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Topic 1. Processing Procedures
May 14, 2024
Section a, Order of Completion, has been updated to add a step for submission of VA Form 26- 8937, Verification of VA Benefits, if the Veteran indicates they have a pre- discharge disability claim pending with VA.
Section b, How to Obtain a Certificate of Eligibility, has been updated to replace references to e-benefits with va.gov.
Section f, Requirements for Active-Duty Service members, has been updated with information on pre-discharge claim information.
This topic has been updated to replace references to the Regional Loan Center (RLC) with VA.
a. Order of Completion
The COE must be ordered prior to requesting an appraisal. The procedures discussed in this topic must be initiated and may be completed in any feasible order, with the exception of the Certificate of Eligibility (COE), as long as they are all completed prior to loan closing. These procedures apply to both prior approval loans and loans closed automatically (except the procedure which specifically refers to prior approval loans).
To avoid delays in closing, it is recommended that the lender take the following actions in the very early stages of loan processing:
obtain a COE, unless the loan is an Interest Rate Reduction Refinancing Loan (IRRRL),
if the Veteran is an active-duty Service member and indicates they have a pre-discharge claim pending, complete and submit VA Form 26-8937, Verification of VA Benefits, (see section f),
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request a VA appraisal or IRRRL case assignment in VA’s web-based loan guaranty system (WebLGY), (see Chapter 10 of this handbook for the steps to request an appraisal),
initiate the Credit Alert Verification Report System (CAIVRS) (see Chapter 4 of the Lender’s Handbook) and,
request a credit report and verifications, if required (see Chapter 4 of this handbook).
b. How to Obtain a Certificate of Eligibility
Verify the Veteran’s or surviving spouse’s eligibility for home loan benefits and amount of available entitlement by obtaining a COE in WebLGY. It is highly suggested that lenders obtain a COE online through WebLGY for the most efficient processing times. Veterans may also apply online through www.va.gov.
A COE obtained by the borrower on www.va.gov will be in WebLGY.
This COE can be accessed by the lender using at the Veteran’s social security number and date of birth.
An additional or updated COE does not need to be obtained or updated unless a change needs to be made to the COE.
Please examine and understand the conditions of the COE.
Failure to comply with the COE conditions may result in an ineligible loan (see Chapter 2 of this handbook).
c. Establish Reasonable Value of the Property
After requesting an appraisal in WebLGY, the appraisal report is uploaded into WebLGY. The Staff Appraisal Reviewer (SAR) will review the appraisal and issue the Notice of Value (NOV). A copy of the NOV is available in WebLGY. The lender must obtain evidence of compliance with any NOV requirements.
d. Determine if VA’s Occupancy Requirement is Met
Determine whether the Veteran meets VA’s occupancy requirement. The loan cannot be closed as a VA loan unless the requirement is met (see Chapter 3 of this handbook for occupancy requirements).
e. Underwrite the Loan
Complete the procedures, verifications, and VA Form 26-6393, Loan Analysis, described in Chapter 4 of this handbook. Compare information received from different sources and resolve any discrepancies. Examples may include, but not limited to:
resolving differences in the number of dependents, and
resolving credit history or employment stability/reliability discrepancies, and
resolving the amount or status of monthly obligation(s).
The final signed Uniform Residential Loan Application (URLA), VA Form 26-6393, Loan Analysis, and final Automated System Feedback, if applicable, should all reflect the same information.
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f. Requirements for Active Duty Service members
Funding Fee Exemption Status: Lenders will ask active duty Service members if they have a pre- discharge disability claim pending with VA. If the COE funding fee status shows Non- Exempt, the lender will submit VA Form 26-8937, Verification of VA Benefits. If a proposed or memorandum rating is not obtained and a closing takes place, the Service member is not eligible for a funding fee refund exemption and will not be entitled to a refund from VA.
VA Form 26-8937 should be uploaded to the existing COE record by completing a “New Application” under “Electronic Application” in WebLGY. When submitting the application, the form should be uploaded as the document type “Form 26-8937”.
The time required to issue a memorandum rating varies. If the Service member has any questions related to a pre-discharge claim, they should contact VA at 1-800-827-1000.
See Chapter 8 for additional information on the VA Funding Fee.
Eligibility Conditions: Ensure the Veteran, eligible as an active-duty member, is still on active duty at the time of closing if the COE indicates: “Valid unless discharged or released subsequent to date of this certificate. A certification of continuous active duty as of the date of note is required.” The Veteran certifies their continuous active duty service on VA Form 26-1820, Report and Certification of Loan Disbursement. If the lender becomes aware that the applicant is no longer on active duty, the loan may not be closed unless VA re-establishes the Veteran’s eligibility as follows:
A Veteran released from active duty must have a DD Form 214, Certificate of Release or Discharge from Active Duty, with time served, Character of Service Discharge, and reason for the discharge listed. It must be uploaded into WebLGY for the issuance of a new COE.
A Veteran released from the National Guard or Reserves must have evidence of time served and an Honorable discharge. This must be uploaded into WebLGY for the issuance of a new COE.
If a COE was issued based upon active-duty service and the Veteran has been separated, eligibility must be re-determined based upon their length of service and character of service.
Counseling Checklist: Ensure every Service member who applies for a loan while still in service is counseled with VA Form 26-0592, Counseling Checklist for Military Homebuyers, as early as possible in the transaction.
The active duty Veteran’s and lender’s signature on the form signifies counseling has been completed.
g. Obtain a Certificate of Commitment on Prior Approval Loans
If the loan requires prior approval, upload the loan file to WebLGY for review (see Topic 3 of this chapter).
If the prior approval loan is approved by VA, a VA Certificate of Commitment will be issued by VA to the lender. Ensure compliance with any conditions listed on the Certificate of Commitment before closing the loan.
To obtain the loan guaranty certificate, the closing package must be uploaded into WebLGY, for VA’s final review.