VA updates policies for cash-out refinance loans
The Department of Veterans Affairs (VA) has issued a circular outlining new policies for the interim final rule that amended its regulations regarding VA-guaranteed or insured cash-out refinance loans. The rule went into effect Feb 15; the circular includes a NAFCU-sought sample disclosure form for lenders to use.
Another circular was also issued to make a clarification to the first.
The rule is only applicable to credit unions that refinance VA loans. It implements a provision of the Economic Growth, Regulatory Relief, and Consumer Protection Act (S. 2155) aimed at protecting veterans from predatory lending. More information is available through a NAFCU Final Regulation.
NAFCU asked for guidance on the required standardized form that must be used for disclosure when commenting on the rule last month. The standardized form has not yet been approved by the Office of Management and Budget (OMB), but can be used by credit unions in the interim. It must be provided to the borrower within 3 days from the date of the loan application under the new rule.
The association also raised concerns about increased regulatory burdens the rule could have on credit unions and argued that "credit unions do not engage in the types of predatory lending practices this rule intends to target."
NAFCU will continue to work with the VA to limit credit unions' compliance burden while ensuring servicemembers and veterans are not targeted by predatory lending practices.
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