Banking and Finance Law Daily Veterans’ complaints about mortgage refinancing addressed by CFPB
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Monday, November 14, 2016

Veterans’ complaints about mortgage refinancing addressed by CFPB

By J. Preston Carter, J.D., LL.M.

A Consumer Financial Protection Bureau snapshot of servicemember complaints shows that as of Nov. 1, 2016, the bureau had received over 12,500 mortgage complaints from servicemembers, veterans, and their dependents. Approximately 14 percent of those complaints concern refinance.

An accompanying blog post by CFPB Assistant Director Holly Petraeus notes an increased interest in refinancing by consumers and lenders. This may be due to a number of factors, she says, including the current low interest rates. "However, as we often see with financial products and services, what could benefit a borrower may also have the potential for financial harm." For lenders, Petraeus says, a Department of Veterans Affairs refinance is considerably quicker and easier than other types of refinance loans because it may not require an appraisal or conventional underwriting. This may lead some lenders to aggressively pursue veterans with offers to refinance their VA mortgage, she says. However, Petraeus warns, those offers may have hidden features or not be in the veteran’s best interest financially.

The CFPB’s third semiannual Servicemember Complaint Snapshot reveals aggressive solicitations, misleading advertisements, and failed promises by lenders. Veterans report that lenders’ aggressive solicitations to them are often unclear about the specific underwriting requirements to obtain the loan. They also report that poor communication from lenders during the refinance process creates confusion.

Refinancing tips. In response, the bureau offers five tips for veterans to utilize when deciding whether refinancing is the best option for them:

  1. You don’t have to respond to the marketing—look at all the terms of the offered loan, not just the monthly payment, to decide if it’s in your best interest.
  2. Be a savvy consumer—look at everything an advertiser has to say about the product they’re selling. Look for hidden terms and conditions in the advertisements and ask questions.
  3. Understand the risks—not every ad directed towards your military status is a guarantee. Be sure to ask the lender about all the qualifications required and understand what needs to be met before the process is finalized.
  4. Remember to shop around—within a limited time (14-45 days), you can shop around for a mortgage and it will be counted as a single inquiry affecting your credit score. The impact of a credit inquiry is small, while shopping around for the best deal can potentially save you a lot of money in the long run.
  5. Know the process—the CFPB is here to help you with financing your home. Learn what to expect and what questions to ask. The bureau reminds veterans that there are tools and resources to help them make decisions, such as its Owning a Home tool.

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