Electrical Contractor Certification (ECC)

Correct: VA Minimum Property Requirements (MPRs) mandate that a property must be accessible via an all-weather surface from a public or private street. For private streets, there must be a permanent easement and a recorded maintenance agreement. If a property does not meet these standards, a waiver must be obtained from the VA Regional Loan Center. The auditor’s role is to verify the existence of these legal protections and the required regulatory waivers to mitigate the risk of the loan being ineligible for the VA guaranty.

Incorrect: Transitioning to USDA programs is not a valid solution for existing VA loan compliance issues as they are separate federal programs with different underwriting criteria. Retroactive seasonal use certifications are insufficient because VA loans for primary residences require year-round access, and a borrower’s certification cannot override the physical property requirements or the need for a VA waiver. Using a non-VA certified appraiser to verify VA property requirements is a violation of VA appraisal policy and would not provide valid evidence for a VA audit.

Takeaway: Internal auditors must ensure that any deviations from VA Minimum Property Requirements are supported by official VA waivers and documented legal easements for property access.

Correct: The best approach to BSA/AML compliance involves a risk-based strategy that combines automated detection with human analysis. By integrating red-flag alerts with manual verification, the institution ensures that unexplained deposits are investigated for potential money laundering or straw buyer schemes. Cross-referencing these findings with Customer Due Diligence (CDD) profiles ensures that the financial activity is consistent with the borrower’s known economic profile, satisfying both VA asset verification standards and federal AML regulations.

Incorrect: Filing a SAR for every undisclosed deposit over $5,000 without investigation is incorrect because SARs should be based on a determination of suspicious activity, and ‘defensive filing’ can dilute the effectiveness of AML monitoring. Relying on the VA’s automated underwriting system (AUS) is incorrect because AUS is designed to evaluate credit risk and eligibility, not to perform BSA/AML compliance or verify the legal source of funds. Limiting investigations to funding fee waiver cases is incorrect because BSA/AML requirements apply to all mortgage transactions to prevent money laundering, regardless of the specific loan benefits or fee structures involved.

Takeaway: Effective BSA/AML compliance requires a multi-layered approach that combines automated red-flag detection with manual due diligence to verify the legitimacy of the source of funds.

Correct: OFAC compliance is a strict liability requirement administered by the U.S. Treasury. Unlike AML or BSA, which often focus on the ‘how’ (suspicious patterns) or ‘how much’ (thresholds like $10,000), OFAC focuses on the ‘who.’ It prohibits any transaction with individuals or entities on the Specially Designated Nationals (SDN) list. There is no minimum dollar threshold for an OFAC violation, and the legitimacy of the source of funds does not excuse a transaction with a sanctioned party.

Incorrect: Focusing on suspicious patterns and the $10,000 threshold describes the Bank Secrecy Act (BSA) and Anti-Money Laundering (AML) reporting requirements rather than OFAC sanctions. Verifying the Certificate of Eligibility (COE) is a VA-specific procedural requirement to confirm a veteran’s entitlement to the loan benefit, not a national security screening. Assessing the creditworthiness of non-permanent residents is an underwriting function related to risk and secondary market guidelines, not a federal sanction compliance measure.

Takeaway: OFAC compliance is a strict liability mandate focused on blocking transactions with sanctioned parties, independent of transaction size or suspicious activity indicators.

Correct: For active-duty service members, the Leave and Earnings Statement (LES) is the primary document for income verification. Because the borrower has not yet separated from the military, they cannot provide a DD-214; therefore, a Statement of Service is required to verify current active-duty status, date of entry, and the likelihood of continued service or the terms of separation. The Certificate of Eligibility (COE) is the mandatory document to confirm the veteran’s entitlement amount and any funding fee exemptions.

Incorrect: The use of a DD Form 214 is incorrect because it is only issued upon discharge or separation, which the active-duty borrower has not yet reached. Relying on a verbal verification of employment or a personal statement of intent to re-enlist is insufficient under VA guidelines, which require formal documentation from the military command. Performance evaluations and original enlistment contracts are not standard substitutes for the Statement of Service or the LES in the VA underwriting process.

Takeaway: Active-duty service members must provide a Statement of Service and a current LES to verify eligibility and income, as they do not yet possess the DD-214 required of veterans who have already separated from service-connected duties.

Correct: According to VA guidelines, for a condominium unit to be eligible for a VA-guaranteed loan, the entire project must be on the VA’s list of approved projects. This is a non-delegable requirement, meaning the VA itself must review the project’s legal documents and management structure to ensure they meet VA standards. If a project is not on the list, or has been suspended, the individual unit is not eligible for the benefit.

Incorrect: While FHA or Fannie Mae approval may be considered during the VA’s review process, it does not grant automatic eligibility for a VA loan; the project must still appear on the VA’s specific list. Planned Unit Developments (PUDs) generally do not require the same formal project-level approval as condominiums. Lenders, even those with automatic or delegated authority, do not have the power to approve a condominium project for VA purposes; that authority remains solely with the VA.

Takeaway: A condominium unit is only eligible for a VA-guaranteed loan if the project is specifically approved by the VA and listed in their official database.

