source:
  type: guide
  id: va-m26-7-ch05-t06
  authority: VA Lenders Handbook (VA Pamphlet 26-7), Chapter 5, Topic 6 — Processing
    Loan Assumptions by the Current Servicer or
  description: VA Lenders Handbook (VA Pamphlet 26-7), Chapter 5, Topic 6 — Processing
    Loan Assumptions by the Current Servicer or.
  coverage_tier: operative
obligations:
- id: va-m26-7-ch05-t06-full
  canonical_id: va-m26-7-ch05-t06-full
  section: VA Lenders Handbook (VA Pamphlet 26-7), Chapter 5, Topic 6 — Processing
    Loan Assumptions by the Current Servicer or
  type: do
  tags:
  - regulator-direct
  - va
  - va-handbook
  - corpus-expansion
  - tier-operative
  primary_source:
    tier: 1
    authority: VA Lenders Handbook (VA Pamphlet 26-7), Chapter 5, Topic 6 — Processing
      Loan Assumptions by the Current Servicer or
    source_class: va-handbook
    source_url: https://www.benefits.va.gov/warms/pam26_7.asp
    snapshot_id: 13ca1f98805e1a58
    fetched_at: '2026-05-23T01:53:53Z'
    content_hash: sha256:90ed18e04de81cd5072c187243efc82c729509a4244a5ab176844838f090b134
    paragraph_quote: '6. Processing Loan Assumptions by the Current Servicer or Holder
      of the VA Loan Change Date April 1, 2019 • This chapter has been revised in
      its entirety. a. General Information If you are not the loan servicer or holder
      of the current VA loan, please refer the borrower or purchaser to the servicer
      or holder of the current VA loan for processing. Assumptions can only be processed
      and closed by loan holders and services with VA automatic authority that are
      holding or servicing the current VA loan. Loan holders or servicers holding
      the loan without VA automatic authority that are holding or servicing the current
      VA loan, may submit a prior approval package to the VA RLC of jurisdiction of
      where the property is located. See Topic 1 of this chapter. A VA assumption
      is also considered a Release of Liability (ROL). Properties that are security
      for VA-guaranteed loans may be disposed or transferred even though the loans
      are not paid in full. Veterans who dispose or transfer their properties under
      these conditions remain liable to VA for any loss that may occur as a result
      of a future default and subsequent claim payment, unless the property is transferred
      to a creditworthy purchaser who agrees to assume the payment obligation. The
      servicer initially determines the purchaser’s creditworthiness. Continued on
      next page VA Pamphlet 26-7, Revised Chapter 5: How to Process VA Loans and Submit
      them to VA 5-23 6. Processing Loan Assumptions by the Current Servicer or Holder
      of the VA Loan, continued a. General Information, continued Any purchaser may
      qualify to assume a VA loan; however, for a Veteran’s entitlement to be restored,
      a Veteran purchaser with sufficient entitlement must complete a Substitution
      of Entitlement (SOE) when the ROL is closed. The Veteran’s entitlement is not
      restored unless the Veteran purchaser, in addition to assuming the payment obligation,
      also agrees and is eligible to substitute their entitlement for the Veteran
      seller’s entitlement. It is important for the servicer as soon as possible in
      the assumption process to obtain COEs for both the Veteran assumer and Veteran
      seller to determine if there is sufficient entitlement in which to substitute.
      See chapter 3 of this handbook. Unless the ROL is an unrestricted transfer,
      a closing disclosure is required. An ROL or SOE does not affect the original
      issuance of the LGC. b. Who Can Process Loan Assumptions? While procedures for
      processing requests for assumption approvals previously depended on the date
      of loan (commitment made on or after March 1, 1988), the VA Loan Electronic
      Reporting Interface (VALERI) regulations authorize loan holders or servicers
      with automatic authority that are holding or servicing the current VA loan to
      be transferred to determine creditworthiness on all assumption approval requests
      processed by their servicers. c. Servicers with Automatic Authority Servicers
      with automatic authority are authorized to process and determine creditworthiness
      on assumption approval requests on behalf of VA. Servicers must follow VA underwriting
      guidelines (see chapter 4 of this handbook) when processing and determining
      creditworthiness on these cases. Servicers must notify VA electronically of
      authorized ownership transfers and approved ROLs in VALERI. Additional information
      on the reporting process is available online at http://www.benefits.va.gov/homeloans/valeri.asp.
