Exempt Veterans Charged VA Home Loan Funding Fees

The VA Office of Inspector General (OIG) conducted this review to determine whether the Veterans Benefits Administration (VBA) had adequate controls in place to ensure exempt veterans did not pay VA home loan guaranty funding fees and to refund fees previously charged to exempt veterans. Veterans entitled to receive VA disability compensation do not have to pay funding fees for VA home loans. However, the OIG review team estimated that VA charged about 72,900 exempt veterans about $286.4 million in funding fees between 2012 and 2017. Also, VBA’s Loan Guaranty Service managers that oversee VA’s home loan guaranty program were aware since October 2014 that thousands of exempt veterans may have been charged home loan funding fees. The team estimated VA had not yet given about $189 million in funding fee refunds to about 53,200 exempt veterans. VA also could owe an additional 34,400 veterans refunds of $164 million over the next five years if VBA does not implement adequate controls to prevent inappropriate funding fee charges. The OIG recommended the Under Secretary for Benefits makes certain the Loan Guaranty Service identifies exempt veterans who were charged funding fees and issues refunds, and conducts ongoing periodic reviews. The OIG also recommended the Under Secretary ensures Loan Guaranty Service managers create a plan to minimize and detect inappropriate funding fee charges by updating veteran exemption status in real time, as well as consistently documenting and verifying that lenders apply funding fee refunds to veterans’ loan balances in a timely manner. The Under Secretary provided corrective action plans for all recommendations, with a target completion date of July 31, 2019.