Announcement 20-0038: Updated VA Funding Fee & IRRRL Certificate of Eligibility Requirements

Overview

The VA requires that Veterans’ funding fee exemption information is up-to-date at the time of closing to avoid incorrect charges to exempt Veterans.  Lenders may not advise Veteran borrowers who believe they are exempt from paying the funding fee to close on a loan without first establishing the borrower’s funding fee exemption status.

Updated Requirements – 6/01/2020

This announcement addresses updated VA Funding Fee and IRRRL Certificate of Eligibility (COE) requirements from Circular 26-19-17 Change 1 and Change 2:

  • For IRRRL transactions, a COE is not required for veterans already determined to be exempt on the IRRRL case, surviving spouses, and spouses of deceased veterans in receipt of Dependency and Indemnity Compensation (DIC).
  • When a Disability Questionnaire is required, if an Active Duty Servicemember states he or she has a pre-discharge claim pending, the VA Regional Loan Center (RLC) must be emailed immediately in addition to processing the 26-8937 Verification of VA Benefits.

The VA Full Doc and IRRRL Guidelines will be updated to reflect these changes.

IRRRL Transactions

Effective immediately, a COE will be required for all VA IRRRLs to determine whether the Veteran borrower has a funding fee exemption, except in the following three situations:

  • The Veteran has already been determined to be exempt from the funding fee as evidenced on IRRRL assignment screen in WebLGY.
  • The entitlement encumbered on the loan being refinanced belongs to the surviving spouse of a Veteran.
  • The entitlement encumbered on the loan being refinanced belongs to a Veteran who has since passed away and the IRRRL borrower is spouse who was also a co-borrower on the loan being refinanced.

Please note:  The spouse of a Veteran who is now deceased, will not be considered exempt from the VA Funding Fee unless (s)he is in receipt of DIC.  Lenders may remit VA Form 26-8937, Verification of VA Benefits, to the RLC of jurisdiction to verify a surviving spouse’s exempt status.

All VA Transactions

For all loans (Full Doc and IRRRL) where the COE does not show the Veteran is exempt from paying the funding fee, the Veteran must answer the following questions:

  1. Does the Veteran have a claim for compensation pending with the VA?
  2. If the Veteran is an Active Duty Servicemember, does he or she have a pre-discharge claim pending?

The CMS VA Disability Questionnaire has been updated to include these questions.  The Veteran must provide a completed CMS VA Disability Questionnaire prior-to-docs (PTD).

If the Veteran has a claim for compensation pending with VA, an updated COE must be obtained within three (3) days of the note date using the COE “Correct” function in WebLGY.

If an Active Duty Servicemember has a pre-discharge claim pending, the Lender must contact the Regional Loan Center (RLC) by email to request assistance in obtaining a proposed or memorandum rating to determine if the Servicemember may be exempt from paying the funding fee as noted above. Form 26-8937, Verification of VA Benefits, must be submitted in addition to the email to the RLC to ensure the RLC is aware of the need for the proposed or memorandum rating.  If a proposed or memorandum rating is not obtained and loan closing takes place, the Servicemember is not eligible for funding fee exemption.

Contacts

Please contact CorrespondentRM@carringtonms.com with any questions.

Carrington thanks you for your business.