Finally Some Long Overdue DU Updates for VA Lending

Written By: Stacey Sprain

It’s been quite awhile since Desktop Underwriter was updated to coincide with VA program trends and changes but on the weekend of June 18th, a substantial list of updates will be added to create more comprehensive and effective messaging associated with DU for VA loans.

Calculation, Eligibility and Message Changes

Mortgage Credit Certificates (MCC) 
According to Chapter 4, 3-b of the VA Lender Handbook, the MCC amount can only be used to offset the mortgage payment and not as income. Therefore, DU will be modified so that the following message is issued on a VA loan casefile when MCC is entered incorrectly as income:

This loan casefile is ineligible because an MCC amount has been entered incorrectly as 'other income' in the application. MCC should be entered in 'MCC' field in the government section of the application instead of the income section.

Liability Payment Months Remaining 
Currently, in certain circumstances, DU is using the Months Left to Pay field (06L-120) to determine whether to include an installment liability in the total expense ratio. With this release, DU will calculate the months remaining based on the payment and the balance. The amount will be rounded up to the nearest whole number.

VA – Circular 26-09-4 – Market Conditions Addendum to VA Appraisal

In accordance with VA Circular 26-09-4, the VA appraisal message will be modified as follows:

A Uniform Residential Appraisal Report (URAR) and a Notice of Value (NOV) must be provided for this transaction. Also, a Market Conditions Addendum is required (Fannie Mae Form 1004MC). Lenders approved for the Lender Appraisal Processing Program (LAPP) may elect to follow LAPP processing guidelines.

VA – Eligibility and Message Changes

Derogatory Credit 
With this release, if the lender indicates in the Declarations section that the borrower has been involved in a foreclosure or bankruptcy, or is in default or delinquent on a federal debt, DU will no longer issue a Refer recommendation.

DU will continue to review the credit report information, and will issue a Refer recommendation if the credit report indicates a foreclosure, a bankruptcy or a mortgage with past due payments within a certain timeframe.

If DU determines that there is a mortgage or HELOC on the credit report with at least two 30 days past due payments (or at least one 60 days or more past due payment) within the prior 12 months, a Refer recommendation will be returned along with the following new message:

This loan casefile has been referred because a review of the credit report indicates the following mortgage accounts with the presence of late payments in the most recent 12 months. An underwriter must review the credit report to verify that the loan meets VA requirements.

If DU is unable to determine if the reported delinquency occurred within the prior 12 months, the following new messages will be issued to inform lenders that a mortgage delinquency was identified with at least two 30 days past due payments (or at least one 60 days or more days past due payment). The recommendation will not be changed when these messages are issued.

If the loan casefile receives an Approve recommendation, the following message will be issued:

A review of the credit report indicates the following mortgage accounts with the presence of late payments which may have occurred within the most recent 12 months. This approve recommendation is only valid if all mortgage accounts had no more than one 30 day late payment within the previous 12 months.

If the loan casefile receives a Refer recommendation, the following message will be issued:

A review of the credit report indicates the following mortgage accounts with the presence of late payments which may have occurred within the most recent 12 months. An underwriter must review the credit report to verify that the loan meets VA requirements.

In cases where DU is unable to determine the report date of a mortgage delinquency, DU will issue the following messages to inform lenders that a mortgage or HELOC was identified with at least two 30 days past due payments (or at least one 60 days or more past due payment). The recommendation will not be changed when these messages are issued.

If the loan casefile receives an Approve recommendation, the following message will be issued:

A review of the credit report indicates the following mortgage accounts with the presence of late payments but Desktop Underwriter is unable to determine if the delinquencies occurred within the most recent 12 months. This approve recommendation is only valid if all mortgage accounts had no more than one 30 day late payment within the previous 12 months.

If the loan casefile receives a Refer recommendation, the following message will be issued:

A review of the credit report indicates the following mortgage accounts with the presence of late payments but Desktop Underwriter is unable to determine if the delinquencies occurred within the most recent 12 months. An underwriter must review the credit report to verify that the loan meets VA requirements.

If any of the mortgage delinquency messages in this section are issued, the following new message will also be issued:

A written explanation of mortgage payment history is required for borrowers with more than one 30 day late payment on any mortgage accounts within the last 12 months.

Retirement Assets
Currently, a message is not issued on VA loan casefiles when a borrower has retirement assets. With this release, the following new message will be issued when a borrower has retirement assets:

Obtain the most recent depository or brokerage statement for each retirement account to verify sufficient funds to close and/or amounts used for reserves.

Repairs and Improvements 
The following new message will be issued on VA loan casefiles when there is an amount greater than $0.00 entered in line b of the Details of Transactions (Alterations, Improvements and Repairs) on refinance transactions:

Repairs in the amount of $ were listed in the Details of Transaction section.



About The Author

Stacey Sprain - As an NAMP® staff writer, Ms. Stacey Sprain is currently a NAMP® member in good standing, and is a NAMP® Certified Ambassador Loan Processor (NAMP®-CALP). With over 15+ years of mortgage banking experience, Stacey is also a Quality Control Manager for a major mortgage lending institution. If you would like to become a volunteer writer for us, please email us at: contact@mortgageprocessor.org.


Opinion-Editorial (Op-Ed) Disclaimer For NAMU® Library Articles: The views and opinions expressed in the NAMU® Library articles are those of the authors and do not necessarily reflect any official NAMU® policy or position. Examples of analysis performed within this article are only examples. They should not be utilized in real-world application as they are based only on very limited and dated open source information. Assumptions made within the analysis are not reflective of the position of NAMU®. Nothing contained in this articles should be considered legal advice.