You're Looking Out for Veterans?
In today's issue of "I love my business but sometimes hate my industry", I read today that there's a federal investigation into the "churning" of VA loans, which, if you've been in the mortgage industry for more than a few months, falls into the "duh" category.
Churning, for those not familiar with the jargon, is strategically issuing someone a mortgage loan, then repeatedly offering refinance options to close several loans from the same borrower, generating fees on each and every transaction, in a relatively short period of time. While, of course, there are 
some very good reasons for many borrowers to refinance, those involved with "churning" tend to issue acceptable, but lesser-than-the-best-option type mortgage loans, then offering a slightly better loan a few months later.
The investigation is focused on churning specifically with regard to the VA loan program, which is, in my humble opinion, the best loan product on the planet. Unfortunately, the VA loan is also one which is very easy to take advantage of if you're a lender that wants to prey on home buyers and owners who haven't taken courses on the mortgage market. Here's an example of how predatory lending takes place on a VA loan (it's especially easy when in a market with appreciating home values).
"Mr/s borrower you're buying a new home, that's great! Let's use your VA benefit to get you a great loan with no money down!"
....6 months later
"Mr/s borrower, great news!! We can offer you a no closing cost refinance loan with your VA benefit that will pay off some/all of your other debts, too --- the rate will be a little higher, but your monthly debts will go down so much that it'll offset the higher rate!"
...6 months later
"Mr/s borrower, more great news!! We can no offer you a mortgage with a much lower rate that will save you a ton of interest over time. There are closing costs, but the lower rate and the long term savings will more than offset those costs!"
And just like that, a lender closes 3 loans in 1 year for 1 borrower. And it's very easy to do with simple sales techniques and simply recognizing that unless a borrower is very savvy and knows how to shop for a mortgage, they don't know that typical VA rates are lower than rates on conventional mortgages. They may also not realize that a "no closing cost" loan isn't always their best option, even though it sounds grrrrrrreat in marketing pieces.
My hope is that the investigation into these practices leads to some predatory lenders being forced to close down (of course, after being fined out the whazoo), but while the investigation unfolds and more information comes out, I'd like to just remind the mortgage industry of a couple of things for those folks focused on helping veterans:
- American flag-draped marketing pieces aren't helping Veterans
- Putting the word "Veteran" in your marketing, business, or website name isn't helping Veterans
- Hiring LO's that can barely spell the word "mortgage", slapping a headset on them, setting them up on a dialer, and buying lists of former military personnel to "dial for dollars" sure as hell isn't helping Veterans
- Sending out misleading marketing mailers with impossible-to-get rates and touting your patriotism isn't helping Veterans
- Paying a few bucks to take some half-assed "educational" course so you can slap a "Super Offical, Most Bestest, Vet-loving, Lender EVER" badge on your email signature, is not helping Veterans.
What IS helping Veterans with the VA loan program?
For one, knowing the product so you can offer good advice in choosing the right loan (the FIRST time), so there's no need to refinance unless there's a large market shift.
For two, taking the time to counsel Vets on the program, their options, all of the costs, and providing them with stellar service along the way.
Finally, staying the hell away from the VA loan program if you don't know it, or are sitting in a dialer cube using sales scripts to try and get Veterans to unnecessarily refinance again and again because your boss showed you how much money you can make from them - THAT'S one big way you can help Veterans.
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