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How a Nonsupervised Lender Can Obtain Automatic Authority

A nonsupervised lender is a lender who can close loans, but only after applying and getting approval by the VA. Nonsupervised lenders have no banking operations and operate solely as lenders or investors. Nonsupervised lenders can do most of the same things supervised lenders can do, but require VA approval in most cases.

The first step a nonsupervised must take to obtaining automatic authority is submitting a completed VA Form 26-8736. This form gives the VA all of the information they need to decide whether or not the nonsupervised lender should be allowed to close loan automatically. There are a number of criteria that the lender must meet to obtain automatic authority.

The lender must meet one or more of the following:

  • The lender must have at least two years active VA origination experience and have originated and closed at least 10 VA loans (properly documented and submitted) within the past two years.
  • The lender (with less than two years active VA origination experience) must have originated and closed at least 25 VA loans (properly documented and submitted).
  • Each principal officer (president or vice president) who is actively involved in managing origination functions must have at least two recent years management experience in the origination of VA loans.
  • The lender, acting as an agent for an automatic lender, must have originated at least 10 VA loans over the past two years or 25 VA loans (if less than two years).

The lender must also have at least $1 million in unrestricted lines of credit.

The Underwriter

The underwriter is responsible for making sure that your finances match the lender’s guidelines and loan criteria. Their main duty is to assess the borrower’s risk. The underwriter must be very familiar with VA’s credit underwriting standards as well as the Lender’s Handbook.

The nonsupervised lender must nominate a senior employee as an underwriter. To obtain automatic authority, the underwriter must have the following experience:

  • At least three years of experience in processing, pre-underwriting or underwriting mortgage loans, or
  • At least one year of the most recent three years must have included making underwriting decisions on VA loans, or
  • A current ARU (Accredited Residential Underwriter) designation from the Mortgage Bankers Association (MBA).

What Else Does a Nonsupervised Lender Need?

A nonsupervised lender is required to meet the minimum requirements of currents assets set by the VA. Current assets are cash or liquid assets that can be converted into cash within one year. The lender needs to have at least $50,000 in current assets or at least $250,000 in net worth to be approved for automatic authority.

The unsupervised lender must send in their most recent annual financial statements that have been certified by a CPA. This information must be in balance sheet form, separated between current and fixed assets, as well as current and long-term liabilities. Additional information should be provided in a footnote.

The lender is required to have at least two permanent investors, a thorough quality control plan, and a qualified liaison. These are all required to ensure that the nonsupervised lender is properly prepared for generating automatic loans.

Once Authority is Obtained

Nonsupervised will be notified by a written letter from the VA Office of Jurisdiction on their decision. If the lender is approved, it will be subject to a probationary period of one year. During this probation, the VA office with authority over the lender will carefully review the quality of the lender’s underwriting, completeness of loan submissions, compliance with VA requirements, and foreclosure rates.

After a nonsupervised lender is approved by the VA, they are allowed approve loans without going through the VA first. They can exercise their new authority nationwide.

VA Loan Centers can help you get almost any property or condo VA loan approved. Start your VA loan application today by calling 888-573-4496.

Click here to learn about VA home loan requirements.