The Department of Veterans Affairs is permanently restricting to two the amount of points that can be rolled back into its interest rate reduction loans, but lenders are complaining they weren't given adequate notice.

Any additional points a lender charges to refinance must be paid by the borrower in cash, according to a statement, effective last Thursday, that the agency sent to its regional field offices.

Lenders were given a four-day window, through today, to comply with the regulations, which were prompted by evidence of excessive charges uncovered early this year. Any refinanced loans closed hereafter with more than two discount points added will not be eligible for the government guaranty.

This is going to create confusion in the industry, said Brian Chappelle, staff vice president at the Mortgage Bankers Association of America. Temporary restrictions issued by the VA Jan. 25 allowed charges of more than two points as long as the refinanced loan included a statement of acknowledgement signed by the borrower.

Mr. Chappelle said his trade group already has received several calls from lenders with refinanced loans in the pipeline that have more than two points on them. Because these loans will not close before today's deadline, lenders will need to go back and renegotiate the fees.

Field offices received notification of the final regulation last Tuesday, with instructions to pass the information along to lenders in their area. But, according to Mr. Chappelle, some lenders had not heard of the regulation by last Thursday, its effective date.

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