by Barbara Cameron, AVP, Bankers Advisory*, December 1, 2011
Recently the Department of Veterans Affairs (VA) has issued a series of Circulars regarding VA Funding Fee changes. There was some confusion over VA loan funding fees as a result of the changes (VA Circular 26-11-15 and VA Circular 26-11-16) – especially regarding the short term changes. VA also provided in VA Circular 26-11-16, guidance for refunds of overages paid when a Good Faith Estimate was issued prior to the enactment of the law reestablishing rates at a higher level. VA Fee changes are listed over a series of dates below. Most importantly are the changes on or after November 18, 2011.
Proper Funding Fee Charges: November 18, 2011 — September 30, 2016
- Loans closed November 18 through and including November 21, 2011: Funding fees for loans closed during this period will be the lower fees cited in the VA Circular 26-11-12, dated September 8, 2011.
- Loans closed November 22 through and including September 30, 2016: Funding fees for loans closed during this period will be the same as those that existed prior to October 1, 2011. See Exhibit A for a complete breakdown of current fees.
- Interest Rate Reduction Refinancing Loans and Assumptions: Funding fees for these loans remain at .50 percent.
Proper Funding Fee Charges: October 1, 2011 — November 17, 2011
The VA Funding Fee Payment System (FFPS) has been updated to calculate the funding fee changes noted in Circular 26-11-15. Lenders may now submit payments for all loans, including those closed on or after October 1, 2011. Procedures for obtaining a refund of excess fees are also described below.
Loans Closed October 1, 2011 Through and Including October 5, 2011
Lenders may 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. Lenders who closed loans during this period, and who submitted funding fee payments prior to October 8, 2011 (the date VA FFPS was updated), would have been charged an incorrect (higher) fee.
To generate a refund of any excess fees paid, lenders can access the record in VA FFPS, select “Correct” and resubmit. It is not necessary to change any data. 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 (FMS) 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. Refunds due to Veterans should be applied directly to the principal balance of the loan.
Loans 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. This waiver will be in the form of a refund to lenders via FFPS. To obtain a refund, lenders must first submit the funding fee in FFPS. Once that task has been completed, lenders should scan and email a legible copy of the GFE to firstname.lastname@example.org.
Lenders should always label the subject header of the email “Funding Fee Refund,” as this will enable timely processing. The refund will be processed in VA FFPS by VA staff, and funds will be deposited into the lender’s VA FMS 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. Refunds due to Veterans should be applied directly to the principal balance of the loan.
Refund / Remitting Procedures
- Waiver of the Difference in Funding Fees For cases in which lenders have closed loans based on lower funding fees cited in the Good Faith Estimate (GFE) rather than the higher fees provided in HR 2646, the Secretary, under existing authority, will waive the difference in the fees. Specifically, VA will waive the right to collect the difference in fees (between the lower October 1 rates and the higher H.R. 2646 rates) for loans for which a GFE was prepared prior to October 6 based on the lower fees, and that was closed after the enactment of HR 2646.
- Procedures for Remitting Higher Funding Fees than Required 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.
VA – 26-11-12 http://www.allregs.com/ao/main.aspx?did2=73577f65a7e04b63b9c4c7327cd1bec2
VA – 26-11-15 – Exhibit A http://www.allregs.com/ao/main.aspx?did2=ff2b0fc36ab74de58f50c3c91fe65829
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*Barbara Cameron is Assistant Vice President at Banker Advisory, Belmont MA. She is a certified FHA DE and VA LAPP. Bankers Advisory provides quality control and compliance audit services and authors policy manuals and compliance resources exclusively for AllRegs.
Disclaimer: The information presented in this article represents the opinion of the author and not that of AllRegs. This article is not meant to be nor should it be construed as advice of legal counsel. The applicability of the information contained herein will vary based on the nature of each lending institution's business, under what law it was created, and its loan products and procedures. Readers are strongly urged to consult with their legal counsel and/or contact local counsel as appropriate in the various states and jurisdictions to determine the applicability of the materials contained herein to the specific facts and circumstances of each organization's programs and products and to identify other law applicable to its business operations. The information contained herein was not reviewed or approved by counsel in the respective jurisdictions.