Net Tangible Benefit Requirement for VA Interest Rate Reduction Refinance Loans (IRRRL)
Pennymac’s intent and policy is that all loans provide a benefit to the borrower. Specific to VA IRRRL transactions, the months to recoup is a primary measure of borrower benefit. Lenders are expected to have policies and procedures in place to ensure all IRRRL transactions provide a benefit to the veteran as measured by:
- months to recoup,
- transition from ARM to fixed financing, or
- a non-trivial reduction in remaining term.
While Pennymac does not provide specific requirements, Pennymac does monitor borrower benefit metrics on all purchased loans and expects Lenders to be within industry norms. Lenders should be aware that patterns of outlying lending practices and any specific loans closed with excessive months to recoup will be reviewed.