The VA Loan Lender Certification – Purpose and Penalties


Deciphering the VA Lender’s Handbook Chapter 17 Part 3

Pupose and Penalties of VA Loan Lender Certification

As you may already know, the VA has strict standards for lenders offering VA loans. These lenders must first be approved by the VA to offer VA loans, and they have to regularly certify that they are still fulfilling all of the VA’s requirements for lenders. This happens with every single loan submission and is called the Lender Certification. The lender submits the Lender Certification with each loan submission and it states that in processing and underwriting the loan, the lender complied with VA requirements, regulations, and the law. There is specific language that is to be used on the Certification, but as long as you know that the lender is required to certify their compliance with all applicable rules and regulations, knowing the specific verbiage isn’t very important.


Obviously,  From the Handbook: “Any lender who knowingly and willfully makes a false certification may be subject to civil money penalties equal to the greater of

  • two times the amount of the Government’s loss on the loan involved, or
  • another appropriate amount, not to exceed $10,000.


In other words, a lender may be on the hook for a lot of money if they falsify a certification and the VA loan results in a loss to the VA. Even if the falsification does not result in a loss for the VA, the lender may still be charged a penalty of up to $10,000. But a one-time monetary penalty is most likely not the end of the story. A lender who makes a false certification will usually provoke an investigation, which might uncover further falsifications and, therefore, further penalties. Even for single offenses, the lender may impose sanctions on the lender in addition to the monetary penalty, such as debarment and suspension, and a loss of automatic authority. All of these situations are dealt with on a case-by-case basis, and the penalties and sanctions are as well.


In the previous article, we discussed the List of Parties Excluded From Federal Procurement and Nonprocurement Programs. This is a list maintained by the federal government of individuals and entities that are not permitted to participate in government programs in a money-making way. A lender being assessed a monetary penalty does not automatically put them on the List; in fact, lenders will not be put on the list if the only penalty they faced was a monetary one. However, if a sanction in addition to a monetary penalty was placed on them, they may appear on the list, depending on the severity of the sanctions. If that is the case, then just like any other party on the list, other program participants are prohibited from doing VA-loan related business with them.

Avoiding Lender Penalties

Lenders can be penalized in many ways – they may have their ability to approve most loans without prior VA approval revoked, or they may no longer be able to have a staff appraisal reviewer process appraisals and have to submit them to the VA instead. The lender may also face debarment and suspension, or a Limited Denial of Participation. These penalties have their own unpleasantness, and all of them provide strong motivation for lenders to keep their noses clean. We’re going to go over each of these penalties in the next few articles and talk about what they mean for the lender and what they mean for the borrower if you’re working with or thinking about working with a lender that is under one of these sanctions.


If a lender has paid a monetary penalty and that was the end of it, then usually you won’t be affected much, if at all. In fact, you probably won’t even find out that the lender paid a penalty (it’s not exactly the sort of thing they advertise). Don’t stress over it too much; if the VA determined that a monetary penalty was sufficient and no other action was needed, then the falsification must have been a one-time thing and relatively minor.


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