Circular 26-23-10 May 22, 2023
3. Assumption Procedures: As indicated above, assumption processing procedures differ
based on the authority held by the loan holder or its authorized servicing agent.
Loan holders and servicers are reminded that repayment of partial claim assistance, provided
as part of VA’s COVID-19 National Emergency recovery measures, must be repaid in full
immediately upon the Veteran’s transfer of ownership of the property.
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a. Holders or Servicers with Automatic Authority: Loan holders or servicers with automatic
authority must process and report closed assumptions to VA. The following is intended to
provide information on assumption processing:
(1) Application: The seller and buyer will submit an application for an assumption, through
which the assumer is agreeing to assume full liability to the loan.
(2) Process and Underwrite: The documentation required to underwrite an assumption is the
same as for a VA purchase transaction. The underwriter should apply the underwriting
standards outlined in the VA Lenders Handbook Chapter 4. The servicer must also ensure the
loan is current or will be made current at or before the close of the assumption. It is
permissible for the loan to be brought current through cash at close. It is not permissible to
bring the loan current through a loan modification at the time of the assumption unless the
assumption is required due to a decree to dissolve the marriage or a legal separation
agreement, or the assumer is obtaining the property by operation of law on the death of the
borrower.
If the assumption request includes a substitution of entitlement, request a Certificate of
Eligibility for the assumer to ensure they have enough entitlement to substitute for the seller’s
entitlement. Apply the occupancy standards in VA Lenders Handbook Chapter 3 Topic 5.
(3) Notify the buyer and seller: The holder or servicer must complete its examination and
notify the seller and buyer of its decision to approve or disapprove the assumption within 45
calendar days of receipt of a complete underwriting package.
If the assumption application is disapproved, the notification must advise the assumer and
seller that the decision may be appealed to VA within 30 calendar days, and provide a servicer
point of contact (including name, address, and email address) for VA to request the credit
package if the assumption is appealed. The notice must also include the reason(s) for
disapproval, and if the application was disapproved for credit reasons, the assumer must be
informed on the basis of which the adverse decision was made in accordance with the Fair
Credit Reporting Act.
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Additionally, if the assumption fee was previously collected, the holder,
or its authorized servicing agent, must refund $50 of the previously collected assumption fee if
the assumption remains disapproved after 60 days.
(4) Close the loan: Charges incident to the loan, described above in 2.c, may be charged in
conjunction with the loan closing.
(5) Create an assumption funding fee record in the Funding Fee Payment System (FFPS):
Unless the assumer is eligible for a fee waiver,
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a funding fee of 0.5% of the loan balance
must be paid on an assumption. Please note, this must be collected at close and may not be
financed into the loan balance. The funding fee must be remitted to VA within 15 calendar
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38 C.F.R. § 36.4806(b)(2)(i).
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15 U.S.C. §§ 1681-1681x
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38 USC § 3729(c) 3