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SIDUS FINANCIAL PRESENTS


V.A. LOANS

ONE BEDFORD FARMS, SUITE 100, BEDFORD, NH 03110


Agenda
Benefits Page 2
VA Programs ___ ________ Page 3
Eligible Properties Page 4
Loan Limits Page 5-6
Who is Eligible Pages 7-8
Certificate of Eligibility Pages 9-13
VA Funding Fee Pages 14-16
Allowable Closing Costs Page 17
Seller Concessions Page 18
Ratio vs. Residual Pages 19-20
Pre-qual vs. VA Loan Analysis Pages 21-25
Compensating Factors Page 26
Automated Underwriting Page 27
Income & Employment, Assets, Credit Pages 28-33
Appraisals Page 34
Pest Inspections Page 35
Refinancing Pages 36-39
Jumbo Pages 40-41
Forms at Application Page 42
VA Processing Steps Page 43
Submission Checklists Pages 44-46
CAIVRS Page 47
Ordering Appraisals ______ Page 48
Condo Approval Pages 49-50
Energy Efficient Improvement Loans Page 51-52
VA Regional Office & Useful Links _____ Pages 53-52
What You Need to Know About…
VA Loans
Benefits of a VA Loan
• No Down Payment, 100% up to $417,000* on 1 – 4 Unit Properties.
• No Monthly Mortgage Insurance Premiums.
• 100% Gift Funds Allowed
• Only One Ratio – 41%
• Automated Underwriting and Traditional Manual Underwriting
• VA Mortgages are Assumable
• No Reserve Requirements (1 unit only)
• Cash-Out Refinances to 100%
• Streamline Refinances with no Appraisal or Credit Check
• No Fico Requirements
• Secondary Financing Allowed
• Temporary Buy downs Allowed
• Approved DAPs Allowed
• Seller Can Pay Allowable Closing Costs Plus 4%
• 75% of Rents Allowed for Qualifying on Multi Families*
• 2 years on BK Discharge
• 1 year into Chapter 13 pay out.
• The Benefit is Restorable
Commonly Used VA Programs
• 30 Year Fixed Rate
• 15 Year Fixed Rate
• Buy-Down, Qualify at Note Rate
• 1 YR ARM Underwritten at Note Rate Plus 1%
• 3/1, 5/1, 7/1, 10/1 Hybrid ARMs Underwritten at the Note
Rate
• Caps: 1% and 5% Lifetime
• Index: 1 Year US Treasury
• Margin: Set by Lender
• May be used for all Property Types
• Energy Efficient Improvement Loans (EEIs)
Property Eligibility
(Owner-Occupied Only)
• Existing 1 -4 Family Properties
- (A home which has been previously occupied or had all onsite &
offsite improvements fully completed for one year)
• New Construction – Completed Less Than One Year & Never
Occupied
- (Covered by a one-year VA builder’s warranty or a 10 year HUD
insured protection plan)
• Proposed or Under Construction
- (See Chapter 5, page 23 of the VA Loan Production 2009 Training
Guide for Lenders at:
http://www.vba.va.gov/ro/manchester/lgymain/lp/loanprocessing.htm)
• Condominiums
- (Must be VA or FHA approved. Condexes are ok. No spot loans)
• Manufactured or Modular Housing
- (Must be classified as real property and properly fixed to a
permanent foundation on its own land)
Loan Limits
• The Department of Veterans Affairs’ Loan Guaranty
program does not impose a maximum amount that an
eligible veteran may borrow using a VA-guaranteed loan.
However, the following county “limits” must be used to
calculate VA’s maximum guaranty amount for a
particular county.

• These limits apply to all loans closed January 1,


2009 through December 31, 2009. The maximum
guaranty amount (available for loans over $144,000) is
25 percent of the 2009 VA Limit shown below. For all
counties other than those listed below, the 2009 Limit is
$417,000.
Loan Limits
•NOTE: These limits include the financed VA funding
Fee
State County Maximum Loan Amount

CT FAIRFIELD $ 556,250.00
MA BARNSTABLE $ 441,250.00
MA BRISTOL $ 463,750.00
MA DUKES $ 736,250.00
MA ESSEX, MIDDLESEX, NORFOLK, $ 506,250.00
PLYMOUTH & SUFFOLK

MA NANTUCKET $1,094,625.00

NH ROCKINGHAM & STRAFFORD $ 506,250.00

NY BRONX, KINGS, NASSAU, NEW YORK, $ 747,500.00


PUTNAM, QUEENS, RICHMOND,
ROCKLAND,SUFFOLK, &
WESTCHESTER

RI BRISTOL, KENT, NEWPORT, $ 463,750.00


PROVIDENCE & WASHINGTON
Borrower Eligibility
Eligible Borrower is a Veteran, Reserve or National Guard Member who:

• Served in the military – honorably discharged

• Served less than the required time at the convenience of the military

• Is the unmarried spouse of a deceased Veteran who died


while in service or of service connected issues.

• Only the spouse of Veteran is eligible to co-borrow with


the Veteran on a VA home loan. No other person may co-borrow,
i.e. brother, sister, parent, aunt, uncle, significant other, etc.

• Two Veterans or VA eligible borrowers can purchase together.


(Must be submitted directly to VA as a prior approval).
QUICK REFERENCE CHARTS
FOR ELIGIBILITY
IMPORTANT: The following data is submitted for your information only. Lenders are not
expected to make eligibility determinations for veterans. Please do not attempt to use this data
to determine if a veteran qualifies for the VA Home Loan Benefit, there are exceptions due to
disability, etc. Only VA should make a final determination as to whether a veteran qualifies for
this benefit or not.
QUICK REFERENCE FOR ELIGIBILITY
FULL TIME ACTIVE DUTY SERVICE

ERA DATES MINIMUM SERVICE* CODE

WWII 09/16/40 - 07/25/47 90 continuous days 01

Peacetime 07/26/47 - 06/26/50 181 days 08

Korean 06/27/50 - 01/31/55 90 days 02

Post-Korean 02/01/55 - 08/04/64 181 days 03

Vietnam 08/05/64 - 05/07/75 90 days 04

Post-Vietnam 05/08/75 - 09/07/80 181 days 09

Post-Vietnam 09/08/80 - 08/01/90 2 years 09

Persian Gulf 8/2/90 - undetermined 2 years 10

Current Active Duty Service Currently on fully time active 90 days 10


Personnel duty*

Restoration of Benefit (not a Above Above 05


duplicate for an IRRRL)

