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The U.S. Department of Veterans Affairs (VA) has published an interim final rule on VA-guaranteed cash-out refinance loans that is designed to establish greater protections against predatory lending.
According to the VA, the new interim rule would implement provisions of the Economic Growth, Regulatory Relief, and Consumer Protection Act and establish regulatory safeguards relating to VA-guaranteed cash-out refinance loans, which are often used by military personnel and veterans for converting home equity into cash. The interim rule would mandate that lenders disclose clearly, both at the time of application and again at closing, a plain comparison of the existing loan’s cost with that of the new loan, as well as imposing loan seasoning with the requirement that at least 210 days pass and six monthly payments must be made prior to refinancing an existing loan. The cash-out refinance loan must also provide at least one of eight “net tangible benefits” defined by VA in the rule.
“VA has taken significant steps to make the home-loan benefit the most competitive loan program available to Veterans,” said VA Secretary Robert Wilkie. “We want to ensure the home-loan program remains strong, attractive and accessible to all who are eligible, while creating a framework for lender accountability to Veterans and taxpayers.”
