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An interim final rule published by the Department of Veterans Affairs (VA) amending its regulations regarding VA-guaranteed or insured cash-out refinance loans is set to go into effect Friday, Feb. 15. The rule is only applicable to credit unions that refinance VA loans.

The VA is accepting feedback on the rule; NAFCU is seeking credit unions' input by Feb. 15 and will provide comments to the department.

The rule implements a provision of the Economic Growth, Regulatory Relief, and Consumer Protection Act (S. 2155) aimed at protecting veterans from predatory lending.

NAFCU, in a Final Regulation sent to member credit unions Thursday, explains that as of Feb. 15, all cash-out refinancing loan applications will not be eligible for a guaranty by the VA unless they meet these criteria:

• the loan-to-value (LTV) cannot exceed 100 percent, and those veterans choosing loans with an LTV exceeding 100 percent must pay the excess amount at closing;
• lenders must ensure that all cash-out refinancing loans pass a net tangible benefit test and provide information to the veteran three days after receiving the loan application, as well as at the loan closing;
• the loan must be properly seasoned; and
• the lender must certify the recoupment period to the VA to obtain a Loan Guaranty Certificate for certain cash-out refinancing loans.

Read the Final Regulation here. NAFCU's highly used and downloaded S. 2155 summary guide, which provides a breakdown of regulatory relief actions required by the law, is available here.