Unmarried Surviving Spouse Adjudication determination n/a-veteran died on active 06


required duty or as the result of a
service-connected disability
QUICK REFERENCE FOR ELIGIBILITY
RESERVE OR NATIONAL GUARD SERVICE

(Note: Must be an expressly honorable discharge)

ERA MINIMUM SERVICE* CODE

Released from service 6 years of actively drilling 11

Currently in Reserves/National Guard 6 years of actively drilling* 11

Currently or previously served in support 90 days Issue the COE in compliance with full time
of a war time operation, i.e. Noble Eagle active duty service personnel-the chart
under Title 10 above. Use a green certificate, not code
11

Restoration of Benefit (not a duplicate for Above 05


and IRRRL)

*See the notation regarding Reserve/Guard member currently


serving or previously called up to active duty in support of a war
effort; you should always ask a Reserve/National Guard member if
they fall into this category.
Certificates of Eligibility
• There are actually three types of
Certificate of Eligibility (COE):
• Regular / Full-Time / Active Duty
(see example)
• Reservist / National Guard
(see example)
• Annotated for Unmarried Surviving
Spouse
Entitlement & Certificate of
Eligibility
• Veteran to provide Certificate of Eligibility (COE)
• When the Veteran does not have his or her COE, the broker
should first try to obtain it through VA’s on-line system, WebLGY, ACE (Automated
Certificate of Eligibility) which can be found at: https://vip.vba.va.gov .
• Scroll down the left-hand side of the page until you see
Application’ and ‘WebLGY’. Click this and choose ‘Eligibility’ from the main menu.
• Choose Automated Certificate of Eligibility.
Input veteran’s name as it appears on DD214 (discharge papers).
• ACE cannot make all determinations. Some types of cases that
cannot be processed through ACE include:
– Persons whose service was or is in the Reserves/National Guard.
– Persons who may have had prior VA loan(s) that went to foreclosure.
– Persons who did not serve the minimum required length of service
and were not discharged for an authorized exception.
– Persons who were discharged under conditions other than honorable.
– Persons seeking restoration of previously used entitlement.
– Unmarried surviving spouses.
Entitlement & Certificate of
Eligibility Cont.
• If you can not obtain the COE directly through ACE;
• You can either submit an application electronically or mail a request to the Winston-Salem
Eligibility Center (mailing directions are listed below.) If you choose to submit an application
electronically:
– Click on the “Electronic Application” link in that particular record (be sure to write down
the reference number)
– Input the required information which is based on data required by VA Form 26-1880
– Scan any supporting documentation you have and upload it for submission with the
electronic application; data may include DD-214, Reserve Point Statement, HUD-1 from
the sale of REO, etc.
– Provide your e-mail address so you can be notified when the application has been
processed
– Check the Status of a Pending COE: Eligibility → Search → Enter reference # and name
or SSN.
• Prior Loan Validation (Can be used in lieu of a COE for an Interest Rate Reduction Refinance
Loan): Eligibility → Prior Loan Validation → Enter veteran’s SSN or previous VA loan number
and name.
• You may also obtain the COE by using the postal mail service. It is strongly suggested that
the form be sent with proof of military service, if possible. For the COE to be returned directly
to the lender, make sure to list your firm in box 5 of the 1880. In either case if a property was
recently sold, proof of payoff of the mortgage should also be included. VA Form 26-1880 can
be obtained on-line at www.va.gov/vaforms/ . The Eligibility Center may be reached at 888-
244-6711, press 1-1-2, or NCELIGIB@va.gov:

Standard Mailing Address PO Box 20729, Winston-Salem, NC 27120

Overnight Mailing Address 251 N. Main St., Winston-Salem, NC 27155


Entitlement & Certificate of
Eligibility Cont.
• A COE does not expire. It can be re-used again and again if it is properly re-stored. In
order to restore entitlement, the property must be sold and the VA mortgage paid off.
An exception to this is if the property is being sold to another Veteran who will be
substituting his eligibility.
• A once in a life time restoration is allowed if the mortgage is paid off.
• If a Veteran holds a valid COE, you can assume she/he has the
appropriate length and character of service. Sometimes, the COE
is annotated for individuals currently serving in active duty.
• Lenders (secondary) require at least 25% of the loan to be guaranteed by VA.
• The current maximum amount of entitlement available to each
eligible veteran is $36k. For Purchases, VA increases the amount
of guaranty to 25% of the current FHLMC conforming limits. For
our purposes, the guaranty will be $104,250, which is 25% of $417,000.
• FOR MORE DETAILED INFORMATION REGARDING THE COE, GO TO CHAPTER
3, PAGES 11 -15 OF THE VA LOAN PRODUCTION TRAINING GUIDE FOR
LENDERS AT:
http://www.vba.va.gov/ro/manchester/lgymain/lp/loanprocessing.htm
VA Funding Fee
• The Funding Fee is a charge that most Veterans pay to use the VA Loan Guaranty
Program.
• The Funding Fee is calculated on the full loan amount.
• The following Veterans are exempt from paying the fee.
Always ask:
- Is the Veteran receiving VA compensation for service-connected Disabilities?
- Would the Veterans be entitled to receive compensation for service-connected
disabilities if they did not receive retirement pay?
- Is there a surviving spouse of the Veteran who died in service or from service
related disabilities?
• Verify exempt status by obtaining:
- A properly completed and signed VA Form 26-8937, Verification of VA Benefits
Form, sent to and processed by VA.
• For a Veteran who elected service retirement pay instead of VA compensation, a
copy of the original VA notification of disability rating and documentation of the
veteran’s service retirement income along with the 26-8937 form completed.
• Indications on the Certificate of Eligibility that the borrower is entitled as an unmarried
surviving spouse of a veteran who died in war or of war related injuries.
VA FUNDING FEE SCHEDULE
Caution: Funding Fees are calculated based upon the borrower’s entitlement
code as noted on their COE, not their current status with a
Reserve/National Guard Unit.
Purchase and Regular Refinance Loans
Veteran Type Down Payment % for First-Time Use % for Subsequent Use
Always code 5

