Change Date

September 15, 2004, Change 4

·  This section has been changed to create subsection lettering.

·  Subsection b adds a reference to the hybrid ARM pilot program.

·  Subsections e and r clarify the veteran’s statement and the lender’s certification disclosures.

·  Subsection r deleted references to obsolete funding fee forms.

a. What is an IRRRL?

An IRRRL is a VA-guaranteed loan made to refinance an existing VA-guaranteed loan, generally at a lower interest rate than the existing VA loan, and with lower principal and interest payments than the existing VA loan.  

Generally, no appraisal, credit information or underwriting is required on an IRRRL, and any lender may close an IRRRL automatically. 

Note: Exceptions and specific requirements are explained in the remainder of this section.

b. Interest Rate Decrease Requirement

An IRRRL (which can be a fixed rate or hybrid ARM) must bear a lower interest rate than the loan it is refinancing unless the loan it is refinancing is an Adjustable Rate Mortgage (ARM).

c. Payment Decrease/ Increase Requirements

The principal and interest payment on an IRRRL must be less than the principal and interest payment on the loan being refinanced unless one of the following exceptions applies:

·  The IRRRL is refinancing an ARM,

·  Term of the IRRRL is shorter than the term of the loan being refinanced, or

·  Energy efficiency improvements are included in the IRRRL.

A significant increase in the veteran’s monthly payment may occur with any of these three exceptions, especially if combined with one or more of the following:

·  financing of closing costs

·  financing of up to 2 discount points

·  financing of the funding fee, and/or

higher interest rate when an ARM is being refinanced.