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#2056446 - 12/31/15 08:49 PM VA Unallowable Fees - Changing Fee Names Memo
TomTom Offline
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Joined: May 2014
Posts: 61
For VA loans, certain fees can be charged to the borrower and some cannot (unallowable fees). One of the unallowable fees is a an attorney/closing fee. One of the allowable fees is a title exam.

We've had some enterprising closing attorneys shift some of the attorney/closing fee into the title exam fee to pass the unallowable fee threshold.

Obviously all sorts of wrong.

However, I thought I saw some type of memo or email or circular from the VA on this practice specifically and their opinion on its legality? I searched the VA's website for that circular but couldn't find it. Does anyone know if I'm mis-remembering and/or where I might be able to find that memo?

I'd like to be able to just point to that memo for those that push back and say they've always done it this way with other lenders.

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#2056456 - 12/31/15 09:34 PM Re: VA Unallowable Fees - Changing Fee Names Memo TomTom
Kathleen O. Blanchard Offline

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Kathleen O. Blanchard
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Did the attorney perform any title work?
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#2056496 - 01/04/16 03:10 PM Re: VA Unallowable Fees - Changing Fee Names Memo TomTom
TomTom Offline
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Joined: May 2014
Posts: 61

The attorney did perform title work. A CD went out to the borrower three days prior to closing with a closing fee of (just illustrative) $600 and title exam of $200. When the loan was found to hit the VA unallowable points threshold, the final CD showed closing fee of $300 and title exam of $500.

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#2056650 - 01/04/16 10:47 PM Re: VA Unallowable Fees - Changing Fee Names Memo TomTom
RolTyde Offline
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Joined: Nov 2008
Posts: 78
Anywhere but here
I understand this is a fairly common practice, moving costs around to avoid the VA fee threshold. My bank will not participate in this even if it means we have to pay a fee ourselves. For example: If an examiner comes in and see that an attorney that you use on a regular basis charges $300 for title search for all loan types except VA, where they charge $800, I can't see that going very well at all. How can it be justified? VA set the fee limits for the benefit of the veteran and working around those limits is opening the door for lots of trouble.

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#2056773 - 01/05/16 05:47 PM Re: VA Unallowable Fees - Changing Fee Names Memo TomTom
Shellfish Offline
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Joined: Dec 2015
Posts: 44
I agree with RolTyde. All the banks that I've worked with pay for the settlement/attorney fee if the seller isn't paying for it (or in a refinance transaction).

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#2056812 - 01/05/16 07:13 PM Re: VA Unallowable Fees - Changing Fee Names Memo TomTom
TomTom Offline
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Joined: May 2014
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Unfortunately it is somewhat common. I could've sworn VA sent out a memo or communication of some kind expressly calling out this sort of fee "rearranging" but can't seem to find it. I'll see if I can scrounge up some contacts that might be able to point me in the right direction. It would be much easier to point to that communication when we get push back (since it is so common).

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#2056843 - 01/05/16 08:52 PM Re: VA Unallowable Fees - Changing Fee Names Memo TomTom
TomTom Offline
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Joined: May 2014
Posts: 61
So it was a lawsuit where it was alleged the title attorney's had shift fees from an unallowable category to another. It was settled for a around 12 million or so.

U.S. ex rel, Victor E. Bibby & Brian J. Donnelly v Wells Fargo Bank, et al.

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#2056856 - 01/05/16 09:12 PM Re: VA Unallowable Fees - Changing Fee Names Memo TomTom
Shellfish Offline
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Joined: Dec 2015
Posts: 44
Hopefully the lawsuit will be enough support to stop the attorney from this practice- it amazes me that they think it's okay. I think the regulators would have an issue as well. It's not an accurate accounting of what the funds are being paid for and UDAAP comes to mind.

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