Regular Military None 2.15% 3.3%

Never code 11 for first 5% or more 1.50% 1.50%


time use
10% or more 1.25% 1.25%

National Guard/Reserves None 2.4% 3.3%


Always code 11 for first 5% or more 1.75% 1.75%
time use
10% or more 1.5% 1.5%

Please note there is no down payment on refinance loans; equity is not


considered a down payment by VA.
VA FUNDING FEE SCHEDULE
CONTINUED

Other Loans
Type of Loan Percentage for Either Type of Veteran

Interest Rate Reduction Refinance (IRRRL) .50%

Loan Assumptions .50%


Allowable Closing Costs
• The Veteran can pay:
• A 1% Origination Fee, plus:
• Reasonable discount points. (Max of 2 on IRRLS).
• Appraisal, recording, credit report, flood certificate and survey/plot plan fee.
• Pre-paid items, taxes, assessments and insurance.
• Recording Fees
• Hazard Insurance Premium
• Title Insurance and title exam
• VA Funding fee
• VA Compliance Inspection Fees
• Courier Fee on refinances
• Charges for housing programs/grants approved by VA prior to closing
• MERS (Mortgage Electronic Registration System Fee
• Fraud detection report
• Veteran can’t pay escrow, processing, document, underwriting, termite
report and repairs, tax service, attorney or notary fees or any broker fees.
Seller Concessions
What Can the Seller Pay?

• The Seller Can Pay For:


• The entire veteran buyer’s closing costs.
• Points as appropriate to the market. Example: If it is customary that lenders are
charging two discount points to obtain the average on going interest rate, than 2
discount points would be appropriate to the market.
• The Seller Typically Pays For:
• The Wood Destroying Insect Inspection (if required by the NOV). VA regulations
prohibit the veteran from paying this fee; however, it may be paid by the seller or a
third party.

Is There Anything Else The Seller Can Pay For?


• The seller can pay for the following items providing the total of these do not exceed
4% of the Reasonable Value of the property as established by the VA fee appraiser.
• Payment of the veteran-buyer’s funding fee.
• Payment of the veteran-buyer’s prepaids (pro-ration of real estate tax and hazard
insurance)
• Payment of points above what is appropriate to the market.
• Gifts such as television sets, cars, etc.
• Payment of points to provide for a temporary buy down.
• Pay off of credit balances or judgments on behalf of the veteran.
Ratios and Residual Income
• DTI = 41%
• May exceed ratio if run through DU with “Approve/Eligible”,
or LP with, “Accept”.
• When the DTI is > 41%, the residual income* should be at least
20% over the stated guideline. See Residual Table for required
amounts.
• Residual income is calculated based on the “total” number of
dependents and the number of persons residing in the household.
• RESIDUAL INCOME IS DISCRETIONARY INCOME LEFT OVER
AFTER THE MONTHLY HOUSING EXPENSE, MONTHLY DEBTS
& OBLIGATIONS, MONTHLY ESTIMATED MAINTENANCE &
UTILITIES AND FEDERAL AND/OR STATE TAXES ARE PAID
Residual Income Guidelines
TABLES OF RESIDUAL INCOMES
For loan amounts of $79,999 and below For loan amounts of $80,000+
Family Size Northeast Family Size Northeast
Residual/+ 20% Residual/+ 20%

1 $390 $468 1 $450 $540

2 $654 $785 2 $755 $906

3 $788 $946 3 $909 $1,091

4 $888 $1,066 4 $1,025 $1,230

5 $921 $1,105 5 $1,062 $1,274

Over 5 Add $75 for any other


members up to a Over 5 Add $80 for any
family of 7 other member up to
a family of 7

Visit the VA website www.homeloans.va.gov for


“Key to Geographic Regions” used on the above tables.
PREQUALIFICATION WORKSHEET
Proposed Loan Amount $ 183,600
Household Size (all members of the household): 3

1. GROSS MONTHLY INCOME $4,843.00 (1)


2. Monthly Housing Expense (PITI)
a. Principal and Interest 6.75%** $1191.00
b. Property Taxes $ 183.00
c. Homeowners Insurance $ 45.00
TOTAL $1,419.00 (2)
3. Monthly Debts and Obligations
a. Car Loan(s) $ 450.00
b. Revolving Charge Accounts $ 80.00
c. Other Installment Loans $ 0
d. Child Care Expenses, Child Support or Alimony $ 325.00
TOTAL $855.00 (3)
4. Monthly Estimate Maintenance & Utilities of the Home $140.00 (4)
Please use 14¢ times the subject property’s gross living area.
For a 1000 sq. ft. dwelling this would total $140.00.
.
PREQUALIFICATION WORKSHEET
CONTINUED
5. Monthly Income Taxes
a. Federal Income Tax $ 251.00
b. State Income Tax (works in NH) $ 0
c. Social Security/Medicare 7.65% - $106,800
(15.3% if self employed) $ 370.00
TOTAL $621.00 (5)
6. Residual Income
a. Amount required by family size $909.00
Count all members of the veterans household regardless of the
nature of the relationship. Use the “Tables of Residual Incomes”
on page 27 or online at http://www.warms.vba.va.gov/pam26_7.html
Chapter 4, Topic 9.
b. From worksheet (1) minus (2,3,4,5) $1,808.00
7. Debt to Income Ratio (2) + (3) divided by (1) (ideal 41%) 47%
What Meets VA Standards?
Generally speaking if the veteran meets the residual guideline and the ratio is 41% or
less, or if the ratio is greater than 41%, the veteran should at least meet residual plus
20%. This one easily qualifies income wise with almost double the residual
requirement!. Veteran must have acceptable credit with sufficient and stable income.
PREQUALIFICATION
WORKSHEET
Proposed Loan Amount $ _________ Household Size (all members of the household): _________

1. GROSS MONTHLY INCOME $_________(1)


2. Monthly Housing Expense (PITI)
a. Principal and Interest ___% $__________ $__________
b. Property Taxes $__________
c. Homeowners Insurance $__________
TOTAL $_________(2)
3. Monthly Debts and Obligations
a. Car Loan(s) $__________
b. Revolving Charge Accounts $__________
c. Other Installment Loans $__________
d. Child Care Expenses, Child Support or Alimony $__________
TOTAL $_________(3)
4. Monthly Estimate for Maintenance & Utilities of the Home (14¢) $_________(4)

5. Monthly Income Taxes


a. Federal Income Tax $__________
b. State Income Tax $__________
c. Social Security/Medicare 7.65% $106,800
(15.3% of self employed) $__________
TOTAL $_________(5)
6. Residual Income
a. Amount required by family size $__________
b. From worksheet (1) minus (2,3,4,5) $_________

