VA pays back $400M in mortgage fees to improperly charged veterans

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The Department of Veterans Affairs distributed more than $400 million in refunded home loan fees after finding exempt borrowers were mistakenly charged due to clerical errors related to their disability status.

"VA staff worked diligently through the summer reviewing 130,000 cases, which is an average of 16,000 loans reviewed per week. This effort included loans dating back nearly 20 years," VA Secretary Robert Wilkie said in a press release.

The VA found origination fees were charged correctly in the majority of cases. However, some errors occurred in situations where veterans' exemption status changed following the issuance of a disability rating after their loan closed.

Veterans eligible to receive disability pay — or who would be if they didn't receive other compensation — are exempt from the fees, as are surviving spouses of veterans who died due to service-related disabilities.

The VA directs mortgage lenders to ask all veterans without written exemptions if they have a pending claim for disability compensation, including any predischarge claims.

The fees the VA charges those who lack exemptions help defray the cost of the government agency's mortgage guaranty.

Fees for those without exemptions are based on a percentage of the loan amount and vary by loan type, down payment, military category, and whether a person is getting a VA mortgage for the first time or not.

Fee amounts can range from 0.5% to 3.3% and be financed or paid in cash. Fees are higher for lower down payments, service members in the National Guard or Reserves and — in many cases — subsequent uses of the loan program.

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Originations Compliance Risk management The VA