How to Avoid VA Loan Scams 2022

Table of Content

• Largest Retiree & Veteran COLA Increase In Decades Approved
• Signs of a VA loan refinance scam
• CFPB Supervisory Examinations Find Credit Reporting Failures, Junk Fees, and Mishandling of COVID-19 Protections
• Fraud Indicators Toolkit and Crime Alerts
• Who Is Eligible for Servicemembers' Group Life Insurance (SGLI)?

You should also be suspicious if something seems too good to be true. Scammers are promising extremely low interest rates to entice victims. They’re also promising or guaranteeing that they can prevent foreclosure. If something seems too good to be true, it’s a strong warning sign of a scam. Instructs you to make a mortgage payment by money order or gift cards.

The VA wanted to make refinancing from one VA loan to a new VA loan cheap, easy, and straightforward. It eased up on many bureaucratic procedures, which is helpful for borrowers but may have left IRRRLs more vulnerable to abuse. For instance, you might get a 3.75% mortgage rate, at a cost of three points , plus other fees — perhaps a total upfront cost of $10,000. That’s because you’re stretching out the repayment of the remaining balance to a new term, and extending your repayment by five years. You could lower your payment to $1,309 by refinancing without even changing the interest rate.

Largest Retiree & Veteran COLA Increase In Decades Approved

Certain scenarios, such as a VA Energy Efficient Mortgage, may involve additional loan funds placed in an escrow account to pay for labor and materials for home improvements. As with any refinance loan, make sure you compare IRRRL offers from multiple lenders to see which can offer the best deal. And use care when comparing rates — just because you can drop your rate, doesn’t mean you’ll save money in the long run.

The beneficiary’s VA benefits are deposited into an account that is also used for other non-VA deposits . The VA Streamline Refinance is a legitimate refinance program backed by the U.S. An unscrupulous lender will refer to the $167 a month difference as “savings.” But clearly you are saving nothing — in fact, you’ll pay more in interest in the long run.

Signs of a VA loan refinance scam

If you know how fraudsters may try to pressure or entice you into making a quick decision on a loan that may not be right for you, it’s easier to withstand those tactics. The VA and CFPB remind military members and dependents that high-pressure phone calls, “official” looking postal mail or electronic mail may come very quickly to you after closing the deal on a new mortgage. Your lender will negotiate an interest rate with you based on these factors; if you know you have credit issues going into the refi loan process but your offer includes “the lowest interest rates ever! ” you should do some research to see what other lenders are offering, too. A legitimate VA refinance loan option is one that is presented by a participating lender, does not violate VA guidelines, and does not include extremely high-pressure sales tactics or “zero thinking time” situations. To find the best deal on your refinance loan, you should apply with at least three lenders and compare their offers.

CFPB Supervisory Examinations Find Credit Reporting Failures, Junk Fees, and Mishandling of COVID-19 Protections

Any third-party offer claiming to let you refinance or purchase and skip a payment or two is to be avoided at all costs. Government-backed mortgages including VA home loans have a prohibition on skipping payments as part of the transaction. A lender cannot, according to the VA Lenders’ Handbook, permit the borrower to skip mortgage payments as part of a refinance loan transaction. If you are offered “skipped payments,” it may be best to look elsewhere for your VA refinance loan. Regardless of how the offer is worded, you will not be allowed to actually “skip” a payment, it will simply be included elsewhere in the costs of the loan. The fraudulent call-back number connects to "veterans services" where "benefits," such as loan modifications to their mortgages are offered.

The Consumer Financial Protection Bureau and the Department of Veterans Affairs have issued a “warning order” to both service members and veterans with VA home loans. This order went out in November 2017 and addresses the solicitation promises that are being made by some lenders. The CFPB suggests contacting the VA or your mortgage service provider if you have questions or suspicions of a scam. If it’s not a legit offer, you should stop communicating with the scammer and report it to your State Attorney General’s office and to the Federal Trade Commission .

Fraud Indicators Toolkit and Crime Alerts

Offers to receive an escrow refund – Promises are being made to service members/veterans to a specific dollar amount they will receive at loan closing. In actuality, the refund turns out to be much lower than promised, or the refinanced loan results in a higher monthly mortgage payment. More than $4.4 million was obtained in civil money penalties as a result of this sweep. Another early warning sign of a home loan or refinance loan scam to be wary of? ” If your third party won’t give you time to think about the offer, skip them and keep moving.

The scammers will often use high-pressure tactics to force victims to act immediately or sign paperwork without reviewing it. Right now, fraudsters are trying to convince homeowners that aid programs are ending and they need to take immediate action or face consequences from being behind on payments. VA loans are recognized as one of the best home financing options for those who meet the VA loan requirements, but recently there’s been an uptick in the frequency of scams targeting homeowners with this type of loan. It’s always important to be aware of common scams and fraudulent schemes so you can protect yourself from becoming a victim, and that’s especially true when the scammers are more aggressive. But it’s not a free ride — in exchange for lender credits, you’ll usually pay a higher interest rate on your new loan.

They may also try to convince you that your home is facing foreclosure. The CFPB and the VA both urge VA loan borrowers to be educated consumers and learn about how refinance loan scams and deceptive offers work. The Department of Veterans Affairs explicitly prohibits lenders from advertising that borrowers can skip one or two mortgage payments when refinancing. A lender might list this as a benefit because there are not real benefits to your refinance; or because it wants the offer to look better than it is. Basically, any third party asking you to deceive your loan servicer or withhold information from them should be viewed as a scam and avoided at all costs.

In this scenario, they will pay about $379,444 over the life of the loan. If they refinance for the same rate at this point and add on 10 years, their monthly payment becomes $801, but they will pay $414,932 over the life of the loan. Be sure you’re getting a lower interest rate and that you’ll come out ahead in the long run. VA Purchase loans that are advertised with thousands of dollars back to you at closing time are a scam. The VA loan program is, like all government-backed home loans, equipped with one type of loan that does allow cash at closing; the VA Cash-Out Refinance. So, when a lender advertises no closing costs on a VA refinance, it really means you’ll increase the cost of your loan by paying higher interest for the rest of your mortgage term.

For the purpose of this article, “scam” refers to something that does not give the buyer what is promised. If you think a refinance is the right move for you, check today’s rates to see how much you could potentially save. Mortgage rates are very low right now, and VA loan rates are generally the lowest of any loan type. There are many different scenarios where it makes sense to refinance. But in every case, it needs to be a personal decision based on your current mortgage and your long-term goals.