7. Debt to Income Ratio (2) + (3) divided by (1) (ideal 41%) _________%
Loan Analysis Worksheet –
Form 26-6393
This is where everything comes together. There are six sections as follows:
1. Loan Data
2. Borrower’s Personal and Financial Status
3. Estimated Monthly Shelter Expenses
4. Debts and Obligations
5. Monthly Income and Deductions
6. Disposition of Application and Underwriter Certification.
Sections A and B
• Section A: Loan Data
• Section B: Borrower’s Personal and Financial Status
Sections C and D
• Section C: Estimated Monthly Shelter Expense.
• Use monthly P&I, taxes and insurance, any HOA dues, and Maintenance and
Utilities amount of $0.14 per square foot.
Section D: Debts and Obligations
• Add child care expense
• Need child care letter in file, if applicable.
Loan Analysis Worksheet
Section E: Monthly Income and Obligations
• Compute federal and state income taxes and deductions, either with charts (
http://www.vba.va.gov/ro/manchester/lgymain/lp/loanprocessing.htm State Tax
Charts) or online with www.paycheckcity.com
• Determine the appropriate deductions for
• Social Security/Medicare which is 7.65% of gross monthly income up to $106,800 per
individual per year
• Do not use deductions on pay stubs, use actual number of dependents, i.e. married
couple with 2 children is 4 exemptions.
• Add non-taxable income. (Do not gross up non-taxable income here).
• Total Income, Lines 37-39
• Subtract Obligations, Line 40 in Section D, to compute Total Net Effective Income,
Line 41.
• Subtract Estimated Monthly Shelter Expense from Section D
• (include maintenance & utility) to compute Balance Available for
• Family Support, Line 43. fill in Guideline from Residual Income Chart.
• Compute Ratio by adding Lines 15-18 (excluding maintenance & utilities), plus Line
20 & Line 40 and then divide the sums of Lines 31 and 38. You can gross up Line 38
to calculate the ratio.
Compensating Factors
Compensating factors include, but are not limited to:

• Excellent credit history.


• Conservative use of consumer credit.
• Minimal consumer debt.
• Long-term employment.
• Significant liquid assets.
• Sizable down payment.
• Little or no increase in shelter expense.
• High residual income.
• Low Debt to Income Ratio
Automated Underwriting
• VA has approved FNMA’s DO/DU, FHLMC’s LP, pmiAura System
for VA, CLUES System and Zippy as automated underwriting
systems. These systems incorporate VA’s credit standards.

• A finding of “Approve/Eligible” or “Accept”, can reduce the amount of


documentation requirements, and underwriting time of a loan file.

• Absence of the above positive findings does not provide a basis for
denying a loan application. Manual underwriting permitted.

• BY LAW, VA MAY ONLY GUARANTY A LOAN WHEN IT IS


POSSIBLE TO DETERMINE THAT THE VETERAN IS A
SATISFACTORY CREDIT RISK HAS STABLE AND SUFFICIENT
INCOME TO ALLOW REPAYMENT OF THE LOAN NOW AND IN
THE FORSEABLE FUTURE
Income and Employment
• Wages - require 2 year history. Less than 2 years considered case
by case.
• Obtain a VOE or 30 days of original paystubs, 2 year’s W2s and a
telephone cert.
• Overtime income and 2nd job income generally needs 2 year
history, less than 2 years considered case by case.
• Commission – 2 year history, unless previous related employment
or specialized training – 1040s required (watch for 2106 expenses).
• Self Employment averaged 24 months, 1040’s required. YTD P&L
• Alimony and Child Support must be verified and stable. Copies of
the divorce decree are required
• Document in accordance with AU findings.
• Seasonal jobs and unemployment may be averaged with 24 month
history of both; it is considered “Normal” for the field the borrower is
in.
• Other Income, pension, retirement, disability, etc. must be verified.
Income and Employment Cont’d
• Active Military income – consider base pay as stable & reliable unless
applicant is within 12 months of release of active duty.
• Leave and Earnings Statement is required (LES). If re-enlisting, letter from
commanding officer & the veteran stating may/will re-enlist.
• Military quarters allowance and Basic Allowance Subsistence (BAS) can be
considered income. Both non-taxable.
• Other Military allowances – obtain verification of type and amount and
length of receipt.
• Income from Reserves or National Guard can be considered if the length of
total service indicates a strong probability of continuance.
• Primary Rental Income: 75% of rental income may only be used if they have
prior experience managing rental properties or have a one year agreement
with a property management company. Six months reserves PITI are
required.
• Other Rental Property. Tax returns documenting income plus three month’s
reserves PITI
• Current single family home. Obtain a lease and wash the debt and take a
loss if necessary. No reserves required.
Assets
• Verify all liquid assets to the extent they are needed to close the
loan.
• Funds needed to pay the difference between sales price and
appraised value (if lower) must come from veteran’s own funds.
• Verify earnest money has cleared account.
• Obtain corresponding Bank Statement to show availability of funds.
• Obtain copy of earnest money check and evidence funds have
cleared.
• VODs or 2 months bank statements not older than 120 days
• Gift letters and receipt, etc.
• Seller concessions are 4%, plus allowable closing costs. Seller may
pay off debt for Veteran, provided it within the 4% maximum
concession. Seller may pay for the VA funding fee. (Partial payment
not acceptable).
Credit
• Perform a CAIVRs Inquiry on all borrowers (see instructions).
• RMCR or MCR (3 files merged) reports are acceptable.
• Current Rent &/or Mortgage history, if required by AUS or to strengthen file.
• Non-purchasing spouse: Monthly obligations are considered in community property
state. A credit report and credit consent form are required on all non-purchasing
spouses. Credit history is also considered.
• Collections may not necessarily be required to be paid, upon review of explanation
and any supporting documentation by borrower; this is considered on a case by case
basis.
• Judgments and federal or state debts must be paid
• Open collections are considered “Recent Derogatory Items” regardless of age.
• Lates in the last year are of major concern and may be reason for declination unless
isolated. Obtain credit explanation even if not required by AUS.
• All inquiries in the last 90 days must be explained
• Obtain a satisfactory rental or mortgage history via a VOM, cancelled checks or credit
report
• Non traditional credit is okay
• Consumer credit counseling must have a 12 month history and approval from the
credit counselor unless borrower entered prior to delinquency
Credit - Continued
• Chapter 13 Bankruptcy. 12 month satisfactory
repayment and approval by the court
• Chapter 7 Bankruptcy. Two years from
discharge with re-established credit. 12 months
from discharge with re-established credit if it was
beyond the borrower’s control.
• Foreclosure, Deed-in-Lieu or Short Sale follow
BK guidelines above
Debts and Obligations
• Must verify alimony and child support via the divorce decree
• Student loans scheduled to begin within 12 months of the Note Date will be counted.
• Loans secured by deposited funds are not counted.
• Installment debts with less than 10 months remaining do not necessarily need to be
included in credit qualifying. Large payments should be considered. Do not omit these
debts in the AUS system.
• Always “populate” liabilities in AUS.
• 401(k) loans are not used against in debt calculation.
• Loan Pay advances (primarily seen on LES statement of in-service veterans) are
used against and must be documented.
• A child care expense letter must be in all files where there are dependent children
including AU files. A letter from the veteran should state whether there is a cost or
not. If there is none, an explanation as to why will be needed. If there is a cost, the
veteran will need to provide the cost and name and address of the provider and this
will need to be listed on the Loan Analysis as a debt.
• If a loan is co-signed and there is no evidence to believe the applicant will have to
repay the loan, then the underwriter may exclude the payment.
Appraisals
• The general rule regarding VA Minimum Property Requirements (MPRs) is that the
property must be Safe, Sound (structurally), and Sanitary. The complete VA MPRs can be
found in Chapter 12 of the VA Lender’s Handbook. Appraisals are ordered and assigned
thru TAS.
• The following list is a condensed list of the most commonly asked about MPRs:
– Each living unit must have the space necessary to assure suitable living, sleeping,
cooking/dining accommodations, and sanitary facilities.
– There must be a mechanical heating system
– Potable water supply and a safe method for sewerage disposal. If public water and
sewer are available, the property must be connected
– The crawl space must have adequate access, be clear of all debris, and be properly
vented.
– The floor joists must be sufficiently above the highest level of the ground to provide
access for maintenance and repair of ductwork and plumbing.
– If any portion of a property is designed or used for nonresidential purposes, that
property is eligible only if the nonresidential use does not impair the residential
character of the property, or exceed 25% of the total floor area.
– Conditions which impair the safety, sanitation, or structural soundness of the
dwelling will cause the property to be unacceptable until the defects or conditions
have been remedied and the probability of further damage eliminated. Waivers can be
requested by the veteran and will be accepted on a case by case basis, though value
could be impacted.
– Escrows for repairs at 1.5 times the cost to cure may be accepted.
– No part of any residential structure may be located within a high pressure gas or
liquid petroleum pipeline easement. No part of any residential structure may be
located within a high voltage electric transmission line easement.
– Water tests are required on private wells. Private septic is ok unless noted by the
appraiser
Pest Inspections
VA requires pests inspections on the Wood Destroying Insect Report Form
NPMA-33 on all existing construction cases in the following areas:

