VA Announces Changes to Verification of Income Process
The VA announced enhancements to its Certificate of Eligibility (COE) for VA’s home loan guaranty program which result in eliminating the majority of instances in which lenders and VA will utilize VA Form 26-8937, Verification of VA Benefits, to verify a Veteran’s receipt of income from VA. Rather, effective March 19, 2021, the VA will allow lenders to rely on the information provided by borrowers in the COE.
VA Form 26-8937 requires veterans who receive VA disability benefits to certify whether they have any debts related to those benefits. The veteran is required to complete the top half of the form, and then the lender submits it to the VA Regional Loan Center. Once there, the form is processed and the bottom half is completed and returned to the Lender. The completed form must be retained as part of the lender’s loan origination package.
In Circular 26-21-03, the VA announced a new streamlined process that does not require the submission of Form 26-8937, so long as the COE lists the income or debt information the lender is seeking to verify. Lenders should only use Form 26-8937 in specific instances when the lender needs additional information from the VA. If VA Form 26-8937 is still necessary, lenders should upload it to WebLGY. Circular 26-21-03 gives three examples of instances where Form 26-8937 might still be required. These include: 1) an active duty service with a proposed rating or that has a pending disability claim; 2) a condition on the COE that expressly states that Form 26-8937 must be submitted; or 3) other unresolved anomalies related to the Certificate of Eligibility that could not be resolved by calling the VA. The VA has also instructed lenders to rely on a veteran’s award letter in cases where the veteran’s income increases after the COE is complete.
The VA expects these changes to improve and streamline the income verification process and provide more certainty to lenders regarding whether to collect a funding fee from Veterans who are rated as eligible to receive compensation either as the result of a pre-discharge disability examination and rating or based on a pre-discharge review of existing medical evidence that results in the issuance of a memorandum rating. After March 19, 2021, the VA will not process or review submissions of Form 26-8937 unless one of the specific exceptions listed above is met.
