The United States government is cracking down on companies that are abusing the veteran home loan system put out by the Department of Veteran Affairs. More than 22 million veterans have achieved homeownership through loans by the VA, and a number of them had been targeted by the loan scam.
The scam comes from several mortgage firms that are putting out refinancing loans that are targeted towards veteran borrowers. These loans offer to help veterans get better terms and rates on their amounts, but actually leave them in worse states then they had been in before.
Officials at the Governmental National Mortgage Association, known as “Ginnie Mae,” say that some veterans are being “flooded with misleading offers and signing up without assessing costs and benefits.”
Some of these veterans are refinancing multiple times a year due to these lenders targeting their competitors’ recent borrowers. They are seeking to make these borrowers refinance again and then create a new loan balance with the new lender, officials have reported.
While a modest reduction in monthly payments has been noted, the long-term costs far outweigh them. Borrowers often add $12,000 to their debt in an attempt to reduce their monthly payments by $165, for example. That could increase the average loan term by six years, and push borrowers that aren’t aware into “negative equity,” according to Ginnie Mae.
Gennie Mae and the Department of Veteran Affairs are teaming up to create a task force to hunt down the lenders offering these poor loan terms. They plan to issue heavy penalties to the firms and make sure that the veterans are getting reimbursed and fair deals for their troubles.