State Counties
Connecticut Required in all counties.
Maine Not required in any county.
Massachusetts Required in all counties
New Hampshire Required in the counties of Belknap,
Cheshire, Hillsborough, Merrimack,
Rockingham, Strafford, & Sullivan only.
New York Required in all counties south of
Broome, Delaware, Greene, & Columbia.

Rhode Island Required in all counties.


Vermont Required in the counties of Bennington &
Windham only.

Pest Inspections must be within 90 days of closing. If treatment is required, the date
of treatment may count towards the 90 days. Cannot be paid by the veteran
VA Loans
Rate/Term & Cash Out Refi
Loan Amount 100% of NOV plus funding fee and up to $6,000 for EEI with full entitlement

1. Appraised Value $
2. Appraised Value x $75% $
3. Entitlement ($36,000 max) $
4. Total of Lines 2 + 3 $
5. Appraised Value x 100% $
6. Base Loan Amount (lesser of 4 or 5) $
7. *Add VA Funding Fee $
8..Add EEI $
9. Final Loan Amount (total of 6,7 & 8) $
(Round down and cannot exceed $417,000)

*VA Funding Fee is calculated on base loan amount as follows unless veteran is exempt:
a) Regular Military: 2.15% first time use; 3.3% subsequent use.
b) Reservist/National Guard: 2.4% first time use; 3.3% subsequent use.
10. GNMA Coverage $
Equity (Line 1 minus Line 6) + Entitlement (Line 3)
divided by Appraised Value = VA Guaranty**
** VA Guaranty must be at least 25% to be eligible
IRRRL
(Interest Rate Reduction Refinance)
• Loan limit is $417,000 unless in a designated area
• Interest Rate – Must be lower than rate on current VA loan, except
ARM to Fixed.
• Term – Existing VA loan term plus 10 years, not to exceed 30 years.
• Payment – The P&I must be less than the P&I on the current loan
unless: the IRRRL is refinancing an ARM, or the term of the IRRRL
is shorter than the term of the current loan, or Energy Efficiency
improvements are included in the IRRRL.
• If the PITI increases by 20% or more, Veteran must credit qualify.
• Credit – Loan must be current. Credit Report required. Must have
rating on current mortgage. Any derogatory credit since loan
origination will be previewed by underwriting to determine
acceptability.
• If the loan is delinquent, it must be sent to VA for underwriting
IRRRL Continued
• Documentation requirements:
• NO Appraisal
• Prior Loan Validation required. Order through TAS.
• Rate Reduction Refinancing Worksheet, VA 26-8923
• VA Benefits Form (if applicable) VA 26-8937
• Initial Loan Application & Addendum signed by borrower and LO.
• VA Old versus New worksheet
• Mortgage Rating
• Copy of Note & Deed on Existing Loan
• Copy of payoff demand from Title
• Preliminary Title Report
• Veteran’s Nearest Living Relative (Name, Address, Phone Number
and Relationship). (Or completed on Form 26-1820)
Refinance Comparison
Regular Refinance IRRRL
(Cash-out Refinance) VA Streamline Refinance

Cash out allowed? Yes No

Loan limit 100% of NOV + funding fee + up to Payoff of previous VA loan +


$6,000 for energy efficient allowable closing costs + funding fee
improvements* + up to $6,000 for EEI

Must veteran own property? Yes Yes

Must veteran occupy home? Yes No (previously occupied is okay)

Maximum loan term 30 years Existing VA loan term + 10 years (not


to exceed 30 years).

