By Marty Kovacs There’s a lot of valuable information and advice for veterans — and all consumers — applying for a home loan or refinancing an existing loan in the federal Consumer Financial Protection Bureau’s recent third “Service Member Complaint Snapshot.” Since the bureau began accepting mortgage complaints in 2012, it has received more than 12,500 mortgage complaints from service members, veterans, and their families. Those complaints came from all 50 states and from all branches and ranks of the military. The snapshot analyzed 1,800 complaints related to mortgage refinancing, which revealed an increased interest in refinancing driven by low interest rates. The bureau found that some lenders aggressively pursue veterans with offers to refinance mortgages obtained from the Veterans Administration – but those offers can hold hidden features, which may not be in the veteran’s best interest financially. Veterans also reported being proactively contacted by lenders with promises of rates lower than their existing mortgages, only to end up at the closing table with much worse terms than they expected. That happened sometimes because of processing delays, like large time gaps in document requests, which can cause rate locks to expire and drive up the rate originally promised. Borrowers often have to choose between the higher rate or putting cash towards a rate extension. Many times, those veterans said they felt compelled to continue the process with their lender, even after terms changed, because their credit has already been pulled. As the housing market rebounded, the bureau heard less about veterans struggling to refinance their loans when facing a financial hardship or imminent default and more about the problems associated with refinancing when they were using it as a tool to get potentially more favorable loan terms. Overall, in their complaints to the CFPB, veterans reported that the solicitations and advertisements they received were often misleading. Many complained that lenders failed to deliver on the promises made during the application process. And the quick underwriting often resulted in the borrower’s failure to clearly understand important loan details, like how the new escrow account will be set up. Here are valuable tips for veterans and all consumers to remember when thinking about refinancing:
- Borrowers don’t have to respond to marketing – An advertisement may sound or look official, but an owner does not have to refinance a home unless they decide it’s in their best interest. Focus on the length of the new loan and whether the interest rate will change, not just the monthly payment.
- Be a savvy consumer – Review everything! Specific terms and conditions often are hidden in an advertisement. Be proactive about asking questions, so you can be sure you know what you are signing up for.
- Understand the risks – Borrowers may not qualify for the rates and terms listed. Before applying, ask upfront about all the qualifications required before finalizing any loan.
- Shop around – Within a limited time, from 14 days to 45 days, borrowers can shop around for a mortgage and it will be counted only as a single inquiry affecting their credit score.
Don’t limit lender choices just because one lender has already pulled a credit report. The impact of an inquiry is small, while shopping around for the best deal can potentially save a lot of money. Marty Kovacs is the 2017 Chairman of the Santa Clarita Valley Division of the 9,500-member Southland Regional Association of Realtors. David Walker, of Walker Associates, co-authors articles for SRAR. The column represents SRAR’s views and not necessarily those of The Signal. The column contains general information about the real estate market and is not intended to replace advice from your Realtor or other realty related professionals.