Nevada County Picayune and Gurdon Times Newspaper Archive

VA Announces Discount Plans

The Department of Veterans Affairs (VA) has published final regulations that limit to two the number of discount points that may be included in VA interest rate reduction refinancing loans.

Such loans are used to refinance and lower the interest rate on existing VA-guaranteed home loans.

The rule helps ensure veterans are not overcharged with excessive points and protects the government agaisnt the danger of overinflated loans.

According to VA officials, the high number of points added to a loan might result in a new loan amount substantially in excess of the value of the property. When trying to sell the property, veterans may not be able to get a high enough sales price to pay off the loan balance, placing VA at a financial risk.

While some loans might reduce veterans' interest rates and create lower payments, the reductions would not be as much as they would have been had veterans not been charged excessive points.

Early last year, VA became aware that some refinancings showed unusually high discount points in relation to the interest rate charged. The VA asked lenders to comply voluntarily with the two-point limitation, followed by an interim final rule making the ceiling mandatory on a temporary basis.

The final rule became permanent with the January 24 publication.