Maximum interest Negotiated Rate Rate must be lower than rate on


present VA loan, unless refinancing
ARM to fixed rate.

Lien of record required? Yes Yes

OK to refinance other liens? Yes No

Appraisal required? Yes No

Credit package required? Yes No, unless 30 + days past due

OK for automatic processing? Yes, automatic lenders Yes, all lenders, unless existing VA
loan is 30 + days past due
Jumbos
Loans > max loan limit to $1MM is permitted subject to the following:

• Owner Occupied, 1unit, Purchase transactions only.


• No mortgage lates permitted in last 12 months and
2 months cash reserves required.
• No BK or foreclosure permitted in last 7 years.
• Down payment funds must be provided.
• Veteran owner must have full entitlement.
• Max loan amount to $1MM including VA funding fee if
financed.
• Only permitted on a 30 year Fixed.
• No Buy Downs allowed.
• Secondary financing is not permitted.
VA Loans “Jumbo” Loans
VA Loans “Jumbo” Loans (Purchase)
Loan Amount > max loan limit to $1,000,000 (including funding fee) with full entitlement
1. Lesser of Sales Price or Appraised Value $
2. Line 1 x 75% $
3. Entitlement (25% of Line 1 not to exceed $104,250) $
4. Base Loan Amount (Line 2 + Line 3) $
5. Down Payment (Line 1 minus Line 4) $
6. Down Payment % (Line 4 divided by Line 1) %
7. VA Funding Fee % (based on down payment)* %
8. VA Funding Fee (Line 4 x Line 7) $
9. Final Loan Amount (Line 4 + Line 8) $
(Round down & cannot exceed $1,000,000)
*VA Funding Fee is based on the following unless veteran is exempt:
Veteran Type Down Payment % For 1st Time Use % For Subsequent Use
Regular < 5% 2.15% 3.30%
Military > 5 < 10% 1.50% 1.50%
> 10% 1.25% 1.25%
Reserves/Nat Guard < 5% 2.40% 3.30%
> 5 < 10% 1.75% 1.75%
> 10% 1.50% 1.50%
10. GNMA Coverage
Entitlement (Line 3) + down payment (Line 5) $
divided by Line 1 = VA Guaranty %
VA Forms at Application
• Interest Rate & Discount Disclosure Statement
• IRRRL Certification (if applying for a streamline
refinance)
• ARM Certification (if applying for an ARM loan)
• VA Option Clause (signed with P&S)
• Certificate of Eligibility Review
• Ask if any VA benefits are currently being received. If so
complete Verification of VA Benefits Form 26-8937
• If Active Duty, complete Counseling Checklist for Military
Homebuyers, VA Form 26-0592
• Child Care Expense Letter
• Nearest Living Relative Letter
VA Processing Steps
• Pre-qualify or qualify using the VA Loan Analysis is a loan amount is
known
• Originate Loan Application with all applicable VA forms and
disclosures.
• Order Certificate of Eligibility if not provided
• Review COE
• Order Verification of VA Benefits (if applicable).
• Order Appraisal & Case Number
• Run CAIVRS
• Run Automated
• Process file and check for all VA forms.
• Submit to Lender for underwriting.
• Receive approval and fund your VA loan.
VA Forms and Disclosures Checklist
CHECKLIST FOR AUDIT PACKAGES OF AUTOMATIC LOANS
PURCHASE & REGULAR REFINANCE

When automated underwriting is involved, follow the feedback sheet for credit,
income and asset requirements.

Lender's cover letter with VA case number and person to contact (optional)
VA Loan Summary Sheet, VA Form 26-0286, fully completed, NOTE the form has been revised
POST CLOSING go to http://www.va.gov/vaforms/ to obtain the latest copy
Certificate of Eligibility or ACE - Check SSN versus credit report, need active duty certification on
VA
Form 26-1820 if box is checked.
Funding Fee Receipt or proof that the veteran is exempt POST CLOSING
Loan Analysis, VA Form 6393 - Must have CAIVRS data, be completed and signed.
Report and Certification of Loan Disbursement, VA Form 26-1820, check for completeness,
signatures, property address, check occupancy cert., active duty certification, if applicable, and
POA. POST CLOSING
Basic Lender Certification
Automated Underwriting? Need the complete/latest feedback sheet; check to assure the data is
up to date and accurate
Verification of VA Benefits, VA Form 26-8937 if needed
HUD Settlement Statement - Check for allowable fees, seller concessions or cash back allowed?
POST CLOSING
Requirements of NOV (termite report, water analysis, repairs, etc.)
Request for waiver of late reporting, reason for delay and certification the loan is current, if not
reported within 60 days from the closing date POST CLOSING
VA Forms and Disclosures Checklist
Interest Rate and Discount Disclosure Statement
Counseling Checklist for Military Homebuyers, VA Form 26-0592, for active duty applicants.
Uniform Residential Loan Application with VA Form 26-1802a - make sure signed by all parties
and
notes the final terms of the loan. Check 1802a for signatures, final terms & items 23 & 25.
Credit Reports) - All credit reports, SS numbers, credit explanation needed?
VOM or Rental Verification Form or cancelled rent checks (front & back) covering the previous 12
months if not on credit report.
Verifications) of Employment Form- cover past two years, compare YTD earnings with current
wages. If stable income may use alternative docs; 1) telephone certification from employer 2)
paystubs covering 30 days 3) past 2 years W-2’s
Pay-stubs - Examine for deductions such as loan allotments or garnishments. If military
personnel, Leave and Earnings Statement (Examine for ETS date, advance pay/debts & assure
BAH is for the proper area.)
Additional income - VA compensation, retirement pay, SS income, child support
Self-Employed Borrowers - Two years signed tax returns, YTD profit & loss statement and
balance sheet
Verifications of Deposit Form- Should show past two months average balance and document
sufficient funds to close. Alt docs-2 months bank statements are also acceptable. Support large
increases with source and look for overdrafts, etc.
Purchase and Sales Agreement with the VA option/escape clause
Blanket Signature Authorization Form if applicable.
Children care expenses must be considered and documented
Copy of the appraisal and NOV
ARM Disclosure, if needed
VA Forms and Disclosures Checklist
CHECKLIST FOR AUDIT PACKAGES OF AUTOMATIC LOANS – IRRRL GURANTY SUBMISSION
VA LOAN# ______________________________
VETERANS NAME SS# __________________________

