VA Reminder and Update– Seasoning Requirements for Refinances of Modified Loans
Newrez LLC "Newrez" Approved Correspondent Clients: please note, 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. If a loan has been modified, seasoning requirements are based on the terms of the modification agreement.
We are updating our requirements for all VA refinances and will require a copy of the original Note and the most recent mortgage statement of the loan being refinanced.
As a reminder, the seasoning requirements for VA IRRRL and Cash-out Refinance transactions are subject to the following requirements:
- The borrower must have made at least six (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 six (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 refinance.
- For the refinance of a loan that has been modified, 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 six (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 or on other mortgage verification documents. In addition, modification agreements may not be recorded timely and not reflected on preliminary title report. 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 a copy of original Note and compare it to a recent mortgage statement to confirm consistency of the interest rate, payment amount, and maturity date between the two (2) documents
- Review pay off statements or mortgage statements for deferred or past due interest amounts or fees
- Review preliminary title reports for recorded modifications
- Ask the borrower if the current loan has been modified during the past 12 months
With this update, we will now require all VA refinance transactions include a copy of the original Note and most recent mortgage statement of the loan being refinanced. If the original Note is not available, reasonable alternatives can be considered to validate the loan being paid off was not subject to a recent modification.
We continue to caution correspondent clients to use the above best practices to help identify if the current mortgage being paid off may have been modified.
Please note: 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.