      An underwriting and closing package must be uploaded into WebLGY, for the existing
      VA loan number. Continued on next page VA Pamphlet 26-7, Revised Chapter 5:
      How to Process VA Loans and Submit them to VA 5-24 6. Processing Loan Assumptions
      by the Current Servicer or Holder of the VA Loan, continued e. Transfers of
      Ownership on Properties with Loan Commitments after March 1, 1988 Transfers
      of ownership on properties securing loans for which commitments were made on
      or after March 1, 1988, must have the prior approval of the loan holder or its
      authorized servicing agent if either of them have automatic authority. If neither
      the holder nor the servicer has automatic authority, the servicer must submit
      a credit package to VA for underwriting. A seller must apply for approval of
      the transfer prior to completing the sale. Servicers and holders with automatic
      authority must examine the application to assess compliance with the provisions
      of 38 U.S.C. 3714. VA will make the determination in a case where neither the
      servicer nor the holder has automatic authority, following receipt of a complete
      application package from the servicer or holder. Continued on next page d. Servicers
      without Automatic Authority Servicers without automatic authority that are servicing
      loans for holders with automatic authority must advise the holders of any assumption
      approval requests, and the holders will be responsible for determining creditworthiness.
      When neither the servicer nor the holder has automatic authority, the servicer
      must develop a complete credit package and submit it, along with a copy of the
      purchase contract and the status of the loan to the Loan Production section
      at the VA RLC where the property is located. The package should contain a cover
      letter indicating prior approval underwriting is required as both the servicer
      and the holder do not have VA automatic authority. See Topic 4, subsection c,
      of this chapter for the stacking order. VA Pamphlet 26-7, Revised Chapter 5:
      How to Process VA Loans and Submit them to VA 5-25 6. Processing Loan Assumptions
      by the Current Servicer or Holder of the VA Loan, continued f. Approval Requirements
      To approve the transfer of ownership: • the loan must be current or will be
      brought current at the closing of the sales transaction, • the prospective purchaser
      of the property is creditworthy, as determined in accordance with 38 C.F.R.
      36.4340 and Chapter 4 of the Lender’s Handbook, and • the prospective purchaser
      has agreed to assume all of the loan obligations, including the obligation to
      indemnify VA if a claim is paid. A processing fee may be collected in advance,
      including a reasonable estimate for the cost of the credit report. The maximum
      fee for processing a request for assumption approval and changing the loan records
      is the lesser of: • automatic authority – $300 plus the actual cost of a credit
      report; or • no automatic authority – $250 plus the actual cost of a credit
      report; or • any maximum prescribed by applicable state law. VA does not specifically
      regulate when the processing fee may be assessed. However, when the processing
      fee is collected prior to signing the sales contract, the portion of the fee
      attributable to changing the servicer’s records (usually $50) must be returned
      to the seller if the application is denied or the process is not completed.
      Therefore, VA recommends that the processing charge accompany the complete package.
      Continued on next page VA Pamphlet 26-7, Revised Chapter 5: How to Process VA
      Loans and Submit them to VA 5-26 6. Processing Loan Assumptions by the Current
      Servicer or Holder of the VA Loan, continued g. Processing Time Guidelines Automatic
      Authority: Servicers or holders with automatic authority must complete the underwriting
      and notify the seller of the decision within 30 calendar days after receiving
      a complete ownership transfer approval application package. Without Automatic
      Authority: Servicers without automatic authority (where the holder also does
      not have automatic authority) must submit documents to VA within 21 days after
      receiving a complete application package. VA Review: VA has 10 business days
      to complete its underwriting review and notify the servicer of its decision.
