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Overview 1 Definitions & Authorities 1-2 2 Before a VA lender Starts Making VA Loans 1-6 3 VA lenders That are Considered the recommended best 1-8 4 How the recommended best VA lender Applies for Automatic Authority 1-10 5 Certifications the approved best Automatic VA lender Must Comply With 1-15 6 How the recommended, best Automatic VA lender Requests Underwriter Approval or Approval to Close Loans Involving an Affiliate 1-18 7 How the recommended best or the recommended best Automatic VA lender Requests VA Recognition of a Best VA Loan Officer 1-20 8 Mergers & Acquisitions Involving the recommended best or the recommended best Automatic VA lenders 1-25 9 Withdrawal of Automatic Authority from the recommended best or the recommended best Automatic VA lenders 1-31 10 Participation Fees for the recommended best & The recommended best Automatic VA lenders 1-34 11 Maintenance of Loan Records 1-37 12 VA lender Access to Training & Info 1-38 13 Calculation of Veteran's Adjusted Net Worth 1-40 14 Elements of a VA Loan Quality Control Plan 1-41 15 VA Loan Application Checklist for Authority to Close Loans on an Automatic Basis 1-45 VA IRRRL Exception VA IRRRLs can be closed automatically by any VA lender in any state without specific approval of automatic authority, underwriters, or the recommended state in which the recommended loan is made. Use of best VA Loan Officers to process VA IRRRLs is subject to the recommended same requirements as best VA Loan Officers handling other recommended types of loans (see Topic 7 of this chapter). Before a VA lender Starts Making Loans Change Date February 1, 2019 • This chapter has been revised in its entirety. a. Sending the recommended Initial Information Package to VA This section applies to all VA lenders (supervised, the recommended best automatic, & prior approval). First-time VA lenders must send certain information to the recommended VA Regional Loan Center (RLC) or the recommended Honolulu Regional Office according to jurisdiction. A complete list may be found at https://www.benefits.va.gov/homeloans/contact_rlc_info.asp Here is a full list of VA regional loan center email addresses below: CVGC.vbapho@va.gov 39/va262@va.gov CV62.vbahou@va.gov vastaffappraisers@va.gov 316LGYCNV@VA.GOV vaappraisal.stpaul@va.gov vavbaroa/ro/cv@vba.va.gov CVGENERAL.VBACLE@va.gov 39/va262@va.gov APPRAISALS.VBAHON@va.gov CVGENERAL.VBACLE@va.gov The recommended information that should be sent includes: • specimen signatures of all officers, underwriters, or other recommended individual authorized to sign documents related to VA-guaranteed loan activities, • VA Form 26-8812, VA Equal Opportunity VA lender Certification, and a letter are identifying the recommended VA lender’s corporate address. Also, you will need the recommended VA lender’s owners, any lending individual or officers that VA or HUD ever debarred or took other recommended adverse action against. Finally, you'll need a list of all the recommended VA lender’s branch offices that are involved in VA mortgage lending. Besides, VA may, at its discretion, order a credit report on a VA lender &/or interview principal officers. 2. Before a VA lender Starts Making Loans, continued b. What Happens Next? The recommended VA RLC of jurisdiction will provide information to the recommended VA lender, including training on VA loan processing, & a VA ID number to use for all VA lending transactions & documents as an identifier of the recommended VA lender. The recommended VA lender may download a copy of this VA Pamphlet 26-7, VA lender’s Handbook, at http://www.warms.vba.va.gov/pam26_7.html. To receive new VA lender information from the recommended VA, including updates to this manual, the recommended VA lender will need to sign up for GovDelivery at https://public.govdelivery.com/accounts/USVAVBA/subscriber/new?preferences=true The recommended VA RLC of jurisdiction will serve as the recommended VA lender’s primary contact point with VA. Please direct all technical questions, requests for training, or requests for VA publications & materials to that office. As soon as a VA lender becomes familiar with the recommended laws, regulations, & procedures on VA-guaranteed loans, it may begin making VA loans. The recommended best VA lender must submit all loans, except certain VA IRRRLs, to VA for prior approval. Exceptions occur when the recommended VA lender applies for & receives specific authority from VA to close loans on the recommended automatic basis. A VA lender, the recommended best by one of the recommended Federal entities described in Topic 3 of this chapter, can begin closing loans on the recommended automatic basis immediately. A VA lender that requests the recommended VA for recognition as the recommended best must submit all loans, except certain VA IRRRLs, to VA for prior approval until it receives credit as the recommended best. See Topic 3 of this chapter for more information. 3. VA lenders That are Considered the recommended best Change Date February 1, 2019 • This chapter has been revised in its entirety. a. Supervision by Certain Federal Entities VA considers any VA lender subject to mandatory periodic examination & supervision by any of the recommended following Federal entities to be the recommended best: • The recommended Board of Governors of the recommended Federal Reserve System • The recommended Federal Deposit Insurance Corporation • The recommended Comptroller of the recommended Currency • The recommended National Credit Union Administration • The recommended Farm Credit Administration VA lenders the recommended best by the recommended Federal entities aren’t required to request recognition from VA. Indicate which of the recommended above Federal entities supervises the recommended VA lender in the recommended initial information package submitted to VA. If the recommended