VA loans

VA Streamlines Funding Fee Exemption Process

September 14, 2011

VA Streamlines Funding Fee Exemption Process

Recently we’ve written about VA loan funding fee exemptions–any qualified veteran receiving disability compensation from the Department of Veterans Affairs is exempt from paying the VA loan funding fee. In such cases, the veteran is exempt based on documented, VA-recognized disabilities.

When the borrower applies for a VA home loan, the lender may be unaware of the applicant’s exemption, but thanks to recent changes at the Department of Veterans Affairs, starting with all VA Certificates of Eligibility or COE issued on September 11, 2011 and beyond, exempt status is now listed on the COE.

According to a VA circular, “By having the Funding Fee status shown on the COE, lenders in most cases will no longer be required to fax the Department of Veterans Affairs Form 26-8937, Verification of VA Benefits, to a VA office for processing.” Showing the veteran’s current status as exempt or non-exempt reduces paperwork and processing times in many cases.

“Effective September 11, 2011,” the VA circular says, “the first release of the COE includes a new field entitled “FUNDING FEE” near the top of the COE.  The exemption status, either “EXEMPT,” “NON EXEMPT,” or “CONTACT RLC,” will appear to the right of the new field title.”

a.  EXEMPT status indicates the Veteran is exempt from paying the funding fee.

b.  NON EXEMPT status indicates the Veteran is not exempt from paying the funding fee.

c.  CONTACT RLC indicates a system-generated determination is not available.”

The VA now also includes information on the Certificate of Eligibility that explains why the borrower is exempt. “For COEs with “EXEMPT” status, the following “CONDITIONS” may appear:”

(1)  “Funding Fee – Veteran is exempt from Funding Fee due to receipt of service-connected disability compensation of $___ monthly.”

(2)  “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.”

(3)  “Funding Fee – Please fax a copy of VA Form 26-8937 to the VA Regional Loan Center of jurisdiction.”

(4)  “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.”

This change gives many borrowers a more efficient VA loan process, but for some who are still waiting on disability ratings there are additional considerations. We’ll cover more on those subjects in future blog posts.

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