VA revised chapter 4 of the Lender’s Handbook (M26-7). Chapter 4 (Topic 7) was revised to clarify that:
- Medical collections and charged-off medical accounts do not need to be considered in qualifying ratios or when determining residual income;
- The presence of medical collections and/or charged-off medical accounts should not be considered when determining an applicant’s creditworthiness; and
- Non-medical collections without minimum payment amounts listed on the credit report should be considered at 5% of the outstanding balance when underwriting the loan.
The revisions are effective for all loan applications taken after January 1, 2024 (lenders may, however, implement these revisions immediately).
Click to view the VA Pamphlet 26-7 (VA Lenders Handbook)-Change 37: https://www.tenaco.com/wp-content/uploads/2023/11/VA-Pamphlet-26-7-VA-Lenders-Handbook-Change-37-07-27-23.pdf
Click to view the VA Pamphlet 26-7, Revised Change 37: https://www.tenaco.com/wp-content/uploads/2023/11/VA-Pamphlet-26-7-Revised-Change-37.pdf
Click to view the VA Communication Letter: https://www.tenaco.com/wp-content/uploads/2023/11/VA-Communication.pdf
