To: VHDA Originating Agents
Date: August 9, 2010
Re: Condo Insurance and Loan Reservation Policy
Condo Insurance Policies Requirement
VHDA requires a copy of the master condo policy on all condominium mortgage loans. Even if the master policy only covers common areas, it must still be included with the servicing set up package. If the borrower is required to obtain coverage on their unit, that policy should also be included along with the HO6, when applicable.
Important Reminders: Reservations and Lock-In Terms
Proper Execution of VHDA Lock-In Disclosure
Lenders are reminded that it is critical to have page 3 of the VHDA Loan Program Disclosure
initialed by the borrower to:
- indicate their choice to lock-in a rate or to float.
- acknowledge that they understand VHDA’s Lock-In Terms.
In a rising interest rate environment, our lock-in policy provides extended rate protection. However, in a falling interest rate environment borrowers are not allowed to benefit from a lower rate. As the Lender, it is your responsibility to understand and discuss this policy with the borrower prior to the execution of the VHDA Loan Program Disclosure.
NOTE: If the document is not properly executed, the Lender will be at risk should rates change.
Requests for Transfer of Reservations or New Reservations
Our policy does not allow for the transfer of loan reservations from one Lender to another. If the borrower chooses to make a new reservation with another Lender, before a new reservation can be made VHDA requires:
1. the first reservation be cancelled by the reserving Lender.
2. payment of the $120 reservation fee for the cancelled reservation.
The new rate will be either the higher of the initial rate reserved, or the rate in effect at the time of the new reservation.
If the original loan application was denied by the original Lender, or if the borrower cannot satisfy conditions placed on the loan, VHDA requires evidence of the reason for denial from the first Lender.
In addition, the new Lender’s underwriter must submit evidence of loan approval to VHDA’s Underwriting Department with applicable credit documentation. If we agree with the underwriting recommendation, the request for a new reservation will be granted, at which time the new reservation can be made.