VA Reminder – Seasoning Requirements for Refinances of Modified Loans
Newrez LLC "Newrez" Approved Correspondent Clients: please note, as a reminder, there are seasoning requirements for all VA Refinance transactions that are based on the original terms of the Note unless the original Note was modified. A modification is a permanent change to the terms of the original Note. A forbearance is a temporary change to the terms of the original Note and follow separate guidelines.
The seasoning requirements for VA IRRRL and Cash-out refinances are subject to the following requirements:
- Borrower must have made at least 6 consecutive monthly payments on the loan being refinanced (the borrower may not pre-pay the current loan to meet the requirement)
- Any interruption in the monthly payments before the initial 6 months of seasoning will require the Veteran to reset the minimum loan seasoning time frame. Six (6) consecutive monthly mortgage payments paid within the month due is required after the last missed payment to meet the statutory seasoning requirement; and
- The Note date of the refinance loan occurs no earlier than 210 days after the date on which the first monthly payment was due on the mortgage being refinanced
- For refinance of a modified mortgage, the Note date of the new refinance mortgage must be on or after the later of:
- The date that is 210 days after the date on which the first modified monthly payment was due on the mortgage being refinanced, and
- The date on which 6 modified payments have been made on the mortgage being refinanced
Clients and associates are advised to exercise due diligence when reviewing mortgage payment histories to identify mortgages that might have been modified within the previous 12 months. Many loan modifications are not reported or clearly identified on the credit reports and other verifications of mortgage documents. The following list of practices (not all-inclusive) may help identify if the original note was modified.
- Review the credit report for special remarks such as “Impacted by COVID-19” or” Deferred”,
- The current mortgage balance is greater than the original loan balance or does not align with amortization schedule
- Request and review copy of original note and compare it to a recent mortgage statement to confirm the payment amounts are consistent between the two documents
- Review payoff statements or mortgage statements for deferred or past due interest amounts or fees
- Review preliminary title reports for recorded modifications
For loans underwritten by Newrez, the underwriter will require a copy of the original note along with the most recent mortgage statement.
The above clarification is specific to refinances of mortgages that have been modified and does not apply to One-time Close Construction to Permanent loan modifications.
Please refer to the Newrez VA Product Profiles for additional details.