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VA Loan Guaranty Compliance & Audit: Navigating Lender Scorecards and Misleading Ads

This informative session will provide an overview of VA Lender Scorecards and how they are used in audits. Learn about key audit perspectives, compliance questions, and tips to navigate lender scorecards. Understand regulations on misleading advertisements and avoid common pitfalls.

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VA Loan Guaranty Compliance & Audit: Navigating Lender Scorecards and Misleading Ads

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  1. VA Loan Guaranty Service Navigating Compliance Lender Scorecards for Audits & Misleading Advertisements Alberto Planas, Assistant Director, Oversight

  2. Lender Scorecard – Audit Perspective • Overview • Discuss VA Lender Scorecards from a Loan Guaranty Audit perspective • How LGY Auditors use the Scorecards • What questions they will ask • Some tips to help you

  3. Lender Scorecard – Audit Perspective • Cash-Outs - higher than National avg? • ARMs - higher than National avg? • Loans Guaranteed at <24.5% Guaranty lower than National avg? • Median Cal. Days – Closing to Guaranty higher than National avg or close to VA 60-day requirement?

  4. Lender Scorecard – Audit Perspective • Fixed – lower than National avg? • Fixed – higher than National avg? • ARM – lower than National avg? • ARM – higher than National avg?

  5. Lender Scorecard – Audit Perspective • Higher than National avg? • Lower than National avg? • Which loans get priority? • Avg Timeliness X past loan volume?

  6. Lender Scorecard – Audit Perspective • AUS Approve – higher than National avg? • AUS Refer – higher than National avg? • Median DTI – high or low? • Other Median Stats – high or low?

  7. Lender Scorecard – Audit Perspective • Loans Reviewed - higher than National avg? • Other stats higher than National avg? • Status of Currently Non-Compliant Cases? • EPD Reviews – higher than National avg?

  8. Lender Scorecard – Audit Perspective • Higher than National avg? • Lower than National avg? • Significant differences from National avg?

  9. Lender Scorecard – Audit Perspective • Fees & Charges higher than National avg? • Unallowable Cash Back higher than National avg? • Significant differences from National avg? • Discount points appropriate?

  10. Lender Scorecard – Audit Perspective • Targeting specific age ranges (i.e., younger Veterans/Servicemembers, elderly, etc.)? • Median Stats for certain age ranges appropriate?

  11. Lender Scorecard – Audit Perspective • Loan activity in line with business model? • Loan activity in line with office locations? • Source of loan activity?

  12. Lender Scorecard – Audit Perspective • Other Lender Audit Tips • Use Lender Scorecard to QC Operations • Respond to RLC inquiries • Document, document, document • What’s caused you stress recently? • When does the audit start?

  13. Lender Scorecard – Audit Perspective

  14. Misleading Advertisements • Overview • Regulatory Process • VA’s Regulation on Misleading Ads • Regulations N & Z

  15. Misleading Advertisements • Regulatory Process • Congress writes a Bill • President Approves (or Vetoes) the Bill • Act is Codified in the U.S. Code • VA Proposes a Regulation • VA considers comments and issues Final Rule • Regulation is Codified in Code of Federal Regulations

  16. Misleading Advertisements • 38 CFR § 36.4370 - Advertising and solicitation requirements • Any advertisement or solicitation in any form (e.g., written, electronic, oral) from a private lender concerning housing loans to be guaranteed or insured by the Secretary: • (a) Must not include information falsely stating or implying that it was issued by or at the direction of VA or any other department or agency of the United States, and • (b) Must not include information falsely stating or implying that the lender has an exclusive right to make loans guaranteed or insured by VA.

  17. Misleading Advertisements • Must not include information falsely stating or implying that it was issued by or at the direction of VA • From VA • VA Program Customer Support • VA Loan Representative • VA Specialist • VA Loan Department • VA Loan Specialist Division

  18. Misleading Advertisements • Must not include information falsely stating or implying that it was issued by or at the direction of VA • About the Veteran’s benefits (Eligibility) • Eligibility Notice • Eligibility Status • Eligibility Advisory • Pre-qualification • Benefit Announcement

  19. Misleading Advertisements • Must not include information falsely stating or implying that it was issued by or at the direction of VA • About the Veteran’s benefits (Time-sensitive) • Expiration Notice • Waiting Period • Pending Authorization • Referencing a false ‘Original Mail Date’

  20. Misleading Advertisements • Must not include information falsely stating or implying that it was issued by or at the direction of VA • Use of VA logo • Additional implications • Similar to VA logos • Green paper • Government-style letter formatting • Government-style envelopes

  21. Misleading Advertisements • Must not include information falsely stating or implying that it was issued by or at the direction of VA or any other department or agency of the United States • Use of IRS signature year style (e.g., 2019) • Information displayed in IRS Form W-2 manner • Additional implications • Similar to IRS symbol • Government-style letter formatting • Government-style envelopes

  22. Misleading Advertisements • Additional Misleading Practices • “Skip” two payments • Escrow account refunded • Fake checks

  23. Misleading Advertisements • 12 CFR § 1014.3 - Prohibited representations (Regulation N) • Some key provisions • Misrepresentation of fees, taxes and insurance • Mortgage type • Variability of mortgage • Likelihood of approval • Source of advertisement

  24. Misleading Advertisements • 12 CFR § 1026.24 - Advertising (Regulation Z) • Seven prohibited acts or practices • Use of ‘fixed’ • Rate &/or payment comparisons • Government endorsement • Use of current lender’s name • Claims of debt elimination • Use of term ‘counselor’ • Foreign language

  25. Misleading Advertisements

  26. THANKS Thank you for helping us provide this important benefit to our Nation’s Veterans!!!

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