Change Date

September 15, 2004, Change 4

This section has been changed to create subsection lettering.

a. Requirements

Lenders may use any note and mortgage forms they wish for VA loans. 

VA regulations at 38 CFR 36.4334 provide that security instruments used by a lender which are inconsistent with VA regulations in effect on the date the loan is closed will be considered amended and supplemented to conform to the regulations.

Lenders must ensure that the security instruments they use

·   establish the required lien

·   comply with the laws and regulations governing VA’s home loan program

·   comply with applicable state laws, and

·   contain the following VA clauses

-   Assumption Approval clause

-   Acceleration clause

-   Funding Fee clause

-   Processing Charge clause, and

-   Indemnity Liability Assumption clause.

If a lender fails to obtain the required lien or otherwise comply with applicable law, VA may reduce or deny liability under its guaranty to the extent that such failure might have prejudiced the rights of the Secretary.

b. Assumption Approval Clause

The instruments evidencing the loan (note or bond and mortgage or deed of trust, or retail installment contract for manufactured homes) must read substantially as follows:

“THIS LOAN IS NOT ASSUMABLE WITHOUT THE APPROVAL OF THE DEPARTMENT OF VETERANS AFFAIRS OR ITS AUTHORIZED AGENT.”

The loan assumption notice must appear conspicuously on at least one of the security instruments for the loan.