VA Loan Articles
More About VA Loan Funding Fee RefundsThere are many questions about VA loans and funding fees. Some borrowers find themselves in situations where they realize they weren't required to pay the funding fee but due to an oversight there were charged anyway. Questions like this one--"why was I charged and how can I get my refund?"--may not be common, but they happen often enough that there's a VA procedure in place to address the problem.
Consider this scenario:
"I purchased a home using VA loan and the funding fee was applied to my loan. I should not have been charged the funding fee since I had a 10% service connected disability. Additionally, I just refinanced few months ago and was charged a funding fee again. Is there any recourse? I was not aware that the funding fee would be exempt if you had a service connected disability and the bank never told me of any exemption."
In this situation, you should contact the Department of Veterans Affairs (1-800-827-1000) to discuss applying for a VA loan funding fee refund. You can also contact the VA Regional Loan Center with jurisdiction over your state-you can look up yours at http://www.benefits.va.gov/homeloans/rlcweb.asp.
The Department of Veterans Affairs has changed the way it processes the VA Certificate of Eligibility so that the certificate now shows a borrower's exempt status on the COE where applicable. Chapter Two VA Pamphlet 26-7 now instructs the lender in a section titled Funding Fee Field and Conditions on COE:
"The "FUNDING FEE" (FF) field appears near the top of the COE. The exemption status, either "EXEMPT," "NON EXEMPT," or "CONTACT RLC," will appear to the right of this field:
- EXEMPT status indicates a veteran is exempt from paying the Funding Fee.
- NON EXEMPT status indicates a veteran is not exempt from paying the Funding Fee.
- CONTACT RLC indicates a system-generated determination is not available."
Chapter Two also adds these instructions to the lender:
"For COEs with "EXEMPT" status, the following "CONDITIONS" may appear:
"Funding Fee - Veteran is exempt from Funding Fee due to receipt of service-connected disability compensation of $___ monthly."
"Funding Fee - Veteran is exempt from Funding Fee due to receipt of service-connected disability compensation. Monthly compensation rate has not been determined to date."
"Funding Fee - Please fax a copy of VA Form 26-8937 to the VA Regional Loan Center of jurisdiction."
"Funding Fee - Please have the lender contact VA Regional Loan Center for loan processing. Please fax a copy of VA Form 26-8937 to the RLC of jurisdiction."
For COEs with a "NON EXEMPT" status, the following "CONDITIONS" may appear:
- "Funding Fee - Veteran is not exempt from Funding Fee."
- "Funding Fee - Veteran is not exempt from Funding Fee due to receipt of nonservice-connected pension. LOAN APPLICATION WILL REQUIRE PRIOR APPROVAL PROCESSING BY VA."
These details now appear on the COE, but some borrowers who don't have an official decision by the VA on disability status may receive a certificate of eligibility which simply states they are "not exempt". This can obviously become a problem in the VA loan application process when trying to determine a borrower's status with regard to paying the VA Funding Fee.
To correct the problem, the borrower must furnish proof of the VA disability rating decision and submit it to the VA Regional Loan Center and request a refund. VA loan funding fee refunds are NOT automatic-they must be applied for. Contact the Department of Veterans Affairs for more information.