Assumptions with release of liability are broken into three basic categories:

• Loans Originated Prior to March 1, 1988
• Loans Originated After March 1, 1988
• Unrestricted Transfers
  • Processed by VA, includes situations such as death or divorce

Being released from liability does not enable a veteran to have their loan guaranty entitlement restored unless a substitution of entitlement (SOE) has been completed.

Loans Originated Prior to March 1, 1988

• Freely Assumable- Ownership can be transferred to any person without prior approval from VA or the Lender.
• The veteran must contact VA for an information packet and forms for the buyer and seller to complete for release of liability.
• Release of liability (ROL) is processed by VA- Once the ROL packet and forms are received, VA will review and make a determination.

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Loans Originated After March 1, 1988

• Not Freely Assumable-The loan may not be assumed without prior approval from the servicer.
• Contact the servicer’s assumption department for instructions on how to proceed once a sales agreement has been completed.
• The potential buyer will need to credit and income qualify through the servicer, using VA guidelines.
• Costs- The servicer may charge a maximum processing fee of $300.00, the actual cost of the credit report, and the cost of an appraisal if requested. A funding fee equal to one-half of 1 percent of the loan balance is collected at closing.
• Release of Liability processed by VA. After the closing, the servicer will submit the entire assumption package so VA records can be updated to reflect the ROL.

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Unrestricted Transfers:

• Processed by VA-Does not require prior approval by the servicer

• Death- The estate of the deceased must provide VA with a letter stating the circumstances of the transfer, a copy of the death certificate, and a copy of the recorded deed transferring ownership of the property from the estate to the assuming relative. The estate is responsible for contact with the servicer regarding the name change on the loan.
• Divorce- The veteran or spouse may provide VA with a letter requesting a release of liability due to divorce. A copy of the final divorce decree and a copy of the recorded Quit Claim deed must be submitted.
  

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Substitution of Entitlement (SOE)

• If the assuming party is an eligible veteran with sufficient entitlement available, a substitution of entitlement may be granted. This allows the selling veteran’s entitlement to be restored after the assuming veteran’s entitlement has been substituted on the loan.
  
• The assuming veteran must certify the home will be occupied as a primary residence.
  
• VA processes substitution- If the assumption was processed by the servicer, the closing package will be forwarded to VA for processing of the SOE.
  

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