╨╧рб▒с>■  23■   1                                                                                                                                                                                                                                                                                                                                                                                                                                                ▄еhcр eАЁ:^`~7qX╪X╪╪Z╪Z╪Z╪Z╪Z$№Z№Z№Z№Z№Z[0[@№Z_zp[А^(и^и^и^и^&╬^,·^_______О_Xц_x_╪Z_" и^и^____╪Z╪Zи^p[____╪Zи^╪Zи^_А╩╟┐▀Ї└№Z№Z╪Z╪Z╪Z╪Z____Chapter 7 Other Considerations with a VA Loan CONTENTS SectionTitlePageHow to Use This Chapter7-ii 7.01 Title Limitations 7-17.02Secondary Borrowing7-27.03Liens Covering Community-Type Services and Facilities7-47.04Powers of Attorney7-57.05Escrow for Postponed Completion of Improvements7-57.06Seller Concessions7-67.07Hazard Insurance7-6How to Use This Chapter IntroductionThis chapter provides information on a variety of VA loan-related subjects which do not fit within the subject matter of the other chapters of this manual. Use in conjunction with related material in the Lender's Handbook, which includes: Chapter 3 SYMBOL 183 \f "Symbol" \s 10 \h Seller Concessions Chapter 5 SYMBOL 183 \f "Symbol" \s 10 \h Hazard Insurance Chapter 6 SYMBOL 183 \f "Symbol" \s 10 \h Postponed Exterior Improvements - Escrow SYMBOL 183 \f "Symbol" \s 10 \h Title Limitations Chapter 7 SYMBOL 183 \f "Symbol" \s 10 \h Liens Covering Community-Type Services and Facilities SYMBOL 183 \f "Symbol" \s 10 \h Powers of Attorney - Use of Veteran's Loan Guaranty Entitlement by Attorney-In-Fact SectionHeadingSubjects in this Chapter7.01 Title LimitationsSYMBOL 183 \f "Symbol" \s 10 \h Restrictions on the Purchase or Resale of Properties SYMBOL 183 \f "Symbol" \s 10 \h Effect of Title Limitations on Reasonable Value7.02 Secondary BorrowingSYMBOL 183 \f "Symbol" \s 10 \h What is Secondary Borrowing? SYMBOL 183 \f "Symbol" \s 10 \h Policy SYMBOL 183 \f "Symbol" \s 10 \h Requirements SYMBOL 183 \f "Symbol" \s 10 \h Prior Approval Processing SYMBOL 183 \f "Symbol" \s 10 \h Loans Closed Automatically SYMBOL 183 \f "Symbol" \s 10 \h Unusual Terms7.03 Liens Covering Community-Type Services and FacilitiesSYMBOL 183 \f "Symbol" \s 10 \h Where to Find Information SYMBOL 183 \f "Symbol" \s 10 \h Station Authority SYMBOL 183 \f "Symbol" \s 10 \h Central Office Determinations7.04 Powers of AttorneySYMBOL 183 \f "Symbol" \s 10 \h General7.05 Escrow for Postponed Completion of ImprovementsSYMBOL 183 \f "Symbol" \s 10 \h Procedures7.06 Seller ConcessionsSYMBOL 183 \f "Symbol" \s 10 \h Where to Find Information7.07 Hazard InsuranceSYMBOL 183 \f "Symbol" \s 10 \h Requirements seq chapter \h \r77.01 Title Limitations Restrictions on the Purchase or Resale of PropertiesWhen reviewing a loan involving restrictions on the purchase or resale of the property to determine if such restrictions are acceptable to VA: SYMBOL 183 \f "Symbol" \s 10 \h Refer to the regulations at 38 CFR 36.4308 and 38 CFR 36.4350 SYMBOL 183 \f "Symbol" \s 10 \h Consult Central Office (264) where doubt exists or when approval of the Secretary is required SYMBOL 183 \f "Symbol" \s 10 \h Determine whether the veteran was fully informed and consented in writing to the restrictions at the time of loan application. A lender may not accelerate a loan based on the sale of the secured property unless the acceptability of the assumption of the loan has not been established pursuant to section 3714 of chapter 37, title 38, U.S.C., except that: SYMBOL 183 \f "Symbol" \s 10 \h Under 38 CFR 36.4308(b), VA may guarantee a loan made through a State, Territorial or local government program where restrictions in the legal instruments require acceleration of the loan if it is assumed by a party ineligible for assistance under the program. SYMBOL 168 \f "Symbol" \s 8 \h Such acceleration must be mandated by Federal, State, Territorial or local law or regulation. Also, VA may guarantee a loan made through a State or local government program, designed to assist low- or moderate-income individuals, which imposes resale and price restrictions on purchasers. SYMBOL 183 \f "Symbol" \s 10 \h If the property is resold within a period established by local law or ordinance, certain restrictions as set forth in 38 CFR 36.4350(b)(5)(iv)(A) on who the property may be sold to, the resale price, and other restrictions approved by the Secretary may be applied. VA may guarantee a loan on which a title restriction limits the sale, lease, or occupancy of the dwelling to persons based on age, including a prohibition against the permanent occupancy of the dwelling by children, provided such restriction complies with applicable Federal law. SYMBOL 183 \f "Symbol" \s 10 \h