18-24: VA Circular 26-18-13 Updates to VA Refinance Transactions


Effective with all loan applications taken on or after May 25, 2018, PennyMac is aligning VA Circular 26-18-13.  All VA IRRRL transactions must meet the requirements in the circular.  The table below summarizes the previous and updated requirements. 


Prior to 5/25/18

On or after 5/25/18

Recoupment Statements

Required with initial and final disclosures

No change.  Required with initial and final disclosures.

Months to Recoup

Not required

  • Maximum 36 months recoupment
  • Calculation based on Circular 26-18-1
  • Lender must certify the loan meets requirements

Net Tangible Benefit (NTB): Interest Rate Reduction

Interest rate must be reduced

  • Fixed to Fixed requires 0.5% rate reduction
  • Fixed to ARM requires 2.0% rate reduction
  • ARM to Fixed not applicable
  • ARM to ARM not applicable
  • Discount points may be used to lower interest rate, subject to additional restrictions summarized below.
  • To ensure compliance with VA’s requirements, a copy of the note from the refinanced loan must be provided.

Discount Points

Not required

When discount points are used to reduce the interest rate, an LTV calculation is required based on the following:

  • less than or equal to one discount point requires an LTV* of 100% or less
  • greater than one discount point requires an LTV* of 90% or less

VA Specific Loan Seasoning

No VA specific seasoning,  Ginnie Mae requirements applicable

The note date for the new loan must be the later of:

  • The date that is 210 days after the date on which the first payment is made on the loan, and;
  • The date on which the sixth monthly payment is made on the loan

*LTV is calculated by dividing the base loan amount by the value.  Value may be determined via:

  • Exterior-Only Inspection Residential Appraisal Report (Fannie Mae 2055)
  • Uniform Residential Appraisal Report (Fannie Mae 1004)
  • Exterior-Only Inspection Individual Condominium Unit Appraisal Report (Fannie Mae 1075)
  • Individual Condominium Unit Appraisal Report (Fannie Mae 1073)
  • Other industry accepted appraisal reports for manufactured and multi-unit homes

Please contact your Sales Representative with any questions.