      Servicers have 7-calendar days to notify all parties of VA’s decision. h. Decision
      Notices Approvals: If the application for ownership transfer is approved, the
      servicer must notify the seller and include instructions for the assumption
      of liability by the purchaser, the amount of funding fee that must be paid,
      and documentation needed to complete the process. Disapprovals: If the application
      is disapproved, the seller and purchaser must be notified. The disapproval notice
      must include: • the reason(s) for the decision and a notice that the decision
      may be appealed to VA within 30 calendar days, • contact information of the
      servicer including address, phone number, and e-mail of the servicer for VA
      to request the underwriting package if appealed, • if the application was disapproved
      for credit reasons, the purchaser must be informed of the basis on which the
      adverse decision was made in accordance with the Fair Credit Reporting Act.
      If the application remains disapproved after 45 calendar days (to allow time
      for an appeal and review by VA), the $50 fee for changing the account records,
      if previously collected, must be refunded. Continued on next page VA Pamphlet
      26-7, Revised Chapter 5: How to Process VA Loans and Submit them to VA 5-27
      6. Processing Loan Assumptions by the Current Servicer or Holder of the VA Loan,
      continued i. VA Appeals The seller or the purchaser may appeal a disapproval
      decision to the VA RLC with jurisdiction over where the property is located
      within 30 calendar days from the notification of disapproval. When the VA RLC
      receives an appeal of a denied request, VA will request that the servicer send
      a copy of the application package used in making the decision. The loan package
      must be provided to the VA office of jurisdiction of where the property is located
      within 7 calendar days. The VA RLC of jurisdiction of where the property is
      located will review and either approve the assumption on appeal or uphold the
      decision to deny the application. If approved, the servicer should close the
      assumption within 30 calendar days of VA’s approval and submit a closing package
      to the VA RLC of jurisdiction of where the property is located. If the appeal
      is not approved, VA’s notice will advise the seller of the right to request
      a special approval within 15 calendar days of receipt of the disapproval notice.
      Special Approval: Following an appeal to VA, the seller may request special
      approval within 15 calendar days of receipt of the disapproval notice. Continued
      on next page VA Pamphlet 26-7, Revised Chapter 5: How to Process VA Loans and
      Submit them to VA 5-28 6. Processing Loan Assumptions by the Current Servicer
      or Holder of the VA Loan, continued i. VA Appeals, continued VA’s special approval
      does not release any obligor from liability. VA may determine that special approval
      of the assumption is in the best interest of the government if: • the seller
      agrees to remain secondarily liable on the loan following assumption, • the
      seller is unable to otherwise continue payments on the loan, and reasonable
      efforts have been made to find a creditworthy borrower for the property, or
      • if an obligor is released without proper approval, VA may be released from
      further liability on the guaranty. VA has 7 calendar days from receipt of the
      seller’s request to make this determination. If approved, the VA RLC will notify
      the servicer and seller that the assumption has been approved and that the seller
      will not be released from liability to VA; however, the property can be transferred
      to the purchaser(s). The servicer should close the assumption with 30 days of
      VA’s special approval. If disapproved, the VA RLC will notify the seller and
      lender that the assumption has not been approved, that the seller will not be
      released from liability, and the property cannot be transferred. j. Steps After
      Approval Once approved, the servicer will complete the transfer with a loan
      closing that meets all federal and any state and local regulations and requirements.
      Continued on next page VA Pamphlet 26-7, Revised Chapter 5: How to Process VA
      Loans and Submit them to VA 5-29 6. Processing Loan Assumptions by the Current
      Servicer or Holder of the VA Loan, continued k. Assumption Clause The VA-approved
      assumption clause must be included in the deed conveying the property to the
      purchaser. The VA RLC of jurisdiction of where the property is located has an
      example(s) of assumption clauses that are both acceptable to VA and compliant
      with state and local requirements. Servicers should contact the RLC of jurisdiction
      of where the property is located to obtain sample language and/or documents.
