A Veteran Asks: Can I Get a VA Streamline Refi Despite Late Payments?


Yes, but let’s qualify that answer. The VA streamline refinance guidelines include provisions for VA mortgages with any late payments or delinquent loans for that matter. But because the lenders will make the loans, they can require a loan to be clean of late payments for 12 or 6 months prior to an IRRRL refinance. Your duty is then to find a lender who is willing to refinance your VA mortgage that is overdue for 30 + days and submit this loan for prior VA approval.

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What the VA Says

Chapter 6 of the VA Pamphlet 26-7 provides that an IRRRL loan is a VA-guaranteed loan used to lower the existing mortgage rate and lower the existing principal + interest payments every month. An exception to the decrease in rate is when you refinance from an adjustable-rate mortgage to a fixed-rate mortgage.

The IRRRL does not generally require an appraisal, credit check or underwriting. Moreso, a lender can close a VA streamline refinance loan automatically.

But there are exceptions to these provisions. For loans that are 30+ days past due, underwriting and credit check are required. These loans with late payments are required to be submitted by the lender for VA prior approval.

Before we go into the process of submitting loans with late payments, it’s important to note that the VA does not specifically say that the loan should be current for the past 12 months or six months before applying under the IRRRL.

The VA however requires the lender to certify that the existing loan is current and not 30 days plus past due at the time of closing.

Based on that guideline, lenders can require varying lengths of payment histories. Some can require no late payments within 12 months; others can allow for a late payment that is seven months’ old or one that has occurred earlier on in the loan. It’s understandable for lenders to look into how good a borrower a homeowner before they give them loans. Makes sense right?

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Approval Process for VA IRRRL Loans With Late Payments

Essentially, the lender is required to gather information and undertake analysis sufficient to determine that (i) the cause of the delinquency has been corrected and (ii) the borrower is willing to make the new loan payments.

The lender will submit a written proposal to refinance the loan to the VA accompanied by this list of information/documentation:

  1. The full name of the veteran borrower and all other parties obligated on the existing loan and will be obligated to the new IRRRL loan.
  2. The number and origination date (month and year) of the VA loan to be refinanced.
  3. The name and address of the lender that will refinance the loan.
  4. The amount, interest rate, and term of the new loan vis-a-vis the existing loan.
  5. The discount, expressed as a percentage of the loan and dollar amount, to be charged on the loan.
  6. A statement signed by the veteran that he/she acknowledges the effect of the refinance on his/her loan payments and rate. The statement must also indicate for how long the veteran can recoup his/her closing costs.
  7. An appropriate certification regarding occupancy signed by the veteran or the spouse of an active duty service member.
  8. IRRRL worksheet
  9. VA Benefits verification
  10. Certificate of Eligibility (COE)
  11. URLA (Uniform Residential Loan Application)
  12. An explanation of the reasons for the delinquency, supported by proper documentation to verify the cause.
  13. Documentation to verify that the cause of the delinquency has been resolved.
  14. Credit report with in-file credit report accepted.
  15. The veteran’s current pay stub and telephone verification of current employment
  16. Loan analysis.
  17. Documentation of costs of any energy efficiency improvements to be added to the loan.

The VA will then inform the lender of its decision. For its part, the lender can close the loan per the VA’s Certificate of Commitment.

Moreover, any late payments or charges can be added to the new loan. Then again, this requires further analysis on the part of the lender as the amount could significantly affect the monthly payment and prior approval from the VA.

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