h. Improvements Not Completed Before Closing

If the energy efficiency improvements are not completed before closing, the lender may establish an escrow or earmarked account and close the loan.

·   A formal escrow is not required.

·   Only the amount needed to complete the improvements must be withheld.

·   Check the appropriate block in item 23 VA Form 26-1820, Report and Certification of Loan Disbursement.

·   No additional documentation concerning the escrowed/earmarked funds must be submitted when reporting the closed loan.

Generally, the improvements should be completed within six months from the date of loan closing.

·   Provide written notification to VA when improvements are completed and the escrow funds are disbursed, and

·   assure the funds are properly applied to the costs of improvements.

If, after a reasonable time, the lender determines that the improvements will not be completed

·   apply the balance of the escrowed/earmarked funds to reduce the principal balance on the loan, and

·   provide written notification to VA that this has been done.

i. Reimbursement of Veteran out of IRRRL Proceeds

The veteran generally may not obtain cash proceeds from an IRRRL. 

Note:  There is one exception.  Up to $6,000 of IRRRL loan proceeds may be used to reimburse the veteran for the cost of energy efficiency improvements completed within the 90 days immediately preceding the date of the loan.