5. Underwriting Loans. For income analysis purposes, as outlined in VA Pamphlet 26-7,
Chapter 4 Credit Underwriting, VA guidelines generally require income to be stable and reliable
for 2 years.
a. If the applicant was impacted by COVID-19 (i.e. furlough, curtailment of income, etc.),that
period should not be considered a break in employment or income provided they have returned,
or are anticipated to return, to work in the same capacity and income levels. In addition to
standard verification documentation, applicants should provide furlough letters where applicable.
b. VA continues to encourage lenders to take proactive measures in documenting and
uploading evidence of their analysis and justifications for all borrowers, especially for
“borderline” cases. This may proactively address questions that VA may otherwise ask and
prevent a loan level audit of that loan.
6. Electronic Mortgages (eMortgages), Electronic Notes and the use of Allonges. VA
anticipates an increase in eMortgages consistent with VA’s longstanding policy, established in
VA Pamphlet 26-7, Chapter 9, Legal Instruments, Liens, Escrows, and Related Issues. VA is
actively working with other federal housing agencies and Government National Mortgage
Association (GNMA) to increase the accessibility of eMortgages. Lenders are reminded to
comply with investor and/or GNMA guidance. It is important to clarify that an eMortgage
package may or may not include an electronic note (eNote). VA loans for which the promissory
note is an eNote are eligible for guaranty.
a. Promissory Note Requirements. eClosing transactions, for all closings executed as of the
date of this Circular may not include the use of an allonge. Any eClosing transaction including
the use of an allonge is ineligible for guaranty and subject to the removal of the guaranty. While
VA does not publish a standard Note or eNote as a template, VA encourages industry and
technology partners alike, to review eNote templates to remove clauses referencing the possible
inclusion of allonge.
(1) Closings transactions including allonge(s), that would otherwise modify the terms of an
eNote, are required to be closed using traditional, paper-based closing procedures. eClosings
transactions are permissible for both, mortgages where the resulting promissory is an eNote and
mortgages where the resulting promissory note is a paper note bearing a wet signature.
b. Electronic Notarization. VA loans for which electronic notarization was used as a part of an
eClosing, including in-person electronic notarization (IPEN) and remote online notarization
(RON) are eligible for guaranty provided that the notarization is valid and effective under
applicable law and regulations.
7. Lien Position. VA acknowledges the closure of some local Recording Offices may result in
the inability to record liens in a timely manner. In certain jurisdictions, lien position is strictly
determined by recordation date. Extended closures could result in the inability to appropriately
record the first lien position of VA Home Loans, as stated in 38 U.S.C § 3703(d)(3) and 38
C.F.R. § 36.4355.
a. In instances where the VA loan was not initially in first lien position, and the holder was
subsequently able to secure first lien position, the loan may later be submitted for guaranty. VA
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