The Department of Veterans Affairs (“VA”) recently issued VA Circular 26-24-9 to announce the availability of new Form 26-10291, Assumption Entitlement Acknowledgment. The form is written to provide information to a veteran that is acting as a seller whose loan is being assumed by a new purchaser.
Form 26-10291 explains that VA- guaranteed loans are assumable by any qualified purchaser, including a non-veteran, as long as the purchaser meets the VA’s credit and income underwriting standards and the loan is current at the time of closing.
The form further discusses that a VA-guaranteed loan may be assumed by an eligible veteran purchaser. In those instances, it may be possible for the assumption to include a Substitution of Entitlement (“SOE”). If the assumer (purchaser) is a veteran with as much entitlement available as the amount of entitlement originally used to guaranty the loan being assumed, the assumer’s entitlement may be substituted for the seller’s entitlement with an SOE.
The assumer must be willing to substitute their entitlement for the seller’s entitlement. The assumer must also be qualified for a VA Home Loan Certificate of Eligibility and meet the VA’s occupancy guidelines. The SOE may also be split by one or more veteran assumers.
If an SOE is not completed at the time of assumption, the veteran seller’s entitlement stays tied to the loan being assumed until the loan is paid in full. Also, if the assumer (purchaser) defaults and VA pays a claim due to foreclosure, deed-in-lieu of foreclosure, short sale, or VA loan acquisition, the loss amount must be repaid in full before the seller’s entitlement can be restored.
The Circular states that the new form is intended to help veterans fully understand how an assumption may impact their available VA home loan guaranty entitlement, as an increasing number of veterans are using assumptions to sell their homes with a VA-guaranteed loan. VA expects holders of these loans to provide Form 26-10291 to the selling veteran immediately after receiving an application for an assumption. The form should be signed by the veteran seller “as soon as possible but no later than close.”
The form is effective for applications of assumption received on or after the date that is 60 days after the publication of Circular 26-24-9, which would be June 24, 2024. Holders of the loans may begin using the form immediately.
DocMagic is making Form 26-10291 (Form ID: 2610291.VA) available upon request as of June 6, 2024.
