The Department of Veterans Affairs charged nearly 73,000 veterans improper home loan funding fees adding up to $286 million, an error that could result in refunds for the affected veterans.
The VA Office of Inspector General released a report Thursday saying that, from Jan. 1, 2012, through Dec. 31, 2017, the VA improperly charged disabled veterans loan funding fees that they are not required to pay because of their disability status.
About 53,200 veterans may be owed a total of $189 million, while an additional 34,400 veterans could receive refunds adding up to $164 million if the Veterans Benefits Administration, or VBA, doesn't fix the problem that resulted in erroneous funding fee charges, the report found.
According to the IG, the VA was aware of the problem as early as 2014 but didn't act.
"OIG finds it troubling that senior VBA management was aware that thousands of veterans were potentially owed more than $150 million yet did not take adequate actions to ensure refunds were issued," VA Assistant Inspector General for Audits and Evaluations Larry Reinkemeyer wrote in the report.
Roughly $67 million of the charges were levied on veterans who were exempt by disability status at the time of their loan applications -- what VA OIG termed "avoidable fees," since their disability rating was known to the VBA.
Related: Learn more about VA home loans
The remainder were considered "unavoidable" because the veterans were appropriately charged when they applied for a home loan but later became exempt because their disability status changed.
The VA refunded $97 million to 19,700 affected veterans from Jan. 1, 2012, through Dec. 31, 2017, but 53,200 are still owed refunds, according to Reinkemeyer.
The refund amounts could be substantial: The average funding fee charge was $4,483, with the highest fee topping out at $19,470, according to the report.
The VA OIG recommended that the VBA identify the affected veterans and issue refunds. It also recommended that the VA identify any exempt veterans erroneously charged the fee before 2012 and provide refunds.
The VA OIG said the Loan Guaranty Service managers must do a better job identifying exempt veterans during the loan application process to prevent avoidable fees and track that lenders apply funding fee refunds to loan balances if an applicant's disability status changes.
The VA concurred with most of the IG recommendations and set a target date for identifying affected veterans and providing refunds by July 31.
Veterans who believe they may have been affected should check their closing documents for a funding fee charge and can contact VA at 1-877-827-3702.
-- Patricia Kime can be reached at Patricia.Kime@Military.com. Follow her on Twitter at @patriciakime.
