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.