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Topic 3. Withdrawal of Automatic Authority
Withdrawal For Proper Cause
VA can withdraw a lender’s automatic authority for proper cause, after giving the lender 30 days’ notice. This applies to both
supervised, and
nonsupervised lenders.
Submitting Loans for Prior Approval
The lender may continue processing loans on a prior approval basis after automatic authority has been withdrawn.
Note: It is the lender’s responsibility to submit all loans for prior approval as long as automatic authority is withdrawn.
VA Business With Other Participants
Lenders with their automatic authority withdrawn do not appear in GSA’s List of Parties Excluded From Federal Procurement and Nonprocurement Programs. Other program participants may still transact VA business with these lenders.
Exception: Lenders may appear on the GSA list if another sanction is imposed against them. In such cases, other program participants may be prohibited from transacting business with them.
Withdrawal for an Indefinite Period
Withdrawal for an indefinite period can be based on
failure to continue meeting basic qualifying criteria
for supervised lenders this includes loss of status as an entity subject to examination and supervision by a Federal or state regulatory agency
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for nonsupervised lenders this includes no approved underwriter, failure to maintain $50,000 working capital, and/or failure to file the required financial statements
any of the causes for debarment set forth in 38 CFR 44.305, or
poor underwriting or consistently careless processing during the probationary period for newly- approved nonsupervised automatic lenders.
Withdrawal Time Periods
Refer to the following table for information on withdrawal time periods.
Withdrawal Period: 60 Days
A withdrawal period of 60 days can be based on any of the following situations:
Loan submissions show deficiencies in credit underwriting after repeatedly being called to the lender's attention.
Use of unstable sources of income to qualify borrower or ignoring significant adverse credit items affecting applicant’s creditworthiness.
Employment or deposit verifications are hand-carried by applicants or otherwise improperly permitted to pass through the hands of a third party.
Loan submissions are consistently incomplete after repeatedly being called to the lender's attention
There are continued instances of disregard of VA requirements after repeatedly being called to the lender's attention.
Withdrawal Period: 180 Days
A withdrawal period of 180 days can be based on any of the following situations:
Loans conflict with VA credit standards and would not have been made by a lender acting prudently.
Failure to disclose to VA significant obligations or other information which affects the veteran’s ability to repay the loan, and which results in undue risk to the Government.
Employment or deposit verifications are handcarried by the applicant or otherwise mishandled, resulting in submission of significant misinformation to VA.
Substantiated complaints are received that the lender misrepresented VA requirements to veterans to the detriment of their interests.
Example
The veteran was dissuaded from seeking a lower interest rate based on the lender's incorrect advice that such options were excluded by VA requirements.
Closing documents show instances of improper charges to veteran after the impropriety of such charges are called to lender’s attention by VA, or the lender refuses to refund such charges after notification by VA.
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Deliberate delays in scheduling loan closings.
Withdrawal Period: 1-3 Years
A withdrawal period of 1-3 years can be based on any of the situations described in the table below.
Situation Example
Failure to properly disburse loans
Loan disbursement checks are returned due to insufficient funds.
Involvement by the lender in the improper use of a veteran's entitlement
Knowingly permitting the veteran to violate occupancy requirements, or lender involvement in the veteran’s sale of entitlement to a third party.
Lender makes the loan with the knowledge that the veteran is not purchasing the property to be his or her home. Instead, the veteran intends to transfer title to a third party who assumes the loan shortly after closing.