VA issued Circular 26-19-17: Funding Fee Guidance to Lenders and Servicers. Per the Circular, a lender:
- Must not advise a borrower who believes they are exempt from paying the funding fee to close on a loan without first establishing the borrower’s funding fee exemption status;
- Must obtain a Certificate of Eligibility (COE) for an Interest Rate Reduction Refinance Loan;
- Must ask if the borrower has a claim for compensation pending with VA (in the event the COE does not show that the borrower is exempt from paying the funding fee);
- Must obtain an updated COE prior to loan closing if the borrower has a claim for compensation pending with VA;
- Must ask all active duty servicemembers if there is a pre-discharge claim pending, and if so, must contact the Regional Loan Center to request assistance in obtaining a proposed or memorandum rating (in the event the borrower may be exempt from paying the funding fee);
- Must request (via the Funding Fee Payment System) a retroactive refund of the funding fee if notified (by VA or the borrower) of an overpayment of the funding fee; and
- Must change the refund destination in the refund setting section of the Funding Fee Payment System from “Lender/Vendor” to “Primary Veteran” in the event a refund is due to a borrower.
The Circular went into effect June 28, 2019.