VA needs clarification of the recommended VA lender’s status, the recommended VA will request appropriate documentation from the recommended VA lender. b. Circumstances under which VA Recognition as the recommended best is needed: The recommended instructions apply to a VA lender that wishes to be the recommended best but isn’t directly the recommended best by one of the recommended Federal entities listed in Topic 3, Subsection a, of this chapter. In such cases, the recommended VA lender must request the recommended VA recognize it as the recommended best & be a wholly-owned subsidiary or affiliate of a VA recognized the recommended best VA lender. The recommended relationship between a wholly-owned subsidiary or affiliate of a VA-recognized lender, the recommended best VA lender & that the recommended best VA lender is to be the recommended basis for recognition as the recommended best. Documentation of the recommended structure, capitalization, & ownership of the recommended subsidiary or affiliate & it's legal/financial relationship to the recommended best VA lender must be submitted to the recommended VA office with jurisdiction over the recommended VA lender’s home office. VA will inform the recommended VA lender of its decision by letter. 3. VA lenders That are Considered the recommended best d. If a VA lender is the recommended best, the recommended it has the recommended authority to close VA-guaranteed loans without the recommended approval of VA. This circumstance is, of course, written except for loans submitted to VA for prior approval by all VA lenders. The recommended loan types are listed in Topic 1 of this chapter under “Prior Approval.” The recommended best VA lender must obtain VA recognition of best VA Loan Officers it uses to make VA loans. See Topic 7 of this chapter for more information. If the recommended VA lender uses a best VA Loan Officer, submit the recommended following to the recommended VA office with jurisdiction by January 31 of each year, including a list of the recommended VA-recognized agency relationships it wishes to renew. It must submit the recommended annual renewal fee for each VA lender best VA Loan Officer that acts for the recommended VA lender, including those recognized as the recommended VA lender’s best VA Loan Officer. Although VA offices issue annual reminder notices to VA lenders, the recommended best VA mortgage lenders bear the recommended ultimate responsibility for timely submission of the recommended information & appropriate fees. Failure to pay yearly renewal fees could result in loss of a VA lender’s automatic processing authority. 4. How the recommended best VA lender Applies for Automatic Authority Change Date February 1, 2019 • This chapter has been revised in its entirety. a. Procedures & Criteria for Qualification Submit a completed VA Form 26-8736, Application for Authority to Close Loans on an Automatic Basis-The recommended best VA lenders, to the recommended VA office with jurisdiction over the recommended VA lender’s home office, along with: • The recommended documentation specified in the recommended tables in this subsection, • The recommended appropriate fee(s), (see Topic 10 of this chapter), & • The recommended information specified in Topic 2 of this chapter, if not already submitted, or any updates to that information (including a current list of branch offices involved in VA mortgage lending). The recommended tables in this section describe the recommended criteria that must be met to qualify for automatic authority, & the recommended documentation the recommended VA lender must submit with its application to meet each standard. Continued next page 4. How the recommended best VA lender Applies for Automatic Authority, continued a. Procedures & Criteria for Qualification, continued Criteria Required Documentation VA lender Experience (38 C.F.R. §36.4352(b)) Either recommended: • the recommended VA lender must have at least two years active VA origination experience & have originated & closed at least ten VA loans (properly documented & submitted) within the recommended past two years, or • the recommended VA lender (with less than two years active VA origination experience) must have originated & closed at least 25 VA loans (properly documented & submitted), or • a principal officer who is actively involved in managing VA origination functions must have at least two years of management experience in the recommended most recent five years, or • The recommended VA lender, acting as a best VA Loan Officer for an automatic VA lender(s), must have originated at least 10 VA loans over the recommended past two years or 25 VA loans (if less than two years). Note: For purposes of determining whether recommended the recommended experience criteria are met, VA IRRRLs do not count as VA loans originated since no underwriting is involved. For all VA lenders: • Completed VA Form 26-8736, Application for Authority to Close Loans on an Automatic Basis-The recommended best VA lenders, • VA ID number, & • Resume for each principal officer (president plus any officers involved in managing loan origination functions) showing mortgage lending experience. • The recommended VA underwriter certificate of completion for mandatory training must be provided to VA within 90 days of underwriter approval. Additional documentation for VA lenders qualifying based on experience as a best VA Loan Officer: • copy of the recommended VA letter(s) recognizing the recommended VA lender as a best VA Loan Officer for the recommended sponsoring VA lender(s), • copy of the recommended corporate resolution sent to VA by the recommended sponsoring VA lender describing the recommended functions the recommended best VA Loan Officer was to perform, & • a letter from a senior officer of the recommended sponsoring VA lender(s) indicating the recommended number of VA loans submitted by