|
Veterans Benefits Administration
Circular 26-04-12
Department of Veterans Affairs
December 10, 2004
Washington, DC 20420
1.
PURPOSE: S. 2486, the Veterans Benefits Act
of 2004, was signed by the President on December 10, 2004.
A Public Law number has not yet been assigned. This
circular explains provisions affecting the Loan Guaranty
Program.
2.
BENEFIT CHANGES
a.
Maximum Guaranty Amount. The law changes
the maximum guaranty amount of $60,000, for certain
loans in excess of $144,000, to an amount equal to 25 percent
of the Freddie Mac conforming loan limit determined under
section 305(a)(2) of the Federal Home Loan Mortgage Corporation
Act for a single family residence, as adjusted for the year
involved. To illustrate, the maximum guaranty for
2005 would be $89,912. This is 25 percent of the 2005
Freddie Mac conforming loan limit for a single family residence
of $417,000. Under Freddie Mac’s charter, maximum
original loan amounts are 50 percent higher for first mortgages
on properties in Alaska, Hawaii, Guam and the U.S. Virgin
Islands. This higher amount would also apply to VA
loans in these areas.
b. Specially Adapted Housing.
The law expands eligibility to the $50,000 Specially Adapted
Housing (SAH) grant to veterans with permanent and total
service-connected disabilities due to the loss of, or loss
of use, of both upper extremities such as to preclude use
of the arms at or above the elbows. Detailed instructions
to VA field stations will be forthcoming. In addition,
Title 38, Section 1151, is amended to specify eligibility
where any veteran has suffered an injury, or an aggravation
of an injury, as the result of hospitalization, medical
or surgical treatment, as if it were service-connected for
benefits under Chapter 21, relating to SAH.
c.
Adjustable Rate Mortgages. The law gives VA
authority to guarantee “traditional” Adjustable Rate Mortgages
(ARMs) in a manner similar to that by which HUD insures
adjustable rate mortgages under section 251 of the National
Housing Act. VA previously had this authority but
it expired September 30, 1995. The legislation provides
authority through September 30, 2008. Key features
of this program are:
(1)
Interest rate adjustments on an annual basis;
(2)
Annual interest rate adjustments limited to
a maximum increase or decrease of 1 percentage point;
(3)
Interest rate increases limited to a maximum of 5 percent
points over the life of the loan;
(4)
This type of ARM loan MUST be underwritten at 1 percentage
point above the initial rate.
d.
Hybrid ARM Loans
(1)
Extension of Authority. The law extends
VA authority to guarantee hybrid ARM loans to September
30, 2008.
(2)
Modification of Interest Rate Adjustment Requirements:
(a)
If the initial contract interest rate remains fixed
for less than 5 years, the initial adjustment is limited
to a maximum increase or decrease of 1 percentage point
and the interest rate increase over the life of the loan
is limited to 5 percentage points.
(b)
If the initial contract interest rate remains fixed for
5 years or more, the initial adjustment will be limited
to a maximum increase or decrease of 2 percentage points.
(c) In cases where the initial interest rate remains
fixed for 5 years or more, the interest rate increase over
the life of the loan will be limited to 6 percentage points.
(3)
Effect on hybrid ARMS Guaranteed prior to Enactment of
the Act. The provisions of this Act will not affect
existing hybrid ARMs. VA hybrid ARM loans made prior
to this Act will be subject to the terms in effect at the
time they were made. For example, a hybrid ARM with
an initial fixed rate for 5 years or more made prior to
this Act is limited to a 1 percentage point initial adjustment
and a 5 percent limit over the life of the loan.
e.
Native American Direct Loan Program (NADL).
The authority to make direct loans under the NADL program
has been extended to December 31, 2008.
f. Funding Fee Exemption.
The law expands the definition of veterans who are in receipt
of compensation and thus entitled to a waiver of the VA
funding fee. Veterans who are rated eligible to receive
compensation as a result of a pre-discharge disability examination
and rating will now be considered as receiving compensation
as of that date. This means veterans still on active
duty awaiting discharge, but who wish to close on a loan
before being released from the military, may be entitled
to a waiver of the funding fee.
g.
Effective Date. All provisions became effective
upon the signing of the Act into law.
h.
Temporary Procedures. Until we accomplish necessary
system updates, lenders processing loans involving entitlement
greater than $60,000 or traditional 1 year ARMs must submit
them to the appropriate VA office for processing.
We will put notification on the Veterans Information Portal
when system updates have been accomplished and lenders can
then process applicable loans through Web-Based Loan Summary
Sheet (WBLS).
3.
STATION PROCEDURES. Stations should disseminate
this information as widely as possible using their local
websites. It is not necessary to prepare “hard copy”
local releases, although, stations may do so at their discretion.
Central Office will place this circular on the Loan Guaranty
website and there will also be a link from the portal.
Central Office will be providing further information on
aspects of the law as needed. We anticipate that all
necessary system updates will be completed sometime in January
2005.
4.
RESCISSION. This circular is rescinded January
1, 2006.
By Direction
of the Under Secretary for Benefits
Keith Pedigo, Director
Loan Guaranty Service
Distribution: CO: RPC 2021
SS(26A1) FLD:
VBAFS, 1 each (Reproduce and distribute based on RPC 2021)
Current Wisconsin
Mortgage Rates
About Ameristar Mortgage
Wisconsin Mortgage Programs
Apply Online
Contact Ameristar Mortgage
|
