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VA’s New Documentation Requirements for Allowable Fees on VA Loans

November 2, 2024

In Circular 26-24-19, the Department of Veterans Affairs (“VA“) issued new documentation standards for fees and charges on VA-guaranteed home loans, effective for loans closing on or after January 1, 2025. These requirements focus on ensuring brokers provide transparency and accountability in all fees assessed to veterans, aside from the VA funding fee and the flat lender charge of up to 1%.

The updated guidelines build upon the VA’s limitations on permissible fees in the VA Lenders Handbook, Pamphlet 26-7, and emphasize clear documentation to support charges, which may be required during audit reviews.

1.Documentation Standards and Fee Limitations

Brokers must now maintain invoices or similar records to verify any fees charged to veterans. The VA has issued the following guidance:

Charges must reflect actual costs: Brokers may only bill veterans for the actual amount incurred for services, ensuring no excess fees.
No duplication of costs: Fees cannot be charged to veterans for services already covered by another party.
Refunds for unsupported charges: Brokers must provide refunds for any fees not supported by an invoice. For overcharges refunded before a VA audit, brokers should keep proof of the refund in the loan file for documentation.

These documentation requirements are exempt for the lender’s flat fee of up to 1% and fees marked as “Seller-Paid” or “Paid by Others” on the Closing Disclosure.

2.State-Specific Fee Variances

The VA’s guidance recognizes that fee variances may occur based on property location. In response, the VA publishes a State Fees and Charges Deviation List that outlines local exceptions for certain fees. However, the VA will no longer publish maximum dollar amounts for most fees. Instead, brokers are encouraged to ensure charges align with reasonable and customary amounts, supported by documentation.

For government-mandated fees that might not be collected by the state or municipality at closing, the VA clarifies that invoices are not required if these charges appear on the Deviation List with a specific amount cap. In cases where no cap is set, brokers should document fees and confirm they reflect reasonable local standards.

3.Preparing for Compliance

To meet these new standards, brokers are advised to review fee policies and enhance documentation practices, as the VA is likely to examine these records in future audits. With January’s effective date approaching, brokers should:

Accurate Invoicing: Ensure invoicing practices reflect actual costs of services rendered to veterans.

Refund Tracking: Maintain a clear record of any refunds issued to veterans for unsupported charges.

Regional Compliance: Regularly consult the State Fees and Charges Deviation List for permissible local variances and ensure all charges align with “reasonable and customary” standards in their respective regions.

These new VA guidelines emphasize transparency and accountability. Brokers can prepare by refining internal procedures to comply with VA requirements and protect their business against audit risks.