      The servicer is responsible for reviewing the document to establish that it
      contains the approved assumption clause and recording data and that it has the
      legal effect intended. l. Agreement Creating Liability If the seller and purchaser
      have satisfied all the requirements of 38 U.S.C. 3714(a)(1), but the transfer
      deed containing an acceptable assumption clause was not included, the servicer
      must prepare an “Agreement Creating Liability to Holder and to United States”
      to execute the release. The servicer must prepare an Agreement Creating Liability
      to Holder and to “United States” to execute the release. Three copies are needed
      for execution and must be signed by the: • seller, • purchaser, and • servicer
      as agent for the Department of Veteran Affairs. The VA RLC of jurisdiction of
      where the property is located has examples of agreements that are both acceptable
      to VA and compliant with state and local requirements. Continued on next page
      VA Pamphlet 26-7, Revised Chapter 5: How to Process VA Loans and Submit them
      to VA 5-30 6. Processing Loan Assumptions by the Current Servicer or Holder
      of the VA Loan, continued l. Agreement Creating Liability, continued Servicers
      should contact the VA RLC of jurisdiction of where the property is located to
      obtain sample language and/or documents. Once received, the servicer is responsible
      for reviewing the document to establish that it was properly completed and that
      it has the legal effect intended. The holder or its authorized servicing agent
      will then execute the release portion of the form. In those states where recording
      the assumption and/or the release instrument is necessary, the Veteran may be
      asked to pay the recording fees. m. Funding Fee At loan transfer, the purchaser
      is required to pay a funding fee to the servicer equal to one-half of one percent
      of the loan balance as of the date of transfer. See Chapter 8 of this handbook
      for information on other exemptions from the funding fee and how to verify exemption
      status. When the transfer is a result of an unrestricted transfer, a funding
      fee is not required. The fee must be paid to VA within 15 calendar days of the
      date of assumption using the VA Funding Fee Payment System – VA FFPS . The VA
      funding fee cannot be financed into the loan being assumed. It must be paid
      in cash at the time of transfer. n. Notification to VA Servicers must notify
      VA after ownership has been transferred and release of liability has been granted.
      Additional information can be found at: http://www.benefits.va.gov/homeloans/valeri.asp.
      Continued on next page VA Pamphlet 26-7, Revised Chapter 5: How to Process VA
      Loans and Submit them to VA 5-31 6. Processing Loan Assumptions by the Current
      Servicer or Holder of the VA Loan, continued n. Notification to VA, continued
      Servicers must also submit a completed closing package to the VA RLC of jurisdiction
      of the property after ownership has been transferred and an ROL has been granted.
      The package should contain documentation in the following stacking order: Order
      Documents 1 Lender’s Cover Letter 2 If Substitution of Entitlement, then Certificate
      of Eligibility for both Veteran seller and assumer and signed VA Form 26- 8106,
      Statement of Veteran Assuming GI Loan 3 Copy of quit claim deed or other recorded
      document with transfer of ownership with VA clause or if not included, signed
      assumption agreement by all parties (seller, assumer, and servicer/holder) 4
      Evidence loan current at the time of the transfer 5 VA Form 26-8937, Verification
      of VA Benefits, if required 6 URLA with revised VA Form 26-1802a, HUD/VA Addendum
      to URLA. These final forms must be properly completed and legible. Forms may
      be signed and dated anytime from the date of initial application to the date
      of loan closing. 7 Closing Disclosure Statement 8 VA Form 26-8497, Request for
      Verification of Employment, and other verifications of income such as pay stubs
      and tax returns 9 CAIVRS: borrower/co-borrower 10 All credit reports obtained
      in connection with the loan and any related documentation such as explanations
      for adverse credit, if required. 11 VA Form 26-8497a, Request for Verification
      of Deposit, or alternative VOD, and other related documents 12 For Automated
      Underwriting cases: Feedback certificate and underwriter’s certification. Continued
      on next page VA Pamphlet 26-7, Revised Chapter 5: How to Process VA Loans and
