VA Addresses Assumption Fees

Ballard Spahr LLP

Ballard Spahr LLP

The U.S. Department of Veterans Affairs (VA) recently issued Circular 26-23-10, Change 1, Circular 26-24-5 and an Exhibit to address fees that may be imposed in connection with the assumption of a VA-guaranteed home loan.

The VA advises in the Circulars that the holder or servicer of a VA-guaranteed home loan with automatic authority may charge an assumption processing fee not to exceed $300. The assumption processing fee for parties without automatic authority is capped at $250. Both amounts are subject to any lower state maximum assumption fee.

Circular 26-24-5 provides for a variance to these amounts based on the location of the property. The assumption processing fee is intended to cover all costs of underwriting, processing and closing the assumption. (If the assumption is not approved and remains not approved after 60 calendar days, and the assumption fee was collected previously, the portion attributable to changing the loan records ($50) must be returned to the party who paid the fee.)

The following charges, if incident to the loan assumption, may be charged to the assumer (regardless of the assumer’s veteran status):

  • The assumption processing fee.
  • The VA funding fee (unless the assumer is exempt, or the transaction is the result of an unrestricted transfer, such as an assumption processed as the result of a divorce).
  • Credit report fee.
  • Recording fees and recording taxes incident to recordation.
  • Applicable taxes, hazard insurance, flood insurance and assessments.
  • Fee for the title examination (including title searches), title insurance, and endorsements, if any.
  • Fees approved in advance as local deviations.

Fees and charges not expressly listed may not be charged to or paid by the assumer of a VA-guaranteed home loan. It is permissible for the seller of the home to pay for real estate commission or brokerage fees.

As noted above, Circular 26-24-5 provides for variances to the $300/$250 assumption fee amount based on the location of the property. The variances, which are referred to as the Assumption Locality Variance, are set forth in the Exhibit to the Circular and are as follows:

  • Midwest, $386
  • South, $404
  • Northeast, $409
  • West, $463

The Exhibit identifies the states that are included in each geographic category.

Significantly, Circular 26-24-5 provides that the noted fees “may be charged as a local variance in addition to the [$300/$250 base assumption] fee . . . and other allowable fees.”

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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