Veterans Benefits Administration Circular 26-20-10

Department of Veterans Affairs March 27, 2020

Washington, D.C. 20420

Lender Guidance for Borrowers Affected by COVID-19

1. Purpose. On March 13, 2020, the President of the United States declared a National

Emergency due to Coronavirus Disease 2019 (COVID-19). This Circular provides guidance for

Department of Veterans Affairs (VA) home loan borrowers affected by COVID-19 and describes

in 38 U.S.C § 3703(d)(3) and 38 C.F.R. § 36.4355.

3. Effective Dates. The policies outlined in this Circular are effective for all loans closed on, or

after, the date of this Circular and until further notice or the rescission of this Circular.

4. Income Verification Guidelines. Lenders should continue to use good judgment and

flexibility when verifying stable and reliable income. Lenders should make every effort to satisfy

VA’s longstanding requirements concerning Verification of Employment (VOE) as outlined in

the VA Pamphlet 26-7, Chapter 4 Credit Underwriting.

(2) If the lender is not able to utilize a third-party service to verify employment and income, a

VOE can be met with evidence of direct deposit from a bank statement and paystubs covering a

at least one full month of employment within 30 days of the closing date. Lenders should

reconcile payment amounts between the paystubs and direct deposit listed on the bank statement.

(3) If the required VOE documentation cannot be obtained by evidence of bank statement and

paystubs, and the borrowers have cash reserves totaling at least 2 months mortgage payments

(PITI) post-closing, the loan is eligible for guaranty. The lender’s effort to obtain the VOE must

be documented in the Correspondence section of WebLGY.

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

“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

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

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

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

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

2

will exercise all discretion under existing authorities to provide every opportunity to the lender to

secure guaranty.

that lenders may experience operational delays as a result of COVID-19. Such issues may affect

the lender’s ability to request the Loan Guaranty Certificate, in WebLGY, within 60 days of

closing per 38 C.F.R. § 36.4303.

a. Lenders are reminded that justification for the delay must be provided when requesting the

Loan Guaranty Certificate. Justifications should be uploaded to the Correspondence section of

WebLGY. For additional guidance when providing justification, please refer to Pamphlet 26-7,

Chapter 5, Section 4, Topic b.

b. If the delay was related to COVID-19, the justification should include this information, so

10. Rescission: This Circular is rescinded April 1, 2021.

Distribution: CO: RPC 2021

SS (26A1) FLD: VBAFS, 1 each (Reproduce and distribute based on RPC 2021)