New VA Policies and Updates to VA-Guaranteed Cash-Out Refinancing

March 1, 2019

Effective February 15, 2019, Gateway Mortgage Group Correspondent Lending (Gateway) aligned with recent publications by the Department Veterans Affairs’ (VA), announcing new VA policies regarding VA-guaranteed cash-out refinancing loans, including refinancing of construction loans (construction-to-permanent), which includes all subsequent clarifications and changes as outlined in Circular 26-18-30, Circular 26-18-30 Change 1, Circular 26-19-05 and Circular 26-19-05 Change 1.  And also as noted in Circular 26-19-05, on December 17, 2018, VA published interim final rule (AQ42) in the federal register setting forth requirements relating to cash-out refinance loans.  This includes the Regulatory Impact Analysis (RIA) that provides details concerning VA’s analysis in developing this rule.  AQ42 amends VA regulations pertaining to all cash-out refinancing loans (38 CFR 36.4306).  This includes refinancing of construction loans (construction-to-perm loans), regardless of whether there is a change in the principal loan amount.  The rule was effective on February 15, 2019, and applies to VA cash-out refinance loan applications taken on, or after, this date, however, AQ42 does not implement rules pertaining to interest rate reduction refinance loans (IRRRLs).

Gateway strongly recommends that Clients review the VA publications in the attached links for full details regarding this announcement and will notify you regarding our alignment with VA if further publications apply.  As a reminder, Clients are responsible for ensuring that all VA guaranteed cash-out refinancing loans must comply with Public Law 115-174, The Economic Growth, Regulatory Relief, and Consumer Protection Act (the Act), interim final rule AQ42 in the federal register, and VA and Gateway policies and requirements.  Loan files that do not comply with VA policies regarding VA-guaranteed cash-out refinancing loans, including refinancing of construction loans (construction-to-permanent), will be ineligible for purchase by Gateway.

Please direct any questions to your Regional Sales Manager

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