      Submit them to VA 5-32 6. Processing Loan Assumptions by the Current Servicer
      or Holder of the VA Loan, continued n. Notification to VA, continued 13 VA Form
      26-6393, Loan Analysis 14 If a loan is submitted more than 60-calendar days
      after loan closing, a statement signed by a corporate officer of the lender
      which identifies the loan, provides the specific reasons for late reporting
      and certifies that the loan is current. 15 VA Form 26-0592, Counseling Checklist
      for Military Homebuyers, if the applicant is on active duty 16 Purchase/Assumption/earnest
      money contract 17 Other necessary documents (for example – but not limited to,
      a POA if used, lenders loan quality certification). 18 Copy of the original
      note and all riders Servicers are required to retain the supporting documentation
      for all transfers, assumptions, and an ROL for at least 3 years from approval
      or denial. o. Assumptions without Prior Approval Servicers must notify VA’s
      Loan Production Department at the RLC of jurisdiction of where the property
      is located (in addition to the VALERI system) within 60 days after learning
      of a transfer that did not receive prior approval by the servicer or VA. The
      notice must advise VA whether the servicer intends to exercise the option to
      immediately refer the case to foreclosure or to give the transferor and transferee
      the opportunity to apply for “retroactive approval” of the assumption. Upon
      learning of an unapproved transfer, the servicer may decide to demand immediate
      payment of the one-half of one percent VA funding fee and request a copy of
      the instrument of transfer to determine the liability of the purchaser. Loans
      for which a commitment was made prior to March 1, 1988, are commonly known as
      freely assumable loans. Owners have the right to sell the property securing
      these loans under any terms; servicers may not impose a restriction, charge,
      or fee that would limit or nullify this right. A funding fee is not assessed
      on assumptions of loans where the commitment was made prior to March 1, 1988.
      Continued on next page VA Pamphlet 26-7, Revised Chapter 5: How to Process VA
      Loans and Submit them to VA 5-33 6. Processing Loan Assumptions by the Current
      Servicer or Holder of the VA Loan, continued o. Assumptions without Prior Approval,
      continued Liability assumed. The purchaser should be afforded an opportunity
      for retroactive approval of the transfer if: • the purchaser pays the funding
      fee, • the purchaser has assumed all of the seller’s obligations in the transfer
      deed, • the assumption language is legally binding, and • it appears that the
      purchaser intends to satisfy those obligations. When these conditions have been
      met, then the Veteran and transferee must specifically apply for an ROL under
      38 U.S.C. 3713. See subsection a of this topic. An ROL does not restore the
      original Veteran’s VA home loan entitlement and does not affect the guaranty
      on the loan. After the completion of an ROL, a Veteran purchaser can apply for
      a Substitution of Entitlement to restore the Veteran seller’s entitlement (see
      subsection r of this topic). Liability not assumed. If prior approval of a transfer
      was not obtained and the title was transferred “subject to” the mortgage or
      deed of trust, then the purchaser usually has no liability on the loan and no
      liability for the funding fee. In this instance, the purchaser may have no incentive
      to maintain the payments. Continued on next page VA Pamphlet 26-7, Revised Chapter
      5: How to Process VA Loans and Submit them to VA 5-34 6. Processing Loan Assumptions
      by the Current Servicer or Holder of the VA Loan, continued o. Assumptions without
      Prior Approval, continued The original Veteran seller is still liable if the
      home subsequently defaults and VA pays a claim based on the Veteran’s entitlement
      used to guaranty the loan. It may still be advisable to extend the opportunity
      to apply for retroactive approval of the transfer, with the expectation that
      the purchaser will assume liability for repayment of the loan. The original
      mortgagor remains liable on the loan unless he or she is released from personal
      liability with a qualifying assumption. The Veteran and transferee must specifically
      apply for an ROL under 38 U.S.C. 3713. See subsection a of this topic. An ROL
      does not restore the original Veteran’s VA home loan entitlement and does not
      affect the guaranty on the loan. The LGC remains in the original Veteran’s name.
