VA loans

Am I Due A VA Loan Funding Fee Refund?

October 20, 2011


Am I Due A VA Loan Funding Fee Refund?

Due to confusion over VA loan funding fee changes scheduled to take effect on 1 October, 2011, some VA borrowers may have been incorrectly charged VA loan funding fee amounts. In some cases the VA loan funding fee charged was too high, and in other cases the fee may have been too low.

In cases where the borrower was overcharged, a refund may be due, and in cases where the VA loan funding fee was too low the government has authorized waivers of the additional fee amounts as described in VA Circular 26-11-16.

The VA has issued guidance to lenders on how to proceed in cases where the funding fee amount is in question. For VA insured home loans closed between 1 October 2011 and 5 October, 2011 the VA instructs lenders to “submit payments at this time and VA FFPS will automatically calculate the funding fee due, using the lower funding fee structure that was in effect from October 1 through October 5.”

That means borrowers with loans that closed during the above time frame were not supposed to be charged additional or higher fees. But in some cases the funding fee payments were submitted before the fee structure was updated. According to VA loan Circular 26-11-16, “Lenders who closed loans during this period, and who submitted funding fee payments prior to October 8, 2011 (the date VA Funding Fee Payment System was updated), would have been charged an incorrect (higher) fee.”

To correct this, the VA instructs lenders to resubmit funding fee data and/or payment.

“By submitting the funding fee payment again, VA FFPS will automatically recalculate the correct fee.  VA staff will then process any refund due, and funds will be deposited into the lender’s VA Financial Management System account.  Upon receipt of the refund, lenders are encouraged to re-review the loan closing documents to determine whether or not the Veteran is entitled to receive any/all of the refund amount.”

In cases where a refund is necessary, VA instructions to the lender state, “Refunds due to Veterans should be applied directly to the principal balance of the loan.”

As stated, no cash goes directly back to the borrower in these cases–the refund is put toward the VA loan amount.

The same type of rules apply in cases where the borrower had a VA loan which closed on or after October 6, 2011. “For loans closed on or after October 6, 2011, VA FFPS will calculate the higher fees noted in VA Circular 26-11-15.  In cases where a Good Faith Estimate (GFE) was issued prior to enactment of Public Law 112-37, VA will waive the difference in fees between the lower October 1 fees and the higher Public Law 112-37 fees.”

Borrowers who may be entitled to a refund in these circumstances will have that refund applied to the principal balance of the VA insured home loan.

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  1. Hank Thomas

    I made a home purchase in July and paid the VA funding fee. If I retire from military service with a disability rating over 10% and still own the home am i entitled a refund on the funding fee? My understanding is that disabled vets are not required to pay the funding fee.

    • Joe Wallace

      Hi Hank, thanks for asking. Were you on retired status when you purchased the home? Or were you on active duty when the loan closed? VA loan rules address situations where the purchaser was no longer on active duty but had not gotten a disability rating yet--the rules instruct the borrower to work with the lender to submit proof of VA recognized disability once it's been received in order to process a refund application. I can't recall seeing anything in the rules that addresses your specific situation, best advice is to contact the VA directly to ask whether or not you're entitled to a refund of the funding fee in your circumstances and work with your lender accordingly.

  2. Tom Clark

    Hi Joe, I purchased my home in January of 2010, and just refinanced it in July of 2012. The person who assisted me with my refinance told me that since I had refinanced within 3 years I should get a VA funding fee refund, but try and figure out who, how and what I have to do is the thing I’m having trouble with. Can you help me? Thanks, Tom

    • Joe Wallace

      Why do they say you might be due a refund of the VA loan funding fee? Did you pay a fee and later begin receiving disability pay from the VA?

      • Tom Clark

        They told me that I shouldn’t have to pay a funding fee twice within 3 three year period.

        • Joe Wallace

          Hi Tom, The only circumstances I am aware of where a VA loan funding fee is appropriate is when the borrower cancels a VA loan before closing, he or she pays cash up front and the fee is later included in the loan, or if the veteran is officially notified of disability status and requests a refund on that basis. I'd contact the VA directly for assistance if you have further questions. You can reach them at 1-800 827 1000. Hope this helps!

  3. Tom Clark

    Thank you, I will try them.

  4. Jim Piper

    I am a Navy veteran. I purchased a home during the Spring of this year 2013. We paid a down payment of over 10% but were charged a funding fee of 3.30%. This was a second use of a VA Loan Guaranty. Should I have only been charged a 1.25% fee based on the down? If so, how may I obtain a refund to principal? Thank you.

    • Joe Wallace

      Contact the Department of Veterans Affairs directly for assistance with VA loan funding fee issues such as these by calling 1-800 827-1000.

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