The American Bankers Association today joined five associations in urging the Federal Housing Administration to provide clear language about eligibility for VA loan terms, as required under legislation recently passed by Congress.
The VALID Act – which was passed as part of the 21st Century Road to Housing Act – requires information about VA home loans to be included in the Informed Consumer Choice Disclosure required to be provided to prospective FHA borrowers. In a letter, the associations said they support the intent of the law but believe that including VA loan terms in the notice without including eligibility criteria will cause some borrowers to conclude those terms are available to them. They instead submitted an alternative draft notice that includes both the terms and clear language about eligibility requirements.
“Our members are concerned that a comparison of loan products that could be misconstrued to suggest that all borrowers are eligible for the products presented will slow the origination process,” ABA said. “Lenders will need to spend more time responding to borrowers who lack the necessary military qualifications and explaining why they do not qualify for the VA terms shown. These additional steps would increase administrative burdens and delay processing without improving the disclosure’s usefulness.”