VA may refuse to approve a property with an age restriction if its operation would work an undue hardship upon the owner in the case of sudden, unforeseen events or be likely to result in an increased risk of loan default. Continued on next page 7.01 Title Limitations, Continued Effect of Title Limitations on Reasonable ValueParagraph 6.17 of the Lender's Handbook provides information on this subject. If the lender discovers, prior to loan closing, title conditions or limitations not shown on the CRV or NOV, there must be evidence that the lender had VA Construction and Valuation review the conditions and determine whether the value assigned to the property is materially affected. SYMBOL 183 \f "Symbol" \s 10 \h Ensure reasonable value is adjusted where appropriate. If a lender requests that VA issue a waiver of title limitations or conditions other than those allowable under 38 CFR 36.4350, consult Construction and Valuation to determine whether the condition or limitation affects the reasonable value of the property to the extent that SYMBOL 183 \f "Symbol" \s 10 \h The loan will be ineligible for guaranty OR SYMBOL 183 \f "Symbol" \s 10 \h A claim on the guaranty will be subject to reduction under 38 CFR 36.4325(b)(10). Issue the waiver or denial as appropriate. 7.02 Secondary Borrowing What is Secondary Borrowing?For purposes of this section, secondary borrowing refers to the veteran obtaining a second mortgage simultaneously with a VA-guaranteed first mortgage, both secured by the same property. PolicySecondary borrowing is acceptable as long as: SYMBOL 183 \f "Symbol" \s 10 \h The veteran is not placed in a substantially worse position than if the entire amount borrowed had been guaranteed by VA AND SYMBOL 183 \f "Symbol" \s 10 \h The requirements detailed below are met. Continued on next page 7.02 Secondary Borrowing, Continued RequirementsThe second mortgage must meet the following requirements: FactorRequirementDocu-mentationDocumentation must be submitted disclosing the source, amount, and repayment terms of the second mortgage and agreement to such terms by the veteran and any co-obligors.Lien PositionThe second mortgage must be subordinated to the VA-guaranteed loan, i.e., the second mortgage must be in a junior lien position relative to the VA loan.Allowable PurposesProceeds of the second mortgage may be used for a variety of purposes, including but not limited to: SYMBOL 183 \f "Symbol" \s 10 \h Closing Costs SYMBOL 183 \f "Symbol" \s 10 \h A downpayment to meet secondary market requirements of the lender, BUT MAY NOT BE USED TO COVER SYMBOL 183 \f "Symbol" \s 10 \h Any portion of a downpayment required by VA to cover the excess of the purchase price over VA's reasonable value.Cash backThere can be no cash back to the veteran from the VA first mortgage or a second mortgage obtained simultaneously.Under-writingThe veteran must qualify for the second mortgage which is underwritten as an additional recurring monthly obligation. SYMBOL 183 \f "Symbol" \s 10 \h See paragraph 5.15 of the Lender's Handbook.Interest RateThe rate on the second mortgage may exceed the rate on the VA-guaranteed first, however, it may not exceed industry standards for second mortgages SYMBOL 183 \f "Symbol" \s 10 \h "Rule of thumb" is that second mortgages are one or two percent above the market interest rates for first mortgages.Assuma-bilityThe second mortgage should not restrict the veteran's ability to sell the property any more than the VA first mortgage. SYMBOL 183 \f "Symbol" \s 10 \h e.g., it should be assumable by creditworthy purchasers.Grace PeriodThere should be a reasonable grace period before: SYMBOL 183 \f "Symbol" \s 10 \h A late charge comes due OR SYMBOL 183 \f "Symbol" \s 10 \h Commencement of foreclosure proceedings in the event of default. Continued on next page styleref "Map Title"7.02 Secondary Borrowing, Continued Prior Approval ProcessingIf the VA-guaranteed first mortgage is submitted for prior approval: SYMBOL 183 \f "Symbol" \s 10 \h Review the documentation on the second mortgage for acceptability of the terms of that mortgage SYMBOL 183 \f "Symbol" \s 10 \h Include the second mortgage payment in the income and debt evaluation SYMBOL 168 \f "Symbol" \s 8 \h Contact the lender if the veteran is marginal due to the second mortgage payment. SYMBOL 168 \f "Symbol" \s 8 \h Suggest modification of the terms of the second mortgage if possible. Loans Closed AutomaticallyAccept the lender's determination that the veteran qualifies for the loan, including the second mortgage. SYMBOL 183 \f "Symbol" \s 10 \h On loans selected for full review, review the second mortgage terms for acceptability and the underwriting for consideration of the second mortgage payment. Unusual TermsA station may encounter proposed second mortgages bearing unusual terms, interest rates, etc. Most often these mortgages are being offered by one of the following parties: SYMBOL 183 \f "Symbol" \s 10 \h Federal, state, or local government agencies SYMBOL 183 \f "Symbol" \s 10 \h Non-profit organizations SYMBOL 183 \f "Symbol" \s 10 \h Private individuals SYMBOL 183 \f "Symbol" \s 10 \h A builder SYMBOL 183 \f "Symbol" \s 10 \h The seller Consult Central Office (264) if it is unclear whether the terms of the second mortgage meet VA standards or if there may be a reasonable basis for making an exception to the standards detailed in this section.  