A reader asks, “In 2003 I purchased a home using VA loan and the funding fee was applied to my loan. I just found out that I should not have been charged the funding fee since I had a 10% service connected disability (since 2000). To make things worse, I just refinanced few months ago and was charged a funding fee again. Is there any recourse? I was not aware that the funding fee would be exempt if you had a service connected disibily and the bank never told me of any exemption.”
Borrowers who find themselves in this situation should contact the Department of Veterans Affairs to discuss applying for a VA loan funding fee refund. Contact the VA Regional Loan Center with jurisdiction over your state–you can look up your VA RLC at http://www.benefits.va.gov/homeloans/rlcweb.asp.
In recent times, the Department of Veterans Affairs has changed the way it processes the VA Certificate of Eligibility so that the certificate now shows a borrower’s exempt status on the COE where applicable. Chapter Two of the VA Lender’s Handbook instructs the lender in a section titled Funding Fee Field and Conditions on COE:
“The “FUNDING FEE” (FF) field appears near the top of the COE. The exemption status, either “EXEMPT,” “NON EXEMPT,” or “CONTACT RLC,” will appear to the right of this field:
–EXEMPT status indicates a veteran is exempt from paying the Funding Fee.
–NON EXEMPT status indicates a veteran is not exempt from paying the Funding Fee.
–CONTACT RLC indicates a system-generated determination is not available. ”
Additionally, Chapter Two states;
“For COEs with “EXEMPT” status, the following “CONDITIONS” may appear:
“Funding Fee – Veteran is exempt from Funding Fee due to receipt of service-connected disability compensation of $___ monthly.”
“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.”
“Funding Fee – Please fax a copy of VA Form 26-8937 to the VA Regional Loan Center of jurisdiction.”
“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.”
For COEs with a “NON EXEMPT” status, the following “CONDITIONS” may appear:
“Funding Fee – Veteran is not exempt from Funding Fee.”
“Funding Fee – Veteran is not exempt from Funding Fee due to receipt of nonservice-connected pension. LOAN APPLICATION WILL REQUIRE PRIOR APPROVAL PROCESSING BY VA.”
All of these items appear on the COE on today’s certificates, but borrowers who don’t have an official decision by the VA on disability status may have a COE which simply states they are “not exempt”. In such cases the borrower will need to furnish proof of the VA disability rating decision and submit it to the VA Regional Loan Center and request a refund. VA loan funding fee refunds are NOT automatic–they must be applied for. Contact the Department of Veterans Affairs directly to get started on the refund process.
Do you have questions about VA home loans? Ask us in the comments section.
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