a. The Search Requirement (continued)

(2)  For all applicants and co-obligors (veteran or nonveteran) on all VA loans including Interest Rate Reduction Refinancing Loans (IRRRLs), perform a CAIVRS inquiry.

Reference:  See “CAIVRS Procedures” in this section.

Note: Lenders who have HUD authority to use the HUD CAIVRS system may now obtain a prescreening through the HUD website.  Please see “CAIVRS Procedures” for more information.

b. Debt Related to VA Benefits

Before processing a loan involving certain veterans, as described in item (1) of “The Search Requirement,” the lender must submit VA Form 26-8937, Verification of VA Benefit-Related Indebtedness, to the VA office where the loan application and/or closed loan package will be sent.  VA will complete and return the form to the lender. 

The loan cannot be submitted for prior approval or approved under the automatic procedure until the lender obtains the completed form from VA. The lender must submit the completed form with the loan package.

If the form indicates that the applicant receives nonservice-connected pension or has been rated incompetent by VA, the loan cannot be closed automatically.  Submit the loan for prior approval.

If the form indicates that the applicant has any of the following:

·   An outstanding indebtedness of overpaid education, compensation or pension benefits

·   an education or direct home loan in default

·   an outstanding indebtedness resulting from payment of a claim on a prior guaranteed home loan,

·   a repayment plan for any of these debts that is not current, then one of the following must accompany the loan package:

-   evidence of payment in full of the debt, or

-   evidence of a current repayment plan acceptable to VA and evidence that the veteran executed a promissory note for the entire debt balance.