7.03 Liens Covering Community-Type Services and Facilities Where to Find InformationParagraph 7.02 of the Lender's Handbook provides detailed information on VA's policy. Continued on next page 7.03 Liens Covering Community-Type Services and Facilities, Continued Station AuthorityStations have the authority to disregard: SYMBOL 183 \f "Symbol" \s 10 \h Liens for taxes, assessments, and ground rents SYMBOL 183 \f "Symbol" \s 10 \h Liens (on existing properties) previously retained by trustees, improvement associations or other nongovernment entities for community-type services and facilities in a given area or subdivision. SYMBOL 168 \f "Symbol" \s 8 \h Use the guidelines provided in paragraphs 7.02e and f of the Lender's Handbook to make a determination. Central Office DeterminationsSuperior liens to be retained by private entities on new and proposed construction must be approved by VA Central Office. Submit fully developed information to Central Office (264) as to whether it is legal or practical to subordinate the superior liens to the home mortgage, and, if so, why they should not be subordinated. 7.04 Powers of Attorney GeneralVA will honor the use of guaranty entitlement by a veteran's attorney-in-fact with an adequate and valid power of attorney when the conditions described in paragraph 7.08 of the Lender's Handbook are met. If relaxation of the requirements may be warranted in an exceptional case because serious hardship may result due to the time or other pertinent factors involved in obtaining the veteran's consent to the specific transaction: SYMBOL 183 \f "Symbol" \s 10 \h Submit the facts of the case to Central Office (264) for a determination. 7.05 Escrow for Postponed Completion of Improvements ProceduresChapter 6, section III, of the Lender's Handbook explains the requirements to escrow for postponed onsite and offsite improvements. Loan Processing and C & V personnel share the responsibility for approving escrow  Continued on next page 7.05 Escrow for Postponed Completion of Improvements, Continued styleref "Block Label"Procedures (continued) arrangements and verifying completion of improvements as needed. Because weather conditions and local practices impacting the use of these escrows differ between geographic areas, procedures may vary from station to station. For stations which encounter these escrows on a regular basis, station management should develop procedures which make efficient use of VA staff time while safeguarding against any potential abuses by parties to the transaction. SYMBOL 183 \f "Symbol" \s 10 \h Blanket authorizations for use of escrows during certain months of the year in northern climates or under other recurring conditions are acceptable. SYMBOL 183 \f "Symbol" \s 10 \h Stations must ensure program participants are aware of the escrow procedures through training sessions and/or adequate written materials. 7.06 Seller Concessions Where to Find InformationSee paragraph 3.19 of the Lender's Handbook. Refer to M26-2, paragraph 2.23(d)6, for appraisal information related to seller concessions. Seller Concessions Exceeding 4% For instances in which a concession or combination of concessions exceed 4 percent of the reasonable value of the property: SYMBOL 183 \f "Symbol" \s 10 \h Discuss with the lender and builder/seller. SYMBOL 183 \f "Symbol" \s 10 \h Repetitive violations may be the basis for imposing program sanctions. 7.07 Hazard Insurance RequirementsSee paragraph 5.06 of the Lender's Handbook.  Continued on next page 7.07 Hazard Insurance, Continued Requirements (continued) If requested, station management may determine the minimum insurance coverage needed to meet the requirements of 38 CFR 36.4326 for a specific loan. SYMBOL 183 \f "Symbol" \s 10 \h The determination is binding on VA. SYMBOL 183 \f "Symbol" \s 10 \h If the required amount of coverage is maintained, no future guaranty claim can be reduced due to inadequate coverage provided there has been no change in the nature, value, or use of the security that would require new or additional coverage (based on what is customary in the locality) since VA's determination was made. 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