VA Loan Quality Certification: A Complete Guide for Lenders

The VA loan quality certification is an important requirement for lenders that originate VA loans. This certification ensures that the lender has adhered to VA guidelines and underwriting standards when originating and closing the VA loan.

What is the VA Loan Quality Certification?

The VA loan quality certification, also known as VA Form 26-1820, is a form that must be completed and signed by an authorized lender official on all VA loans, except Interest Rate Reduction Refinance Loans (IRRRLs).

This form certifies that the lender has originated, closed, and disbursed the VA loan in compliance with VA regulations underwriting standards and guidelines. The certification covers key aspects of the loan process including

• Appraisal and valuation of the property
• Creditworthiness of the borrower
• Income, assets, and debts of the borrower
• Closing costs and fees
• Occupancy status of the property
• Lien and title status

By signing this certification, the lender attests that due diligence was exercised in originating and closing the loan. The VA relies on the representations made by lenders on this form when determining that a loan should qualify for the VA loan guaranty.

When Must the Certification be Completed?

The VA loan quality certification must be completed by the lender before requesting evidence of the VA loan guaranty Lenders typically complete VA Form 26-1820 at the time of loan closing and upload it to VA’s electronic loan submission portal along with the closing package

For prior approval loans that require a commitment from VA before closing, an initial Form 26-1820 is submitted with the closing documents. A final Form 26-1820 must also be completed on the actual closed loan and submitted to VA when requesting the loan guaranty.

The form is not required for IRRRLs since these are streamlined refinances of existing VA loans. However, lenders must still adhere to VA underwriting guidelines for IRRRLs

Who Can Sign the Certification?

The VA loan quality certification must be executed by an authorized lender official who has direct knowledge of how the specific loan was originated, closed, and disbursed.

For supervised lenders, the form is typically signed by the individual underwriter. For automatic lenders with delegated authority from VA, an officer of the company usually completes and signs the certification.

Individuals signing the form are certifying that they have exercised due diligence and reviewed sufficient documentation to evidence adherence to VA requirements. Signing officials may be subject to civil and criminal penalties under law for false certifications.

Key Aspects of the Certification

The VA loan quality certification covers several key aspects of the loan process. The authorized lender official certifies that:

• The loan conforms to VA requirements – The loan terms, underwriting, closing, fees, and servicing procedures comply with VA regulations.

• Income was adequately verified – The veteran’s income, employment, and assets were verified, analyzed, and documented.

• Credit history was reviewed – The borrower’s credit report was reviewed to determine satisfactory credit reputation and capacity.

• Debts and obligations were verified and analyzed – All debts and obligations were included in the debt-to-income analysis.

• Occupancy requirements were met – The veteran intends to occupy the property as their home.

• The loan amount is not greater than the reasonable value – The loan amount does not exceed the reasonable value established in the VA Notice of Value.

• First lien status was obtained – The loan is secured by a valid and enforceable first lien.

• Closing costs do not exceed 1% origination fee – Closing costs do not include an origination fee exceeding 1% of the loan amount.

• No false certifications were made – No false or incorrect certifications have been made by any party to the loan.

Consequences of False Certifications

Lenders must exercise due diligence when completing the VA loan quality certification. False certifications can result in serious consequences including:

• Loss of automatic authority status for the lender
• Withdrawal of VA approval as a VA lender
• Civil penalties up to $10,000 per violation
• Liability for losses on the loan guaranty
• Criminal penalties for fraud

VA routinely samples and reviews loans to ensure certifications are valid. Lenders found to exhibit a pattern of false certifications may have their VA automatic authority revoked.

How to Correct Minor Deficiencies

For minor technical deficiencies on a loan, a lender has the option to correct the deficiency and make the loan conforming prior to completion of the VA loan quality certification.

Examples of minor deficiencies include errors in certain closing costs, miscalculations of escrows or prorated amounts, or incorrect recording fees.

The lender must document any curative action taken and ensure the loan is fully compliant before certifying proper origination, closing, and disbursement. This avoids the need to submit false certifications to VA.

Best Practices for Lenders

To ensure VA loan quality and avoid issues with false certifications, lenders should adopt best practices including:

• Maintaining up-to-date policies and procedures based on current VA guidelines
• Providing regular training to underwriters on VA regulations and updates
• Performing quality control reviews of VA loans before and after closing
• Discussing any unclear or borderline cases with VA staff to obtain guidance
• Seeking assistance from VA on waivers or exceptions to guidelines before closing loans
• Developing checklists for loan officers and processors to ensure all VA requirements are met

Adhering to VA lending standards and keeping staff informed on guidelines is key to avoiding problems with certifications. Lenders should take a proactive approach in communicating with VA when guidance is needed on more complex loans.

The VA loan quality certification ensures sanctity of the VA housing loan program. Lenders fulfill a trusted role in self-certifying adherence to VA underwriting and origination standards. Taking the certification obligation seriously is imperative to safeguarding the integrity of the VA home loan guaranty.