Investigative Group

VA Owes Millions To Thousands Of Disabled Veterans In Refunds For Home Loan Fees, Report Finds

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Luke Rosiak Investigative Reporter
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  • The Department of Veterans Affairs charged disabled veterans a fee on their home loans even though they were supposed to be exempt. 
  • In 2014, the VA learned that it owed 50,000 veterans $150 million, but it did not try to contact the veterans or fix its policies.
  • The inspector general said it was “troubling” that the VA said it expected veterans to contact it if they wanted a refund, even though the vets didn’t know of the mistake and there was no form to claim a refund.

Thousands of disabled veterans were wrongfully charged fees by the Department of Veterans Affairs (VA), and even after the VA learned of the problem in 2014, it did not refund the money, investigators said Thursday.

The VA improperly charged veterans more than $280 million home loan funding fees between 2012 and 2017, a report by the VA’s Office of Inspector General (OIG) said. As of now, 50,000 veterans are owed a combined $189 million.

The Veterans Benefits Administration’s (VBA) “Loan Guaranty Service management, which provides oversight of VA’s Home Loan Guaranty Program, was aware since October 2014 that thousands of exempt veterans may have been charged home loan funding fees. 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 IG wrote.

“The average funding fee charged to these exempt veterans was $4,483, and the fee was as high as $19,470,” it said.

UTAH BEACH, FRANCE: As a sailor plays "Taps," US veterans of the 06 June 1944 D-Day invasion lay a wreath 06 June 1994 in front of a monument at Utah Beach during commemoration ceremonies of the 50th anniversary of the landing. (Photo by PASCAL GUYOT/AFP/Getty Images)

US veterans of the D-Day invasion lay a wreath during commemoration ceremonies of the 50th anniversary of the landing. (PASCAL GUYOT/AFP/Getty Images)

“The review team further estimated that VA could owe an additional 34,400 exempt veterans funding fee refunds of $164 million over the next five years if VBA does not implement adequate controls to minimize or detect inappropriate funding fee charges,” it said.

“In May 2016, the former director of Loan Guaranty Service documented a need to address the issue of inappropriate funding fee charges and acknowledged over $150 million in refunds may be due. Disturbingly, as of January 2019, Loan Guaranty Service management had not taken action to issue refunds to these exempt veterans,” it said.

When veterans get mortgages through the VA, they are charged a funding fee, but disabled veterans are supposed to be exempted. At least $66 million is due because the VA failed to waive the fee even though the vet qualified at the time of application. In other cases, the veteran was flagged as disabled in the VA’s computer system later and therefore became retroactively eligible to have the fee waived, but the problem was the refund was never sent.

The VA did not make attempts to return the funds to veterans, saying it “relies on veterans to contact VA and that veterans are required to file a claim to request refunds.” Yet, the VA did not have a form for them to do so. (RELATED: Prostitute Gave VA Employee Crack In Exchange For Vets’ Identities)

In October 2014, the St. Paul Regional Loan Center sent information to the VA headquarter’s Loan Guaranty Service management, making clear that the agency owed what was at that time $151 million in refunds to 50,000 veterans. VA’s management did not create a policy to return the money.

When certain offices of the VA did finally return money, they gave it to the banks holding the mortgages, instead of to the veterans who wrote checks they never should have had to. The VA did not collect any documentation, and therefore had “no reasonable assurance” that the banks even applied the money to the vets’ loan balances, the report said.

Gulf War veteran Bill Virill, retires U.S. Army, attends a Veterans Day ceremony at the Vietnam Veterans Memorial November 11, 2014 in Washington, DC. Win McNamee/Getty Images

A veteran at the Vietnam Veterans Memorial November 11, 2014. Win McNamee/Getty Images

On May 22, Inspector General Michael Missal told Congress that the OIG has “commonly” found the following in the VA:

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