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 in 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.
“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.
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.
On May 22, Inspector General Michael Missal told Congress that the OIG has “commonly” found the following in the VA:
- Culture of complacency
- Bureaucracy ahead of veterans
- Failure to ensure accountability
- Poor financial management
- Not using IT effectively
- HR and staffing issues
- Poor quality assurance
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