VA requires the audit system to review mortgage loan files to evaluate the loan origination and underwriting functions. The review must determine, at a minimum, whether the following requirements have been met:

 

Legal documentation. Each loan file contain all required loan processing, underwriting and legal documents.

 

Information integrity. No relevant loan documents were signed in blank by the borrower or an employee of lender. Any corrections were initialed by the borrower or employee. No verification of employment, verification of deposit or credit
reports was handled by the borrower or any interested third party.

 

Credit reports. The credit reports conform to the required standards and, if more than one credit report was ordered, all credit reports submitted with the loan package to the VA.

 

Discrepancies in credit information. There is a correlation of each outstanding liability and each asset of the borrower and coborrower used to qualify for the loan to those listed on the
initial loan application. If any discrepancies exist, the loan file documents how this was resolved. All conflicting information or discrepancies were resolved and properly documented in writing prior to submission of the loan to VA for guaranty.

 

Adverse information. Any outstanding judgments appearing on the credit report were listed on the application with an accompanying explanation and documentation. If there is a delinquency or judgment involving debt to the federal government, evidence was provided showing how this was satisfactorily resolved.

 

Tax returns. If the borrower is self-employed, the loan file includes any required tax returns, profit and loss statement and a current balance sheet.

 

Settlement statement. The HUD-1 settlement statement was accurately prepared and properly certified.

 

Fees. Any fees charged to the veteran were appropriate and accurate.

 

Submission to VA. The loan properly was properly documented and submitted in accordance with VA standardized loan file set-up procedure and was current at the time its was submitted to VA for guaranty.

 

Funding fee. VA funding fees are remitted within 15 days from the date of loan closing and late charges and interest penalties are promptly submitted.

 

Strawbuyer. There was no transfer of the property by the borrower at the time of closing or soon after indicating a possible misuse of the veteran’s loan entitlement.

 

Escrow management. The escrow funds received from the borrower were not excessive and were not used for any purpose other than those for which they were received.