      After the completion of an ROL, a Veteran purchaser can apply for an SOE to
      restore the Veteran seller’s entitlement. See subsection r of this topic. An
      exception applies when the loan was made by a state, territorial, or local governmental
      agency and the law requires acceleration of the maturity of the loan upon sale
      or transfer of the property to a person not eligible for assistance under the
      special program. VA has approved due-on-sale clauses to allow Veterans to participate
      in these programs and take advantage of below-market interest rates and benefits.
      Continued on next page VA Pamphlet 26-7, Revised Chapter 5: How to Process VA
      Loans and Submit them to VA 5-35 6. Processing Loan Assumptions by the Current
      Servicer or Holder of the VA Loan, continued o. Assumptions without Prior Approval,
      continued Process for Retroactive Approval. If the Veteran and current owner
      will be permitted to apply for retroactive approval, the assumption process
      should be completed in the same manner as if the application had been received
      prior to the transfer. This includes the right of appeal to VA, if the request
      is denied. Should a purchaser fail to cooperate in the retroactive approval
      process, a servicer has the option of accelerating the loan. When making this
      decision, the servicer should consider the implications of state law when delaying
      acceleration as compared to the prospect of accelerating a current loan that
      has the potential for future timely payments. Any decision must be reported
      to the VA RLC of jurisdiction of the property and in VALERI. p. General Release
      of Liability Procedures VA-guaranteed loans dated prior to March 1, 1988, can
      be transferred without VA’s prior approval, borrowers and transferees may apply
      for an ROL before or after the closing of the transaction. Servicers with automatic
      authority must process an ROL when the borrower and transferee specifically
      apply for a release. Servicers without automatic authority that are servicing
      loans for holders with automatic authority must advise the holders of any assumption
      approval requests, and the holders will be responsible for determining creditworthiness.
      Continued on next page VA Pamphlet 26-7, Revised Chapter 5: How to Process VA
      Loans and Submit them to VA 5-36 6. Processing Loan Assumptions by the Current
      Servicer or Holder of the VA Loan, continued p. General Release of Liability
      Procedures, continued A processing charge may be assessed for reviewing a request
      for an ROL just as on a request for approval of ownership change on a later
      loan. When a borrower sells his or her home to transfer ownership without requesting
      an ROL, the servicer may charge up to $50 for amending its records to reflect
      a change in ownership, if the parties involved agree and it is permissible under
      the loan agreement. No funding fee may be assessed on assumptions of loans where
      the commitment was made prior to March 1, 1988. q. Release of Liability Procedures
      for Divorce A Veteran may seek release from personal liability when his or her
      former spouse acquires the property as the outcome of a legally binding separation
      agreement or divorce proceedings and the ex-spouse was jointly liable on the
      loan with the Veteran prior to the divorce. Servicers may process requests for
      an ROL from divorced Veterans using the same general procedures outlined in
      subsection a of this topic. When processing an ROL in divorce cases in which
      the Veteran’s former spouse receives the property, the servicer is authorized
      to charge the normal processing fee to complete the credit underwriting. A funding
      fee may not be assessed. Continued on next page VA Pamphlet 26-7, Revised Chapter
      5: How to Process VA Loans and Submit them to VA 5-37 6. Processing Loan Assumptions
      by the Current Servicer or Holder of the VA Loan, continued q. Release of Liability
      Procedures for Divorce, continued The following requirements must be met: •
      the divorce is final and absolute and it is determined no appeal will be taken,
      or • a signed separation agreement by all parties based on local laws and available
      documents with reasons why a separation agreement is used in lieu of a final
      decree of divorce, and • the entire estate encumbered for the VA-guaranteed
      loan has become vested in the name of the Veteran’s former spouse, and • there
      is not any knowledge of any property settlement that would make the Veteran
      liable between the parties to pay the guaranteed loan. Some states require a
      specific amount of time between a legal separation and a divorce (up to one
      year). With proper documentation, do not delay the request for an ROL, if the
      divorce is not final, but a legal separation agreement is in effect. In some
      instances, the ex-spouse may also be a Veteran; however, for VA purposes, only
      the applicant who used their entitlement to guaranty the loan is considered
      a Veteran. For example, John and Mary Doe are divorcing and both have obtained
      a COE; however, only John’s COE was used to guarantee the loan. Since Mary’s
      COE was not used to guarantee the home, only John is considered the Veteran.
