Change Date

September 15, 2004, Change 4

This section has been changed to create subsection lettering.

a. Purpose

Because of the high loan-to-value ratios of VA-guaranteed loans, it is critical that underwriters use sound judgment.  The underwriting deficiencies listed in this section represent a sample of actual deficiencies found on VA loans that went into default.  The deficiencies were of such significance that many of the loans should not have been made.

b. Inadequate Development of Credit Information

Deficiencies included

·   failure to compare documented information with the applicant’s initial application

·   failure to question and investigate obvious discrepancies

-   in the number of dependents or household size, and

-   between actual year-to-date average monthly earnings and the income   claimed on the loan application

·   failure to question multiple Social Security numbers for an applicant

·   failure to determine future plans of an active-duty serviceperson whose separation from service is imminent, and

·   accepting an explanation for a bad credit history without documenting the circumstances alleged to have caused the credit problem, judgment, or bankruptcy.

c. Missing Documentation

Deficiencies included failure

·   to inquire about and document the payment history on previous home loans, including prior VA loans, and

·   to obtain documentation of employment history during the previous 2 years.