A: When VA refunds a loan, the loan is purchased from the private lender. VA only refunds a loan when the veteran has had problems making the payments due to circumstances beyond his or her control, the problems have improved so that payments can now be made or will be in the near future, but the loan holder is not willing to wait before taking action to terminate the loan. Refunding is rare because most lenders prefer to work out the problems, if at all possible, rather than selling the loan to VA and thereby giving up the right to future income from that loan.
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