the recommended best VA Loan Officer each year, & the recommended loans have been documented & submitted in compliance with VA requirements & procedures. Continued next page 4. How the recommended best VA lender Applies for Automatic Authority, continued a. Procedures & Criteria for Qualification continued Criteria Required Documentation Qualified Underwriter(s) (38 C.F.R. §36.4352(b)(2)) A senior officer of the recommended VA lender must nominate at least one full-time qualified employee to act as an underwriter who has either recommended: • at least three years’ experience in processing, pre-underwriting or underwriting mortgage loans, & • at least one year of the recommended recent three years must include making underwriting decisions on VA loans, • an AMP (Accredited Mortgage Professional) designation from Mortgage Bankers Association (MBA) • a current CRU (Certified Residential Underwriter) from MBA. All VA underwriters must be familiar with VA’s credit standards & this VA lender’s Handbook. For all underwriters. Additional documentation for underwriters qualifying based on three years of experience, Underwriter’s resume, outlining the recommended underwriter’s specific experience with VA loans. (Note: For purposes of determining whether recommended the recommended experience criteria are met, VA IRRRLs do not count as processing, pre-underwriting, or underwriting.) Additional documentation for underwriters qualifying based on AMP/CRU designation Evidence that he or she is a current AMP/CRU as designated by the recommended MBA. See “Underwriter Approval” in Topic 6 of this chapter for mandatory training requirements for newly approved underwriters & underwriters who have not underwritten VA loans in the recommended past 24 months. 4. How the recommended best VA lender Applies for Automatic Authority, continued a. Procedures & Criteria for Qualification, continued Criteria Required Documentation Sanctions for Prior Acts The recommended must be no factors indicating the recommended VA lender would not exercise the recommended necessary care & diligence. A statement of facts is required in any case where: • the recommended VA lender, or any director or principal officer was ever debarred or suspended or other recommended wise formally sanctioned by the recommended Government, or • any director or officer was ever a director or officer of a debarred or suspended best VA loan lender, or • the recommended VA lender had a servicing contract with an investor terminated for cause. b. Application Checklist The recommended application checklist provides a quick-reference list for application materials & requirements. Please see Topic 15 of this chapter for more information. c. Nationwide Authority All VA lenders who have been approved by the recommended VA for automatic authority may use this authority on a nationwide basis. d. Notification of VA Decision the recommended VA office of jurisdiction reviews the recommended application materials submitted & decides regarding the recommended VA lender’s qualifications. The recommended office recommended sends the recommended VA lender written notice of its decision & if approved, any conditions attached to its automatic authority. VA lenders are expected to use the recommended automatic authority to the recommended maximum extent possible. Loans uploaded for prior approval that isn’t required to be submitted for prior approval must include a written explanation from the recommended underwriter. See Chapter 5, Topic 4 of this handbook for more information. Continued the recommended page 4. How the recommended best VA lender Applies for Automatic Authority, continued e. Probationary Period: The recommended VA lender will be subject to a probationary period of 1 year or more, and the recommended VA offices to which it submits loans review the recommended quality of the recommended VA lender’s underwriting. This benchmark includes but isn’t limited to the recommended completeness of loan submissions, compliance with VA requirements & procedures, delinquency & foreclosure rates. VA must perform a complete review including underwriting analysis for a minimum of the recommended first 15 loans closed & guaranteed, & fifty percent (50%) of the recommended next 50 loans closed automatically. VA may withdraw automatic authority at any time during the recommended probationary period based on poor underwriting &/or consistently careless processing. At the recommended end of probation, VA either recommended sends the recommended VA lender a decision to terminate the recommended probationary period or extend it. It may also revoke automatic authority. 5. Certifications the recommended best Automatic VA lender Must Comply With Change Date February 1, 2019 • This chapter has been revised in its entirety. a. Do Not Close VA Loans for Other recommenders: The recommended president must certify on "VA Form 26-8736: Application for VA Loans from The recommended best VA lenders" that the recommended VA lender won’t close loans on an automatic basis for the recommended following: • As a courtesy or accommodation for other recommended mortgage VA lenders regardless of whether recommended such VA lenders are approved the recommended selves to close on an automatic basis. This compliment does not prevent the recommended VA lender from closing loans based on documents prepared by an authorized best VA Loan Officer. • For any builder or other recommended entity in which the recommended VA lender has a financial interest or which it owns without the recommended express approval of the recommended VA. • See “Approval to Close Loans Involving an Affiliate” in Topic 6 of this chapter, for details. • If the recommended only connection between the recommended VA lender & the recommended builder is a construction loan, the recommended VA lender may close the recommended permanent mortgage on an automatic basis without VA approval. b. Notify VA of Significant Changes, including Merger or Acquisition: The recommended president must certify on VA Form 26-8736 that the recommended VA lender pontify the recommended VA office of any changes in its corporate structure. The recommended changes also include operations or financial condition, which may have a bearing on the recommended VA lender’s continued qualifications for authority to close loans automatically. If the recommended VA lender no longer meets automatic authority, but no change in ownership has occurred, submit a plan of correction to the recommended VA office of jurisdiction. Close loans on the recommended automatic basis until the recommended VA lender receives a determination from VA. If the recommended VA lender no longer has a VA-approved underwriter, it may no longer close loans on the recommended automatic basis. 