More on VA under the new RESPA

VA issued a circular on January 7th giving some guidance as to how to handle VA's unallowable borrower fees under the new RESPA. You can read it here: http://www.homeloans.va.gov/circulars/26_10_1.pdf

It seemed somewhat encouraging but not completely clear, so I e-mailed William White for clarification. From our discussion, it seems that it is VA's position that on a refi we would itemize the fees from "our origination charge" on a separate sheet and also itemize which of those fees are being paid by SRP on a separate page of the HUD and, by doing that, be able to pay the unallowable fees using SRP like we always have. This is great news because if you read my earlier posts you'll see that we would all be out of the VA refinance business without some provision like this.

Of course, now the challenge is to get the wholesale lenders to see it that way. One I spoke with thought that VA was wrong about this and would change their mind shortly, and of course they don't want to be stuck with a pipeline full of loans that can't be closed. His argument was that since SRP is now credited to the borrower it's the borrower's funds, and those fees can't be paid by the borrower's funds. I ran that argument by Mr. White from the VA and he said that they were OK with doing it that way. He also stated that they were struggling to figure out how to deal with the new RESPA just like the lenders are. The difference is that at least VA seems to be trying to make it work.