38 U.S.C. §3709 — Refinancing of housing loans
38 U.S.C. §3709 sets the statutory eligibility conditions for VA refinance loans (other than cash-out, which is governed by §3709(d)). Three operative tests: (a) Fee Recoupment — 36-month recoupment via lower regular monthly payments with issuer certification; (b) Net Tangible Benefit — fixed-to-fixed 50 bp drop / fixed-to-ARM 200 bp drop / discount-point-financing limits; (c) Loan Seasoning — the later of 6 consecutive monthly payments OR 210 days after the first payment due date on the loan being refinanced.
Verbatim regulatory text
Verbatim provisions from 38 U.S.C. §3709 — Refinancing of housing loans — each quote is a verified substring of the regulator-published source snapshot, not retyped. Quoted for reference; this is not legal advice. The operational layer (P&P updates, prompts) lives in the regulation update kits.
38 U.S.C. §3709(a) — Fee recoupment within 36 months via lower monthly payments
(a) Fee Recoupment.— Except as provided in subsection (d) and notwithstanding section 3703 of this title or any other provision of law, a loan to a veteran for a purpose specified in section 3710 of this title that is being refinanced may not be guaranteed or insured under this chapter unless—
38 U.S.C. §3709(a)(2) — 36-month recoupment-cap
all of the fees and incurred costs are scheduled to be recouped on or before the date that is 36 months after the date of loan issuance; and
38 U.S.C. §3709(b) — Net Tangible Benefit test (rate-drop floors)
(b) Net Tangible Benefit Test.— Except as provided in subsection (d) and notwithstanding section 3703 of this title or any other provision of law, a loan to a veteran for a purpose specified in section 3710 of this title that is refinanced may not be guaranteed or insured under this chapter unless—
38 U.S.C. §3709(b)(2) — Fixed-to-fixed 50 bp rate-reduction floor
in a case in which the original loan had a fixed rate mortgage interest rate and the refinanced loan will have a fixed rate mortgage interest rate, the refinanced loan has a mortgage interest rate that is not less than 50 basis points less than the previous loan;
38 U.S.C. §3709(c) — Loan seasoning: later of 6 payments or 210 days
(c) Loan Seasoning.— Except as provided in subsection (d) and notwithstanding section 3703 of this title or any other provision of law, a loan to a veteran for a purpose specified in section 3710 of this title that is a refinance may not be guaranteed or insured under this chapter until the date that is the later of—
38 U.S.C. §3709(a) — Fee recoupment within 36 months via lower monthly payments — enumerated items (chapeau recall fix)
(1) the issuer of the refinanced loan provides the Secretary with a certification of the recoupment period for fees, closing costs, and any expenses (other than taxes, amounts held in escrow, and fees paid under this chapter) that would be incurred by the borrower in the refinancing of the loan; (2) all of the fees and incurred costs are scheduled to be recouped on or before the date that is 36 months after the date of loan issuance; and (3) the recoupment is calculated through lower regular monthly payments (other than taxes, amounts held in escrow, and fees paid under this chapter) as a result of the refinanced loan.
38 U.S.C. §3709(b) — Net Tangible Benefit test (rate-drop floors) — enumerated items (chapeau recall fix)
(1) the issuer of the refinanced loan provides the borrower with a net tangible benefit test; (2) in a case in which the original loan had a fixed rate mortgage interest rate and the refinanced loan will have a fixed rate mortgage interest rate, the refinanced loan has a mortgage interest rate that is not less than 50 basis points less than the previous loan; (3) in a case in which the original loan had a fixed rate mortgage interest rate and the refinanced loan will have an adjustable rate mortgage interest rate, the refinanced loan has a mortgage interest rate that is not less than 200 basis points less than the previous loan; and (4) the lower interest rate is not produced solely from discount points, unless— (A) such points are paid at closing; and (B) such points are not added to the principal loan amount, unless—
38 U.S.C. §3709(c) — Loan seasoning: later of 6 payments or 210 days — enumerated items (chapeau recall fix)
(1) the date on which the borrower has made at least six consecutive monthly payments on the loan being refinanced; and (2) the date that is 210 days after the first payment due date of the loan being refinanced.
38 U.S.C. §3709(b) — Net Tangible Benefit test (rate-drop floors) — enumerated items (chapeau recall fix) — enumerated items (chapeau recall fix)
(i) for discount point amounts that are less than or equal to one discount point, the resulting loan balance after any fees and expenses allows the property with respect to which the loan was issued to maintain a loan to value ratio of 100 percent or less; and (ii) for discount point amounts that are greater than one discount point, the resulting loan balance after any fees and expenses allows the property with respect to which the loan was issued to maintain a loan to value ratio of 90 percent or less. (c) Loan Seasoning.— Except as provided in subsection (d) and notwithstanding section 3703 of this title or any other provision of law, a loan to a veteran for a purpose specified in section 3710 of this title that is a refinance may not be guaranteed or insured under this chapter until the date that is the later of—