___Signed 1003
VA Loan Summary Sheet, VA Form 26-0286 POST CLOSE
**Certificate of Eligibility-benefit should be tied**(A COE or an WebLGY-Prior Loan Validation print
out showing an active loan)
Acknowledgment of Funding Fee or proof the veteran is exempt POST CLOSE

****IRRRL Loan Comparison Statement -(must include the following items)*****


Old & new PITI payments-look for a PITI reduction unless ARM or term reduction or EEI
The term of the NEW LOAN cannot increase by more than 10 years
Old vs. new interest rate/assure the rate is being reduced unless old loan was an ARM
Length of time to recoup the closing costs (financed and POC)-not required if there is no reduction in payment due to
an EEI loan or converting an ARM to a fixed rate or, decreasing the term
Statement must be signed by the veteran

If there is an increase in payment by more than 20% underwriter must certify the veteran qualifies for new loan
*****Interest Rate Reduction Worksheet, VA Form 26-8923-make sure CAIVRS is listed in the note section*****
Report and Certification of Loan Disbursement, VA Form 26-1820 POST CLOSE
Check for completeness, signatures, need waiver for late reporting?, check occupancy certification.
HUD-1 Settlement Statement - Check for allowable fees and charges. Discount points financed cannot be more
than 2%. If subordination recording charge-get a copy of the agreement. Subordination processing is not an
allowable fee. Also if credit report and appraisal listed, a copy must be sent. POST CLOSE
**** Federal Collection Policy Notice, VA Form 26-0503, or 1802a****
Lender certification that the prior VA loan was current at the time of closing for loans POST CLOSE
ARM disclosure if needed

For Priors (IRRRL) any loans where the existing VA backed loan is more than 30 days delinquent:
Explanation for delinquency with documentation to the problem has been resolved.
Credit Report, in file is acceptable
Current pay stub, W-2 and telephone certification of current employment or documentation concerning income
CAIVRS
– CAIVRS (Credit Alert Interactive Voice Response System) is a HUD maintained
system to determine if the borrower has defaulted on any federally-assisted loan.
– A CAIVRS inquiry must be performed on all borrowers.
– HUD offers online access for CAIVRS to current FHA lenders, and to VA lenders
with registration. https://vip.vba.va.gov (Veterans Information Portal).
– Consider all obligations appearing in CAIVRS when qualifying.

To complete the CAIVRS check, access the HUD website:


http://www.hud.gov/offices/hsg/sfh/sys/caivrs/caivrs.cfm . All lenders will have to
have a coordinator to authorize individual employees who will be allowed to access
the site. The coordinator will need your firm's VA lender identification number when
initially registering those selected. Access is not immediate and can take up to 10
days so assure to plan accordingly. After access for the company is granted,
individual employees will have to request their own access and when completed, will
be assigned their own log-in and password. Employee access is again not
immediate. Detailed instructions can be found on the HUD site noted above. Please
note, VA can not assist you with access issues. Lenders must deal with
SFADMIN@hud.gov for issues in accessing the CAIVRS site.
Once you have been granted a log-on and password, you are ready to check for any
federal debts your borrower may have. You will need the applicant(s) social security
number when calling to check for a federal debt. Upon confirmation of a debt or no
debt, you will be given a CAIVRS number (the CAIVRS confirmation code) which
should be written in either box 46 or 47 of the Loan Analysis form (VA F26-6393). If
there is a debt, proof that it has been paid in full or the terms of repayment, which
must be noted as a debt, must be included in the file. Each applicant should have
their own CAIVRS confirmation code. Please see VA Lenders Handbook, Chapter 4,
Topic 6 for more detail
Ordering Appraisals
• Appraisals are ordered by the broker, via the VA appraisal system (TAS).
• If the broker is not already registered, please direct them to the
following website: https://vip.vba.va.gov .
• From the US Dept of Veterans Affairs homepage, click on “The Appraisal
System (TAS)” (Third option from the bottom on left hand side).
• Click on “Register” (Left-hand side of screen).
• Register with VA. When registering, use your Broker ID Number.
• Use your lender’s number as your “Sponsor”. Obtain the VA ID Number
from your Account Executive.
• Order appraisal by choosing “LAPP”. Do not order as a “IND” appraisal.
• On IRRLs no appraisal is required. Order a “Case Number Only”
• GO TO
http://www.vba.va.gov/ro/manchester/lgymain/lp/loanprocessing.htm
AND CLICK THE VA LOAN PRODUCTION FOR LENDERS 2009 AND GO
TO PAGES 25 &26 FOR MORE DETALS
Documents Required for VA
Condo Approval
• This list is provided as a reference only. VA’s Lender Handbook,
http://www.warms.vba.va.gov/pam26_7.html, and the Valuation Staff can provide you
with the latest changes and/or clarification as needed.
• All questions concerning documentation should be directed to Valuation
• Best method of contact: nh.appr@vba.va.gov
Or
• Call 800-827-6311 (Option 6)
• Fax: 603-222-5861
• All condominiums MUST be VA approved prior to closing. This includes condexes,
stand alone, and complexes. VA does not require PUDs to be approved anymore.
• FHA Approved Condominium
• A condo that is FHA approved can be added to the VA approved list by submitting the
following items:
• Evidence that the condo is FHA approved.
• A copy of the current budget.
• Copies of the minutes of the two most recent home owners association meetings.
• Upon satisfactory receipt of these items a short review will be completed and the
condo will be added to the VA approved list. You can see if a condo is FHA approved
by going to the web site www.hud.gov .
Documents Required for VA
Condo Approval Cont’d
• Condominiums That Are Not VA/FHA Approved

• Condos that are not VA or FHA approved can be


submitted to VA for approval. Condos can fall into two
categories, existing and new. The following table
displays the documents that are required to be submitted
for approval for either category of condos.