Correct: VA loss mitigation guidelines require servicers to explore a specific hierarchy of options to help Veterans avoid foreclosure. This hierarchy typically moves from short-term solutions like repayment plans and special forbearances to long-term solutions like loan modifications or even liquidation options (short sale/deed-in-lieu). By defaulting all borrowers to a short-term repayment plan without analyzing the nature of the default (temporary vs. permanent), the servicer risks placing Veterans in unsustainable plans when a loan modification would have been the appropriate and required step under VA policy.

Incorrect: Foreclosure referrals are not strictly mandated at the 90-day mark if the servicer is actively working with the borrower on a loss mitigation plan; in fact, the VA encourages avoiding foreclosure whenever possible. Funding fee waivers are generally determined by the borrower’s disability status at the time of loan origination and are not a standard component of entering a repayment plan. The VA does not impose a specific minimum credit score (such as 620) for loan modifications; instead, the focus is on the borrower’s ability to support the new payment and their good-faith effort to resolve the delinquency.

Takeaway: Servicers must ensure that automated loss mitigation models adhere to the VA hierarchy of options to provide the most sustainable long-term solution based on the borrower’s specific financial hardship.

Correct: The Department of Veterans Affairs issues Circulars to announce new policies, clarify existing ones, or provide temporary guidance. These updates are often effective immediately or on a specific date that precedes software implementation. Relying solely on software updates (LOS or AUS) can lead to non-compliance or missed opportunities for veterans, as these systems may have a lag time in reflecting the most current VA requirements. A specialist must be proactive in reading the source material to ensure the most accurate application of benefits.

Incorrect: The approach favoring automated systems is incorrect because while AUS is a powerful tool, it does not replace the professional responsibility to understand manual underwriting requirements or specific policy nuances that are not always captured by algorithms. The approach suggesting that manual monitoring is for increasing volume is incorrect because the primary driver for staying current is regulatory compliance and veteran service, not volume. The approach of delegating all policy knowledge to software or other departments is incorrect because a Certified Veterans Lending Specialist must possess the expertise to advise clients accurately without total reliance on third-party vendors.

Takeaway: Professional VA specialists must proactively monitor VA Circulars and Handbook updates because automated systems often lag behind the immediate implementation of new Department of Veterans Affairs policies.

Correct: The integrity of an AUS recommendation is entirely dependent on the accuracy of the data entered into the system. For VA loans, the underwriter must verify that the income, assets, and liabilities used to generate the Approve/Eligible finding are fully supported by the documentation in the loan file. If the data entered into the AUS is inaccurate or cannot be documented according to VA guidelines, the automated finding is invalid and cannot be used to justify the loan approval.

Incorrect: Relying solely on the AUS recommendation is incorrect because the underwriter retains ultimate responsibility for ensuring the loan meets VA standards. Bypassing the residual income calculation is a violation of VA policy, as residual income is a mandatory requirement that must be manually confirmed even with an AUS approval. Waiving the Certificate of Eligibility is never permitted based on an AUS finding, as the COE is the only official document that establishes the Veteran’s entitlement and the government’s guaranty amount.

Takeaway: An AUS recommendation is only valid if the underlying data is manually verified against source documentation to ensure compliance with VA-specific underwriting standards.

Correct: VA servicing guidelines emphasize early intervention and proactive communication as the primary means of preventing foreclosure. Servicers are required to contact delinquent borrowers early in the process to discuss the reasons for default and offer specific VA loss mitigation tools, such as repayment plans, special forbearances, or loan modifications. Additionally, informing the borrower about VA’s own financial counseling resources is a critical regulatory requirement designed to support the veteran’s homeownership.

Incorrect: Initiating a property inspection is a procedural step for protecting the collateral but does not address the communication or loss mitigation requirements of the VA. Requiring a full financial package before any discussion creates a barrier to early intervention, whereas VA guidelines encourage immediate dialogue to identify solutions. Referring the file to a foreclosure attorney at 60 days is a reactive legal step rather than a preventive communication strategy and may be premature if loss mitigation options have not been fully explored.

Takeaway: Proactive, early communication regarding VA-specific loss mitigation and counseling is the cornerstone of VA default management and regulatory compliance.

Correct: The VA’s strategic direction involves leveraging technology to streamline the loan process, particularly through automated data sharing for Certificates of Eligibility (COE) and income verification. However, the program maintains a commitment to risk management by requiring manual underwriting for complex files, such as those with ‘refer’ results from an Automated Underwriting System (AUS) or those involving non-traditional income, ensuring that the human element of professional judgment remains a safeguard for the guaranty fund.

Incorrect: The suggestion that a COE would trigger automatic approval without credit analysis is incorrect because eligibility (the right to use the benefit) is distinct from creditworthiness (the ability to repay). The idea of eliminating third-party credit reporting agencies is inaccurate as the VA relies on standard industry credit data to assess risk. While the VA is exploring modernization in appraisals, eliminating the Staff Appraisal Reviewer (SAR) role in favor of total AI valuation would remove a critical layer of delegated authority and quality control that is central to the current VA risk model.

Takeaway: The future of the VA loan program focuses on digital efficiency for standard processing while upholding manual oversight for risk-sensitive underwriting and complex eligibility scenarios.