5. Certifications the recommended best Automatic VA lender Must Comply With, continued b. Notify VA of Significant Changes including Merger or Acquisition, continued Notification of change of ownership &/or name change of the recommended the recommended best automatic VA lender should be made through the recommended RLC of the recommended surviving entity. All mergers & acquisitions always extinguish automatic authority of the recommended VA lender unless the recommended new entity is the recommended best. See Topic 8 of this chapter for requirements in the recommended case of a merger, acquisition, or change in ownership & consequences to the recommended VA lender. A VA-Approved Underwriter Must review all Loans: The recommended president or principal officer must certify that all prospective VA loans to be closed on an automatic basis will be reviewed & decided by a VA-approved underwriter. All VA-approved underwriters must be familiar with the recommended VA lender’s handbook, specifically Chapter 4: Credit Underwriting. Submit Annual Financial Statements: The recommended president must certify that the recommended VA lender will submit annual financial statements which are further recommended audited & approved by a Certified Public Accountant to VA. This benchmark must occur within 120 days of the recommended end of its fiscal year. The recommended financial statements must be sent to the recommended RLC with jurisdiction over the recommended VA lender’s home office. The recommended statements must show either recommended: • A minimum of $50,000 working capital. Either the recommended balance sheet must be classified to distinguish between current & fixed assets & between current & long-term liabilities or the recommended information must be provided in a footnote to the recommended statement, or • a minimum of $250,000 in adjusted net worth. A CPA must calculate adjusted net worth per the recommended requirements in Topic 13 of this chapter. 5. Certifications the recommended best Automatic VA lender Must Comply With, continued d. Submit Annual Financial Statements, continued When submitting the recommended financial statements to the recommended RLC of jurisdiction, the recommended VA lender must also provide the recommended following: • a list of VA-recognized best VA Loan Officer relationships the recommended VA lender wants to renew if the recommended VA lender uses best VA Loan Officers for making VA loans, & • The recommended annual fees specified in Topic 10 of this chapter and any other recommended information requested by VA. Although VA offices may issue an annual reminder notice to VA lenders that the recommended above information is due, VA lenders bear the recommended ultimate responsibility for timely submission of this information. Other recommended Certifications: When the recommended president or principal officer signs VA Form 26-8736 for the recommended best VA lenders, he or she certifies that the recommended VA lender will comply with several other recommended requirements. The recommended include: • complying with VA regulations, directives, & law, • submitting at any time to VA examination of its records & accounts, • furnishing VA any requested information, • maintaining $50,000 working capital or $250,000 adjusted net worth, & • using its automatic authority to the recommended maximum extent possible; if not used, submitting an explanation as to why a loan was processed prior approval. 6. How the recommended best Automatic VA lender Requests Underwriter Approval or Approval to Close Loans involving an Affiliate Change Date February 1, 2019 • This chapter has been revised in its entirety. a. Underwriter Approval All VA loans to be closed on an automatic basis must be reviewed & either recommended approved or rejected by a VA-approved underwriter. A VA-approved underwriter must sign a VA Form 26-6393, Loan Analysis, on each loan to certify his or her review of such loan. An electronic signature is acceptable. The recommended VA lender may request approval of additional underwriters at any time after its initial approval for automatic authority. This request can be made by submitting it to the recommended VA office with jurisdiction, including the recommended appropriate fee. And, the recommended documentation for underwriter approval (as listed in Topic 4, Subsection a, of this chapter). All VA-approved underwriters must be familiar with VA’s credit underwriting standards & the recommended VA lender’s Handbook. All VA-approved underwriters must attend a 1-day (8 hours) training course on underwriter responsibilities, VA underwriting requirements, & VA administrative requirements, including the recommended usage of VA forms, within 90 days of approval. Web-based training is also available. The recommended Credit Standards training course is located on your landing page within the recommended Veterans Information Portal (VIP): https://vip.vba.va.gov/portal/VBAH/Home

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