Operation VA SITREP
“Your VA Situation Report” By Richard M. Bettencourt Jr., CRMS, CMHS
The Veteran’s Money! Credit for Interest Rate Chosen I hope you all had a wonderful holiday season! I know me and my family did! It’s a time of year that I just absolutely adore … the opportunity to spend time with friends and family, do some charitable work, and hopefully, pay it forward. This month, I wanted to focus on a particular aspect of the VA home loan that, in my opinion, many industry professionals do not truly understand. Now, this is applicable no matter what channel you originate loans: Nondepository, mortgage broker, depository, small community bank or credit union. If I was in a room of 100 mortgage originators and asked the question: “What is the premium/credit over par pricing called?” I would bet 99 of them would yell out “Lender credit!” and you know what, those 99 would be wrong! The premium “Credit” over par pricing is actually defined by the Veterans Administration (VA) and called “Credit for Interest Rate Chosen.” I can assure you, if you are a mortgage originator and didn’t know that, don’t feel bad … you’re not alone. I would also venture that a majority of closers, processors, operations managers, and other industry professionals wouldn’t know it either.
JANUARY 2016 n National Mortgage Professional Magazine n
Why? Well, a few reasons, but for starters, the VA loan is a severely underutilized benefit that our veterans are oftentimes dissuaded from using because others in the transaction are more concerned with a paycheck than ensuring that the veteran gets the appropriate home loan. So, due to the underutilization, you lose sight of the guidance provided in VA Pamphlet 26-7. When you lose sight of what makes it special, it begins to take on the shapes, smells, colors and guidelines of other loans programs. This is something that we, as an industry, need to avoid, mixing VA with everything else! VA is in a category of its own, and definitely doesn’t need help from conventional, FHA, USDA or any other program. But, now that the uninformed has lumped the VA home loan in with all the others, that premium over par has turned itself into “Lender Credit.” When the veteran makes the decision to slightly increase his/her rate any credit over the par pricing or broker compensation agreement is now the veteran’s money and he/she can do just about anything they want to do with it! Let me give you an example on a loan one of my loan originators just closed … The veteran was provided an interest rate from a large online lender and the veteran was set to come to closing with a check for approximately $1,700. The buyer’s agent was a bit perplexed and thought that didn’t seem right, but after careful review of the Loan Estimate, we determined it was accurate! My loan originator, who has been training under me for over a year now, has a favorite loan to originate. Do you know what that is? Yup ... you guessed it VA! He and I spoke very briefly and he provided the following option to this Veteran: 1. Same rate! 2. Paid off a credit card at closing—using the Credit for Interest Rate Chosen! (yes, the veteran can pay off a credit card to qualify with Credit for Interest Rate Chosen). 3. Used remaining Credit for Interest Rate Chosen as a principal pay down on the mortgage we’re closing. 4. Closing costs were paid for by the seller! Now, if we were to do the math here, I’d say that was a swing of about $5,100 in favor of this veteran. Even the closing attorney asked, “How were you able to do this?” The simple answer was, “It’s a VA home loan!” A true Lender Credit cannot do any of the above! Well, if Lender Credit did do any of the above, its continued on page 87