The move implements the recently passed Economic Growth, Regulatory Relief, and Consumer Protection Act
The Department of Veterans Affairs has announced a new policy under which lenders will be required to provide veteran borrowers with a comparison of their existing VA-backed home loan to the proposed one when refinancing.
The new policy implements the recently passed Economic Growth, Regulatory Relief, and Consumer Protection Act. The law includes provisions that protect veteran borrowers from predatory lending practices when obtaining a VA-guaranteed refinance loan.
Also called a recoupment or break-even analysis, the comparison required under the new policy helps veteran borrowers understand the costs of refinancing, the monthly payment savings, and the overall impact on their finances.
“We want to ensure veterans have the informed ability to take advantage of economic opportunities and make sound decisions that enable them to prosper when using their benefits,” Acting VA Secretary Peter O’Rourke said. “This is yet another tool that will help veterans meet their personal goals.”
According to the VA, the new law puts in place protections for veterans and service members from the dangers associated with repeatedly refinancing their home loans by requiring, among other things, the seasoning of the original loan and a recoupment period for fees, closing costs, and expenses related to the refinance. The act also provides for a specified interest rate decrease and for protections of loan-to-value ratios. The VA will only guarantee a refinancing loan if it meets the requirements specified in the act.