two discount points

– Brokers may charge discount points required to buy down the rate

– Correspondents may charge discount points that are reasonable and customary, regardless of loan pricing

– Only two points may be financed into the IRRRL loan – Discount points above the 2% limit must be paid in cash by the veteran

• Funding Fee– 2009 loan limits may be exceeded as long as IRRRL

Worksheet calculation is not exceeded

ALLOWABLE BORROWER-PAID CLOSING COSTS

• Borrowers may pay the following closing costs, provided they are reasonable and customary 1% origination fee Reasonable discount points – Up to two

points may be included in the new loan amount – Discount points above 2% must be paid in cash

Recording fees Pre-paid items (taxes, assessments, etc.)

ALLOWABLE BORROWER-PAID CLOSING COSTS, Cont’d

Insurances (hazard and flood, when required) Flood zone determination Survey, if required by lender or veteran, except for

surveys of condominiums Title insurance and title examination and applicable

environmental protection lien endorsements Mailing fees for refinances - Only when the saved per

diem interest cost to the veteran will exceed the cost of the special handling

VA funding fee Mortgage Electronic Registration System (MERS) fee

NON-ALLOWABLE BORROWER-PAID CLOSING COSTS

• Borrowers may not pay the following fees and closing costs: Attorney fees other than for title

commitments Broker fees Loan closing or settlement fees Doc prep, loan application or processing

fees Interest rate lock-in fees Postage, stationery, telephone or other

overhead charges

NON-ALLOWABLE BORROWER-PAID CLOSING COSTS, Cont’d

Amortization schedules, etc. Notary fees Escrow fees or charges Commitment fees or marketing fees of secondary

purchasers Trustee fees Fees charged by third parties, regardless of affiliation

with lender Tax service fees – Flagstar charges a $69 tax service

fee If no origination fee is charged, the veteran may pay

non-allowable costs up to 1% of the loan amount

Product Highlights

• Do not run loan through automated underwriting

• The following items are not required:– Credit report– Verification of mortgage– Verification of employment– Verification of assets– Appraisal– Termite inspection

• Maximum cash-in-hand $500– Must be the result of documented overages

Product Highlights, Cont’d

• New loan term may not exceed original loan term plus ten years – 30 year maximum loan term

• Existing subordinate financing may be re-subordinated

• Borrower must be current on existing mortgage – If the loan funds in April, the March payment must have been made

Power of AttorneyPermitted for active-duty military personnel stationed overseasor other veterans who cannot be present at closing:• General power of attorney

Veteran must sign initial 1003• Specific power of attorney

Veteran not required to sign any application documents Power of attorney document must include all of the

following specifications: Entitlement – must state the veteran intends to re-use

a specified amount of entitlement Loan purpose – must state veteran intends to obtain

IRRRL financing Property – must list address and legal description Loan terms – must state loan type and terms Occupancy – veteran must state he or she intends to

meet VA occupancy requirement

Power of Attorney, Cont’d

• All signatures must be notarized, and the power of attorney must be reviewed by a Flagstar underwriter

• All signatures must match signatures on application documents, if applicable

• There must be more than one borrower on the loan, and at least one borrower must be present at closing Single borrower transactions permitted when

Flagstar has experience with borrower and can compare signatures from a previous file

• Title policy cannot contain any exceptions related to the POA

Alive and Well Statement

• Lender must verify veteran is alive and well and not missing in action on the day of closing E-Mail, fax or letter from veteran

E-Mail, fax or letter from veteran’s commanding officer

In extreme cases, provide lender certification stating conversation with commanding officer or rear detachment personnel

Name and rank/title

Date and time of conversation

Method of communication, including phone number, if applicable

Old Versus New Loan Comparison• Flagstar document #9723 – Not required when payment is not

decreasing (refinance of an ARM loan or shortening of loan term)• Compares loan being refinanced to the new loan

Loan amount Interest Rate Term Monthly Principal and Interest Monthly PITI

• States how long it will take the borrower to recoup all closing costs, regardless of whether they are financed into the loan amount Determine the payment difference and divide the amount of

closing costs, including the funding fee and discount points by the monthly savings