Required Document New Project Existing Re-sales

1 Declaration of Covenants, Conditions Yes Yes


and Restrictions
Documents Required for VA Condo
Approval Cont’d
Required Documentation New Project Existing Re-sales
2 Bylaws for HOA Yes Yes
3 Articles of Incorporation for HOA If Applicable If Applicable
4 “Umbrella” projects, Declaration, Bylaws and If Applicable If Applicable
Articles of Incorporation, as above
5 Plat, map and/or air lot survey of project Yes Yes
6 Plat, map and/or air lot survey of unit(s) If Applicable If Applicable
7 Development plan and schedule Yes If Declarant Controls
8 Information or Public Offering Statement Yes If Declarant Controls
9 Grant/deed/leasehold agreement form Yes If Declarant Controls
10 State reviewing agency’s report If Applicable If Applicable
11 Annexation documents If Applicable If Applicable
12 Cross-easement(s) If Applicable If Applicable
13 Facility Leases If Applicable If Applicable
14 Management agreement If Applicable If Applicable
15 Service contract(s) (either form of or actual) If Applicable If Applicable
16 HOA budget (existing or proposed) Yes Yes
17 Current financial statements and reserves of If Applicable If Applicable
project
Documents Required for VA
Condo Approval Cont’d
Required Documentation New Projects Existing Re-sales
18 Special assessments/litigation statement Yes Yes
19 Minutes of last two HOA meetings Yes Yes
20 Registered architect/engineer statement on If Declarant Controls If Declarant Controls
project condition (conversions only)
21 Recorded documents Yes Yes
22 Recorded annexation document for subject Yes Yes
phase (expandable projects only)
23 Evidence recreational facilities completed and Yes Yes
common area conveyed to HOA
24 Statement on adequacy of utilities serving site If Declarant Controls If Declarant Controls
(conversions only)

25 Evidence common area title free of financial Yes If Applicable


encumbrances
26 Evidence of final local authority approval and Yes No
final VA inspection (Low/High Rises and
Conversions only)
27 Lender’s certification that pre-sale requirement Yes Yes
met (70%)

NOTE – The review of these documents takes approximately fourteen days after receipt of all required documentation
Energy Efficient Improvement Loans
(EEIs)
• Eels are loans to cover the cost of making energy efficiency improvements to a
dwelling. Funds for energy efficiency improvements are considered part of the total
loan. The escrow for the work must be made at the time of the purchase or refinance.
Note: The funding fee must be calculated on the full loan amount, including the cost
of the energy efficient improvements.

• The mortgage may be increased by:


Up to $3,000 based solely on the documented costs of the energy improvements
OR
Up to $6,000 provided the increase in monthly mortgage payment does not exceed
the documented likely reduction in monthly utility costs; (Documentation of reduction
is reviewed and accepted by the underwriter. It may be in form of an energy audit or
information from a utility company website; it is up to that underwriter’s judgment.)
OR
More than $6,000 subject to a value determination by VA. (This option is not available
with an IRRRL)

• If the labor is to be performed by the veteran, the loan increase will be limited to the
amount necessary to pay for materials. See VA Lender’s Handbook, Chapter 7 for
full details.
EXAMPLES OF ENERGY
EFFICIENT IMPROVEMENTS

• Solar heating and cooling systems


• Furnace replacement or efficiency modifications
• Clock thermostats
• New or additional ceiling, attic, wall and floor insulation
• Water heater insulation
• Storm windows and/or doors/vapor barriers
• Heat pumps

All questions concerning what is acceptable as an EEI


should be directed to the Valuation (appraisal)
Department.
VA REGIONAL OFFICE
• The Manchester Regional Loan Center (RLC) is one of nine nationwide locations handling
Loan Production (underwriting & closing), Valuation (appraisal) and Loan Administration
(servicing & claims) activities. The Manchester RLC provides services for seven states of:
• * Connecticut * Maine
• * Massachusetts * New Hampshire
• * New York * Rhode Island * Vermont

• Our office is under the direction of William F. Dallmann, Loan Guaranty Officer.

• Departments, Staffing and How to Reach Us:

• Loan Production handles questions on eligibility, processing of loans, credit


standards/underwriting, guarantees and assumptions. Telephone number is (800)827-
6311, option 7, fax 603-222-5862. E-mail address is nh_lp@va.gov .

• Staff:
– Anne Keller, Loan Specialist
– Barbara Croman, Loan Specialist
– Gerri Casey, Loan Specialist
– Jimmy Clark, Loan Specialist
– Monique Beaudoin, Loan Production Officer

• Valuation (formerly known as C&V, commonly known as the Appraisal Department)


handles all questions concerning what properties VA would accept; i.e., construction
requirements, condo approval, appraisal issues, use of/logging into TAS, and water and/or
pest inspections. Telephone number is (800)827-6311, option 6, fax 603-222-5861. E-mail
address is nh_appr@va.gov .
VA Web Site Links
• www.homeloans.va.gov/ls.htm
• VA’s home page specifically for lenders. This link gives them information on training,
what’s hot, and how to contact all the RLCs plus a link to the Portal (for TAS,
WebLGY, etc.), and VA Lender’s Handbook.
• www.homeloans.va.gov
• The national home site for Loan Guaranty that offers information to lenders and
veterans; i.e. VA’s Lender Handbook, circulars, forms, online training, etc.
• http://www.vba.va.gov/ro/manchester/lgymain/loans.html
• Manchester’s website which lists upcoming training, local releases and you can even
download updates of this guide.
• http://vip.vba.va.gov/
• website address to access VA’s Portal. The portal allows you to access:
• TAS (the appraisal system) to order case numbers, appraisers, find out the status of a
case, issue or print an NOV
• E-Appraisals is the Web-based application that allows appraisers to upload URAR
documents online and other interested parties to retrieve these for review or hard
copy printing
• Condo/PUD/Builder provides a customized list of VA registered Condominiums and
Builders (search tip: search by state and then choose by alphabet or if selecting a
city use an * in lieu of a project name)
• WebLGY allows you to obtain a certificate of eligibility (or copy of one issued by VA),
check the status of a prior approval loan, or obtain a guaranty online
VA Web Site Links Cont’d
• http://www.va.gov/vaforms
• To download various VA forms
• www.homeloans.va.gov/eligibility.htm
• Provides information and the necessary form to obtain a certificate of
eligibility
• http://condopudbuilder.vba.va.gov/2.2/frames.html
• Provides a list of VA approved condominiums, planned unit developments
and builders. You may also access this list directly from the Portal by
logging on then selecting CPB under Applications.

• www.warms.vba.va.gov/pam26_7.html;
• Direct access to VA Lender’s Handbook
• www.homeloans.va.gov/contact.htm
• Website to E-mail various VA offices
• www.paycheckcity.com/netpaycalc/netpaycalculator.asp
• Paycheck deduction calculator:
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THANK YOU!