      If Mary wishes to assume the loan, a credit qualifying package is required for
      an ROL and Mary can substitute her entitlement with the assumption. When the
      Veteran is awarded the property, the ex-spouse may seek an ROL. Continued on
      next page VA Pamphlet 26-7, Revised Chapter 5: How to Process VA Loans and Submit
      them to VA 5-38 6. Processing Loan Assumptions by the Current Servicer or Holder
      of the VA Loan, continued q. Release of Liability Procedures for Divorce, continued
      Requests for an ROL from an ex-spouse in cases where the Veteran retains the
      property should be referred to the VA RLC of jurisdiction over the state where
      the property is located, to process a Non-Veteran Spouse (NVS) ROL. The servicer
      will be provided a with an NVS letter indicating VA has released the non-Veteran
      spouse of liability. The servicer may only charge a fee of $50 for amending
      its records to reflect the change. It is not necessary for the servicer to complete
      an ROL. For example, Mary and Jon Smith divorced after they purchased a home
      using Mary’s COE. She obtains the home per the divorce decree. Since she is
      the Veteran and will be retaining the property, she will contact the VA RLC
      of jurisdiction of where the property is located to process the NVS. r. Substitution
      of Entitlement A Veteran may allow an assumption/ROL of his or her VA- guaranteed
      loan with the expectation of being able to have his or her entitlement restored.
      A restoration may be needed to obtain another VA-guaranteed loan in the future
      by restoring the previously used entitlement for full entitlement benefits.
      Entitlement cannot be restored until VA makes a determination of eligibility
      for the Veteran assumer and Veteran seller and processes the SOE. VA completes
      the SOE process after a servicer closes the assumption and issues an ROL. Questions
      about an SOE should be directed to the VA RLC with jurisdiction where the property
      is located. It is important for the servicer to obtain a COE as soon as possible
      in the assumption process to determine if there is sufficient entitlement for
      the Veteran assumer to complete the SOE for the Veteran seller. Entitlement
      must be of equal amounts to substitute. See Chapter 3 of this handbook for determination
      of home loan eligibility. Continued on next page VA Pamphlet 26-7, Revised Chapter
      5: How to Process VA Loans and Submit them to VA 5-39 6. Processing Loan Assumptions
      by the Current Servicer or Holder of the VA Loan, continued r. Substitution
      of Entitlement, continued When a Veteran requests approval for a transfer of
      ownership, he or she may request to have entitlement restored for use on another
      VA loan. For VA to approve such a request: • the assumption (ROL) must be completed
      and closed by the lender; • the purchaser must be an eligible Veteran who has
      sufficient entitlement to substitute for that of the original Veteran; • the
      purchaser must certify that the property securing the loan will be occupied
      as his or her residence; • the purchasing Veteran must agree to the SOE; and
      • there must be equal available entitlement from the assuming Veteran in order
      to substitute his or her entitlement with the Veteran being released of their
      entitlement. The assumption (ROL) must be completed and closed by the lender.
      The purchaser must be an eligible Veteran who has sufficient entitlement to
      substitute for that of the original Veteran. The purchaser must certify that
      the property securing the loan will be occupied as his or her residence. The
      purchasing Veteran must agree to the SOE, and there must be equal available
      entitlement from the assuming Veteran in order to substitute his or her entitlement
      with the Veteran being released of their entitlement. Whenever two Veterans
      intend to follow the SOE process, the servicer should have the Veteran purchaser
      complete VA Form 26- 8106, Statement of Veteran Assuming GI Loan, (Substitution
      of entitlement). It should be included in the closing package submitted to VA.