Payment on loan being refinanced - $1000 New payment - $900 Closing costs, discount points, funding fee, and pre-paid

expenses for new loan - $5000 $5000 divided by $100 monthly savings = 50 months to

recoup costs

Required File Documentation• 1003

– Must be new 1003 – Not a copy of 1003 from original loan

• IRRRL Worksheet – VA Form 26-8923• VA Old vs. New Statement – Flagstar document #9723• VA Form 1802-A (or FHA 92900-A) – Pages 1 and 2 only• VA disability questionnaire – Flagstar document #9706• VA Letter of Indebtedness – VA Form 26-8937

– Required only if borrower is exempt from funding fee• Military Counseling Checklist – VA Form 26-0592

– Required for active-duty borrowers only• Federal Collection Policy – VA Form 26-0503

Required File Documentation

• VA Case Number Assignment • Eligibility verification via ONE of the following methods:

– Certified true copy of original certificate of eligibility– Prior loan validation from WebLGY – must indicate

same loan number as loan being refinanced• CAIVR Verification• GFE• TIL• Servicing Disclosure• Privacy Disclosures – Flagstar Document #4804

Required File Documentation

• Patriot Act Disclosure – Flagstar document #3243

• Driver’s License• Interest Rate/Point Disclosure Statement –

Flagstar document #9704• ARM Disclosure, if applicable• Payoff verifying loan is current• Copy of original note• Power of attorney, if applicable

– Alive and well and not missing in action verification if using POA

• Input “999” in Loantrac credit score field

Documents Required at Closing

• 4506T• Social Security Verification – Flagstar

document #3257• Fully executed Request for Certificate of

Eligibility – VA Form 26-1880• Report and Certification of Loan Disbursement

– VA Form 26-1820

VA Regional Loan Centers

Regional Loan Centers

Cleveland Regional Loan Center• Delaware, Indiana, Michigan, New Jersey, Ohio,

Pennsylvania• 1240 East Ninth Street

Cleveland, Ohio 44199(800) 729-5772

Houston Regional Loan Center• Arkansas, Louisiana, Oklahoma, Texas• 6900 Almeda Road

Houston, TX 77030(888) 232-2571

Regional Loan Centers

St. Paul Regional Loan Center• Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska,

North Dakota, South Dakota Wisconsin• 1 Federal Building

Fort SnellingSt. Paul, MN 55111(800) 827-0611

Atlanta Regional Loan Center• Georgia, North Carolina, South Carolina, Tennessee• 1700 Clairmont Road

Decatur, GA 30031(888) 768-2132

Regional Loan Centers

Denver Regional Loan Center• Alaska, Colorado, Idaho, Montana, Oregon, Utah,

Washington, Wyoming• 155 Van Gordon Street

Lakewood, CO 80228(888) 349-7541

Manchester Regional Loan Center• Connecticut, Maine, Massachusetts, New Hampshire,

New York, Rhode Island, Vermont• 275 Chestnut Street

Manchester, NH 03101(800) 827-6311

Regional Loan Centers

Phoenix Regional Loan Center• Arizona, California, Nevada, New Mexico• 3333 North Central Avenue

Phoenix, AZ 85012(888) 869-0194

Roanoke Regional Loan Center• District of Columbia, Kentucky, Maryland, Virginia,

West Virginia• 210 Franklin Road, SW

Roanoke, VA 20411(800) 933-5499

Regional Loan Centers

St. Petersburg Regional Loan Center• Alabama, Florida, Mississippi, Puerto Rico, U.S. Virgin

Islands• 9500 Bay Pines Boulevard

St. Petersburg, FL 33708(888) 611-5916

Honolulu Regional Office• Hawaii• 459 Patterson Road

Honolulu, HI 96810(808) 433-0481

Government Underwriting Support/Contact Numbers

• Questions pertaining to files in process: Underwriter

• General government loan questions: Government Underwriting Support Desk

Governmentuw@flagstar.com

866-945-9872 – Select one for underwriting and then 2 for

Government Underwriting

THANK YOU FOR GIVING FLAGSTAR BANK THIS OPPORTUNITY.

WE APPRECIATE YOUR BUSINESS AND LOYALTY!

Contact Information

Fran Wagner

National Trainer

Direct Number: 248-312-5801

Toll Free: 800-945-7700, Ext. 5801

fran.wagner@flagstar.com