The VA loan funding fee issue has been confusing for all involved, and we’ve received quite a large number of reader comments and questions on the issue. Fortunately, that confusion is about to come to an end thanks to recent developments.

The Department of Veterans Affairs has announced that the scheduled VA loan funding fee reduction which took place November 18, 2011 has been superseded by the President’s signing of H.R. 674, the Vow To Hire Heroes Act of 2011.

The VA is working on clarification of the issue at the time of this writing, we’ll post an update as soon as one becomes available. In the meantime, one reader asks:

“I just closed on a home in Virginia today Nov 21 2011 and I paid the higher funding fee and my lender stated that they are not honoring the VA Circular 26-11-18, “If H.R. 674 is not signed by November 18, 2011, funding fees will decrease as scheduled for a short period of time. What should I do?”

The VA Circular mentioned above clearly states, ” If H.R. 674 is not signed by November 18, 2011, funding fees will decrease as scheduled for a short period of time.  If funding fees do reset to the lower amounts, VA’s Funding Fee Payment System will collect only the statutory lower amount.  Lenders who disclosed higher funding fees on closing documents based on anticipation of Congressional action, will have to refund the difference to the Veteran borrower, either in the form of a principal curtailment for financed funding fees, or a check for funding fees paid at closing.”

The key to all this is the timing. If the borrower owed and paid the funding fee at the time when the lower amount was authorized, that’s the amount the VA expect to be paid. However, if the VA loan funding fee was due and paid AFTER the bill is signed into law–which occurred on Monday November 21, 2011, the higher amount is due. According to VA Circular 26-11-18, “Once the bill becomes law, funding fees will revert to their current levels.

**UPDATE** According to VA Circular 26-11-19, “VA Circular 26-11-19 states that for loans closed between November 18 through and including November 21, 2011, “Funding fees for loans closed during this period will be the lower fees cited in the Department of Veterans Affairs (VA) Circular 26-11-12, dated September 8, 2011.”

VA expects all lenders to remit the correct funding fees on these loans, regardless of closing document disclosures.  VA will not waive the difference in fees between the lower November 18, 2011, fees and the higher H.R. 674 fees in these situations.”

If you have a VA loan funding fee issue, as the reader clearly does, because of the new Vow To Hire Heroes Act of 2011, contact the Department of Veterans Affairs directly and explain your situation and get VA assistance. You can call the VA for help on this issue at 1-800-933-5499.

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