      A COE for each Veteran should accompany the credit package used to approve the
      ROL. It is important to verify the purchasing Veteran has sufficient entitlement,
      is willing to substitute their entitlement, and will meet occupancy requirements
      to substitute before the closing of the ROL to meet the requirements of an SOE.
      Continued on next page VA Pamphlet 26-7, Revised Chapter 5: How to Process VA
      Loans and Submit them to VA 5-40 6. Processing Loan Assumptions by the Current
      Servicer or Holder of the VA Loan, continued s. Unrestricted Transfers Certain
      transfers of ownership, otherwise subject to 38 U.S.C. 3714, do not require
      prior approval by a holder or VA. Loans may not be accelerated due to these
      types of transfers. An ROL will not be processed. Processing charges and funding
      fees may not be assessed. It is permissible to charge a reasonable fee up to
      $50 for changing the account records, provided that there is an agreement with
      the borrower and it is permissible under the loan agreement. Servicers must
      report unrestricted transfers to VA through VALERI as authorized transfers of
      ownership, which will typically be handled automatically by their servicing
      systems. Unrestricted transfers of ownership include: • the creation of a lien
      or other encumbrance subordinate to the lender’s security instrument that does
      not relate to a transfer of rights of occupancy in the property; • the creation
      of a purchase money security interest for household appliances; • a transfer
      by devise, descent, or operation of law on the death of a joint tenant or tenant
      by the entirety; • the granting of a leasehold interest of 3 years or less not
      containing an option to purchase; • a transfer to a relative resulting from
      the death of a borrower; • a transfer when the spouse or child of the borrower
      becomes a joint owner of the property with the borrower, • a transfer into an
      inter-vivos trust in which the borrower is and remains a beneficiary and which
      does not relate to a transfer of rights of occupancy in the property; and •
      a transfer resulting from a decree to dissolve a marriage, legal separation
      agreement, or from an incidental property settlement agreement by which the
      spouse of the borrower becomes the sole owner of the property. Continued on
      next page VA Pamphlet 26-7, Revised Chapter 5: How to Process VA Loans and Submit
      them to VA 5-41 6. Processing Loan Assumptions by the Current Servicer or Holder
      of the VA Loan, continued s. Unrestricted Transfers, continued VA does not consider
      a sale on an installment contract, contract for deed, or similar arrangement
      in which title is not transferred from the seller to the buyer, to be a “disposition”
      of property as sale agreements are not subject to 38 U.S.C. 3714. These sale
      agreements do not require prior approval from the servicer or VA. Borrowers
      inquiring should be cautioned that any borrower considering a sale in this manner
      would remain liable for repayment of the loan under such an arrangement. t.
      Documentation Requirements VA does not require a servicer to change records,
      even if the agreement calls for the contract purchaser to make payments directly
      to that servicer. The contract seller is responsible for forwarding payment
      coupons and other information to the contract purchaser. Depending on the circumstances
      of a case, servicers may agree to change the account address to read “in care
      of” the contract purchaser, although the contract seller must promptly advise
      the servicer of any change in his or her address. Sales by installment contracts
      typically call for transfer of title after a certain period of time. If the
      contract calls for title to transfer prior to payment in full of the VA loan,
      VA requires assumption approval according to the procedures previously discussed.
      Processing charges and VA funding fees will be applicable upon transfer. As
      one of the conditions of the contract, servicers should advise the borrower
      that the language stating an application for assumption approval will be made,
      and approval secured, prior to the completion of title transfer. The contract
      should address the options of both parties if the request for assumption approval
      is denied. Servicers are required to retain the supporting documentation for
      all transfers, assumptions, and releases of liability for at least 3 years from
      approval or denial. An assumption package should be submitted to the RLC of
      jurisdiction of where the property is located.'
  judgment: false
