The U.S. Department of Veterans Affairs recently issued Circular 26-19-23 to provide interim guidance on the provisions of the Blue Water Navy Vietnam Veterans Act of 2019 (Blue Water Act) that affect VA’s Loan Guaranty Service. The amendments made by the Blue Water Act will apply to loans that are closed on or after January 1, 2020.
The Blue Water Act increases the maximum VA guaranty amounts for purchase, construction, and cash-out refinance loans that exceed the Freddie Mac conforming loan limit. VA advises that for loans above $144,000, the maximum amount of the guaranty will be 25 percent of the loan amount, regardless of the Freddie Mac conforming loan limit. The Circular provides examples of how to calculate the maximum guaranty available for a loan in situations in which the veteran does and does not have the full entitlement available. (VA notes that for Interest Rate Reduction Refinance Loans, it will continue to guaranty 25 percent of the loan amount without regard to the veteran’s available entitlement or the Freddie Mac conforming loan limit.)
Based on changes made by the Blue Water Act, the Circular sets forth the funding fee rates that will apply for the most common types of VA loans for all veterans (i.e., regular military, Reserves and National Guard) for loans that are closed on or after January 1, 2020 and before January 1, 2022. Additionally, the Blue Water Act includes a waiver of the funding fee for members of the Armed Forces who are serving on active duty and provide, on or before the date of loan closing, a certificate or military orders indicating they were awarded the Purple Heart. VA advises that further guidance on what additional evidence may establish eligibility for the fee waiver will be issued in the future.
The Blue Water Act will permit VA fee panel appraisers to use third parties to obtain information. VA will issue guidance on this topic in the future. VA cautions that before it establishes policy on this topic, VA fee panel appraisers are not authorized to use third-party information.