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Happy October everyone! I hope you all have a ghoulish good time! Before we get into this month's VA SITREP article, I have to ask: How many of my readers are hanging with us at the Luxor in Vegas for NAMB National 2015? If you said YES, I'll be there … that's awesome! I cannot thank you enough for taking the time out of your busy schedule to support your industry and your peers! I hope you have a great time … I know I will! Let's chat VA!
Alright, be honest, how many of us on a VA purchase transaction have heard some of the statements below:
►From the buyer's agent: "The seller is not going to be happy with having to pay the pest inspection!"
►From a sellers agent: "The seller is not going to pay for the pest inspection."
►From an underwriter: "Evidence … veteran didn't pay for the pest inspection."
Okay … I'm going to let you all in on a little secret! The VA issued a Circular back in May of 2014 that moved the Pest Inspection into the Non-Allowable Category. Want a copy of the Circular? I'll put a link up in the Members Section of the NAMB Web site! What does non-allowable mean? How can that benefit the veteran? Well, for my VA rookies, there are three categories of expenses in a VA transaction: Allowable, Non-Allowable, and Never to be Paid by the Veteran. Without taking 1,000 words to explain each category in detail, let's just focus on the pest inspection fee!
Simply put, veterans can pay for those fees listed in the Non-Allowable category to an amount equal to one percent of the base loan amount. Now, if you have a one percent origination fee listed on your New Loan Estimate Form (TRID) and are trying to charge some of those Non-Allowable fees, you'll most likely get a notice from your compliance department that those fees cannot be charged and you exceeded the one percent tolerance! Guess who'll eat that cost? You! So, it's important to consider this when originating VA home loans in your particular market. Here in Massachusetts, I never charge a one percent origination fee to veterans. Actually, on most of my VA transactions, the veterans' only out-of-pocket costs are the home inspection and the pest inspection! A majority of my VA loans possess a combination of lender and seller credits, making the VA loan one of the least expensive options for financing.
I'm sure you are asking, "How does this benefit the veteran?" Well, it's quite simple! The VA has done a significant amount of work in ascertaining what could be done to make the VA process easier and help remove seller barriers to increase veteran participation. One of those solutions was to allow the veteran to pay for certain minor expenses, like pest inspections. Contact your VA Regional Loan Center and ask them about the State Deviation List. This List will identify a variety of fees that have been re-categorized and could be help you and your veteran on their VA home loan.
Most of the veterans the VA surveyed and every single veteran client I have worked with in 13 years would never had a problem paying for a $125 or $150 pest inspection fee. They just wanted to move into their new home! Now, if treatment was required, I would suggest you check with your VA Regional Loan Center to see if they'll allow veteran-paid treatments on a case-by-case basis.
So, what do I take away from this and how can this little piece of information change the way you assist those who did more for us than we could ever imagine? If you are not using or working for a lender with fully-delegated VA underwriting authority, it's time to switch! A wholesale lender or non-depository with VA underwriting authority has the best chance of following the VA Pamphlet as written, and believe me, that will make your life a lot easier! We're still seeing many lenders with overlays that limit some of the amazing benefits the VA has created for our veterans.
As an industry, we need to remove as many barriers as possible to assist in increasing our veterans’ opportunity at making the dream of homeownership a reality! We owe it to them!
Until next time, and if you haven't already, please take a minute today to thank a veteran!
Richard M. Bettencourt Jr., CRMS, CMHS of Danvers, Mass.-based Mortgage Network is secretary of NAMB—The Association of Mortgage Professionals. He may be reached by phone at (978) 304-0818 or e-mail firstname.lastname@example.org.
This article originally appeared in the October 2015 print edition of National Mortgage Professional Magazine.