Carlos Scarpero, Senior Loan Originator Specializing in VA Loans
Congress is trying to pay for new veterans benefits by charging other veterans more to refinance. The VA IRRRL funding fee increase in front of Congress right now would take the funding fee on an Interest Rate Reduction Refinance Loan from 0.5% to 1.42%, and the loan assumption fee from 0.5% to 1.0%. As of August 16, 2026, none of that is law. If you close a streamline refinance today, your funding fee is still 0.5%.
I want to be clear about what this post is. Most of what I write here is straight guideline explanation. This one is an opinion piece. I originated these loans, I ran the numbers on my own past files, and I went on the record about it with Mortgage Professional America in June. I think this provision is bad policy, and below I lay out the facts first and then exactly why I think that.
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It amends one table. Section 3 of H.R. 6047 rewrites the loan fee table in 38 U.S.C. 3729(b)(2): it strikes “0.50” and inserts “1.42” for the interest rate reduction refinancing loan row, strikes “0.50” and inserts “1.0” for the loan assumption row, and pushes the fee table sunset date from June 9, 2034 out to September 30, 2036. That is not a rumor or a summary. You can read the bill text as referred to the Senate and compare it to the current fee table in 38 U.S.C. 3729, where the IRRRL row still reads 0.50.
The same fee language rides in two vehicles, which is why the news coverage can be confusing:
So the honest status is: passed one chamber inside one bill, stalled inside another, not law, and still changeable. That last part is the whole reason to speak up now.
What the fee pays for is not in dispute. The handbook is blunt about why it exists.
VA HANDBOOK EXCERPT
“In order to defray the cost of administering the VA Home Loan program, each veteran must pay a funding fee to VA at loan closing.”
The funding fee keeps the VA loan program self-supporting instead of taxpayer funded. Congress sets those percentages in statute, which is exactly what this bill would change for streamline refinances.
Source:
Four reasons, in the order they matter to the veterans I actually work with.
This is the part that gets missed in the headlines. Federal law already protects veterans from bad refinances. Under 38 U.S.C. 3709(a), a refinance of a VA loan cannot be guaranteed unless all of the fees and incurred costs are scheduled to be recouped on or before the date that is 36 months after loan issuance, calculated through the lower monthly payment. I am completely in favor of that rule. It is one of the best consumer protections in the mortgage business.
But that rule is a hard ceiling, and this bill raises the cost that has to fit under it. Here is what I told Mortgage Professional America: “It’s pretty common for an IRRRL to be at like 12 to 18 months on the recoup. That could easily throw it over the 36 months. Some loans will work, but a lot won’t.” That is not a slogan. When I looked back at the streamline refinances I closed over the past year and re-ran them at 1.42%, most of them would not have made sense. A fee increase that pushes files past a legal test does not make refinancing more expensive. It makes it unavailable.
Every veteran on an IRRRL signs a statement showing exactly how long the payback takes, so this shows up in writing on every single file.
VA HANDBOOK EXCERPT
“The statement must show the interest rate and monthly payments for the new loan versus that for the old loan. The statement must also indicate how long it would take to recoup ALL closing costs (both those included in the loan and those paid outside of closing).”
You see your own breakeven in writing before you close. Raise the funding fee and that number moves in one direction, and for a lot of borrowers it moves past the point where the loan is allowed at all.
Source:
VA Lender’s Handbook (Pamphlet 26-7) – Chapter 6: Refinancing Loans, Topic 1
I support what the underlying bill is trying to do. Catastrophically disabled veterans and surviving spouses have gone roughly two decades without this kind of increase, and they should get it. My objection is to the offset. As I put it in the interview: “It’s one of the situations where you’re basically using the funds from one side to pay for the other side.” And this: “I am happy that they’re helping the veterans with disabilities, but it’s kind of ridiculous because the funding fee fund has plenty of money. They just claim they couldn’t find another way to fund that disability payment. But there are always ways to fund everything.”
Notice who actually pays. Veterans with a service connected disability rating are exempt from the funding fee, so they do not feel this at all. The bill is paid for by the veterans who are not exempt, which in my own pipeline is more than half of my streamline refinance borrowers. Working age veterans and active duty service members end up funding a benefit expansion out of their housing costs.
A fee increase only raises what the scorekeepers expect if the same number of loans still close. That is not how this works. “It doesn’t triple if you don’t get the IRRRLs. It only triples if you actually get the same amount of refis,” I told MPA. “If the refis dry up by two-thirds, you’re basically back to where you started.” A borrower whose file no longer clears the 36 month recoup test does not pay a bigger fee. That borrower does not refinance, and the government collects nothing.
VA’s own numbers put the scale in context. In fiscal year 2025, VA guaranteed 119,458 interest rate reduction refinancing loans, about 22.6% of total VA loan volume, per the VA Loan Guaranty annual benefits report. That is the population being asked to absorb this. Whatever share of those files would fail the recoup test at the higher fee is a veteran who keeps a higher payment for no reason other than a budget offset.
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This is not one loan officer complaining. I was interviewed about it by Mortgage Professional America in an article headlined Tripling the VA refinance fee could put 119,000 annual loans at risk, published June 30, 2026. In that same piece, the National Association of Mortgage Brokers formally opposed the funding fee provision while still supporting the bill’s broader goal. NAMB president Kimber White put it this way: “we are concerned that nearly tripling the IRRRL fee places an unintended financial burden on the very community we aim to protect. Increasing these upfront costs directly reduces the immediate financial relief that a lower interest rate provides.”
I have not yet heard a single person inside this industry defend the fee increase as written. Not one.
If you think charging veterans more to lower their own payment is a strange way to fund veterans benefits, say so while the bill is still moving. Two concrete steps:
My honest read, and I said this to MPA too: public pressure can still change this before it becomes law. “I’m hoping and praying that all this stuff works, and we just keep pushing,” I said then, and I still mean it. “That’s all we can do. Spread the word.”
Nothing has changed yet. The IRRRL funding fee is 0.5% today, and that is the number on a refinance you close this month. A few practical things worth knowing:
If you are exempt from the funding fee because of a service connected disability rating, none of this changes anything for you either way.
No. As of August 16, 2026 the IRRRL funding fee is still 0.5%, and the loan assumption fee is still 0.5%. The increase to 1.42% is proposed language in H.R. 6047 and H.R. 9237. Neither has become law.
Both. Section 3 of H.R. 6047 amends the fee table in 38 U.S.C. 3729(b)(2), and the same change appears inside the larger H.R. 9237 package. H.R. 6047 passed the House on May 21, 2026 and is in the Senate Committee on Veterans' Affairs. H.R. 9237 was pulled from the House floor on July 16, 2026.
No. Funding fee exemptions are unchanged by this language. Veterans who are exempt, generally those receiving compensation for a service connected disability, would not pay the higher fee.
Because of 38 U.S.C. 3709(a), which requires that fees and costs be scheduled to recoup within 36 months through the lower payment. A larger fee lengthens that recoupment period, and once it passes 36 months the loan cannot be guaranteed at all.
Only if the refinance already makes sense on today's numbers. Calculate your breakeven at the current 0.5% fee and your own rate improvement. A bill that has not passed is not a reason to refinance.
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Can you use a VA loan on a deed-restricted affordable home? What VA’s resale-restriction and marketability rules require, and what to check before you sign.
Sellers worry VA appraisals run low and closings drag. What the VA Lender’s Handbook actually says, and how to make your VA offer competitive anyway.
H.R. 9237 would raise the VA IRRRL funding fee. What the bill text actually says, where it stands as of August 15 2026, and what it means for your refinance.
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