On May 24, 2018, the “Protecting Veterans from Predatory Lending Act” (herein “VA Act”) was signed into law, effective as of that date, as section 309 of the Economic Growth, Regulatory Relief, and Consumer Protection Act (Public Law 115-174). The VA Act, codified at 38 U.S.C. 3709, provides new statutory criteria for determining when, in general, the VA may guarantee a refinance loan. The VA Act also requires VA to promulgate regulations for cash-out refinance loans within 180 days after the date of the enactment of the Act, specifically for loans where the principal of the new loan to be VA-guaranteed or insured is larger than the payoff amount of the loan being refinanced.
Based on the way the VA Act structured new section 3709, VA-guaranteed or insured refinance loans are now effectively grouped into three categories: (i) interest rate reduction refinancing loans (herein “IRRRLs”), (ii) cash-outs in which the amount of the principal for the new loan is equal to or less than the payoff amount of the refinanced loan (herein “Type I Cash-Outs”), and (iii) cash-outs in which the amount of the principal for the new loan is larger than the payoff amount of the refinanced loan (herein “Type II Cash-Outs”).