The federal government owes at least $189 million to 53,000 disabled veterans who overpaid on their home loans, according to the Department of Veterans Affairs’ inspector general.
When veterans take out a mortgage, they pay a funding fee to the lender that usually costs several thousand dollars. The fee is waived for veterans who receive disability compensation.
A review by VA’s Office of Inspector General released Thursday found that from 2012 through 2017, more than half of the veterans entitled to this added benefit paid the fee and never received reimbursement from the government.
The Veterans Benefits Administration, in its response to the inspector general report, agreed to identify the exempt veterans who paid the fee and issue them refunds.
The VBA noted that the financial impact to the veterans was minimal over the life of the loan, the inspector general report says.
The watchdog office said it “stands by the assertion that VBA did not protect these veterans’ financial interests and any inappropriate funding fee charges, regardless of the amount, should be refunded.”
The review found that in some instances, certificates of eligibility for exemption were “outdated, incorrect or missing.” In one example cited in the report, a veteran had been receiving disability compensation since March 2011, but it wasn’t correct on his eligibility form, so when he bought a home in September 2017, he was incorrectly charged $5,800.
Currently, veterans have to file a claim if they were wrongfully charged the fee and request the refund, which the IG said “improperly places the burden and responsibility solely upon the veteran.”
The watchdog report also said the Veterans Benefits Administration knew since 2014 that tens of thousands of veterans may have been wrongfully charged the funding fee.
“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,” the report says.
In 2014, VA was mired in a broader scandal around long patient wait times at VA health facilities resulting in veteran deaths.
VA’s Loan Guaranty Service office, which oversees VA’s home loan program, told the IG that it, too, had an issue with long wait times and prioritized that over ensuring that veterans weren’t overcharged.
by Paul B. Burkhalter Managing Partner of Morgan & Weisbrod, Board Certified in Social Security Disability Law.