With mortgage origination volume expected to remain flat this year and the cost to originate reaching $8,611 per loan in Q4 2018, according to the Mortgage Bankers Association (MBA), many bankers are struggling to compete in today’s environment and cannot afford to turn away any opportunities.
Even though they only represent approximately 10 percent of the mortgage market, loans backed by the U.S. Department of Veterans Affairs (VA) have become a critical part of every banker’s origination mix especially for smaller banks who serve their local communities. Unfortunately, they come with constraints. Unlike Qualified Mortgage (QM) loans, which allow bankers to charge up to three percent as lender fees to cover origination, processing and underwriting costs for a loan of $100,000 or more, bankers originating VA loans are only permitted to charge up to one percent of the loan amount.
Bankers have the option to charge a flat one percent origination fee to cover lender costs which are non-reimbursable as itemized fees. If bankers charge the flat one percent fee, they are prohibited from charging any additional lender fees that are considered unallowable.
Alternatively, bankers can itemize fees to take advantage of state deviations/exceptions and charge fees that would otherwise be considered unallowable. Today, the VA permits lenders to charge certain fees that would otherwise be included in the one percent cap in 31 different states. Some of these fees include attorney fees, fraud report costs, municipal lien certifications, various title insurance/policy fees, and termite inspection fees. Texas allows 11 exceptions—the most out of any state. Arkansas has the second most exceptions with eight. And New York comes in third with six exceptions.
[Sidebar: A complete list of state fees and charges deviations is available at: https://www.benefits.va.gov/homeloans/documents/docs/state_deviations.pdf]
Up until now, taking advantage of state exceptions has been a manual process—costly, time consuming, and fraught with the risk of calculating incorrectly and exceeding the maximum amount allowed.
To help mitigate risk and improve efficiency for VA lending, ComplianceEase has enhanced its flagship platform, ComplianceAnalyzer®. The platform now gives bankers the option to implement VA lending policy and test loans for all of the unique state charges and fee deviations published by the VA. This ensures that bankers are not only compliant when charging fees to veterans and active military, but also able to recover the maximum allowable costs under each jurisdiction in real time.
ComplianceAnalyzer with TRID Monitor is the only mortgage compliance solution to be included as an ABA Endorsed Automated Home Mortgage Compliance solution.
Special discounted pricing is available to ABA members. Visit aba.com/endorsed for more information.