A Scam Warning from the Department of Veterans Affairs
The Department of Veterans Affairs doesn’t typically dispense consumer advice the way federal watchdog agencies like the Federal Trade Commission does. But some circumstances require going the extra mile and the VA issued its very first “warning order” all the way back in 2017 to let VA borrowers know about a growing wave of scams targeting homeowners, especially those who might be experiencing trouble with their mortgages. Those scam attempts still happen today.
The good news is that there are warning signs to watch out for when dealing with these issues. You can make a formal or mental checklist of these signs and compare them to any offers you might get as a preliminary filter of sorts. What do these scammers do and what should you know going forward?
The First Warning Signs of a Home Loan Scam
The first thing the VA and the Consumer Financial Protection Bureau (the agency they partnered with to issue that first warning order) want you to watch out for? People trying to contact you about a mortgage offer without you having initiated contact first.
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Offers that come unsolicited should be viewed with extreme caution. You simply don’t know whether the offer is legitimate or not when that offer arrives by phone, text, e-mail, social media, and even sometimes popups on a web page. Clicking through any links provided is NOT recommended. Never click on the links you are sent by a third party you did not contact first. It’s a terrible idea to do so.
So, checklist item number one should be asking yourself whether you initiated the contact or if the third party has gotten your contact information somehow and is reaching out to you first.
Another early warning sign of a home loan or refinance loan scam to be wary of? High-pressure sales tactics include admonishments like “Don’t delay! Time is running out!” If your third party won’t give you time to think about the offer, skip them and keep moving. If your third party keeps telling you time is short, supplies are low, availability is extremely limited, or that the offer ends very very soon, don’t give in.
Move on and consider yourself lucky to have avoided a fraud attempt.
A Major Sign of A VA Home Loan Scam
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. Your scam warning checklist should include this type of bogus offer.
No, it’s not common or even likely in most cases to be offered a purchase loan that immediately offers to let you skip a mortgage payment. Perhaps a truly ham-fisted scam artist might try such a thing, but it’s more likely this scam would be run as a refinance offer. Don’t trust any refinance offer that advertises skipped payments on a government-backed loan of any type; VA, FHA, USDA, etc.
Offers to Refinance a VA Mortgage
Some home loan scams are refinance scams, offering to refinance your VA home loan at very low interest rates without explaining the specifics. A common trick is to entice you with either deliberately non-specific language or to post the interest rate on a 15-year mortgage (without saying it’s the 15-year rate) when you are really seeking a 30-year loan. Does that sound like “bait-and-switch” to you?
Other features of refi loan scams you should add to your checklist include situations where you are asked to sidestep your loan officer or otherwise keep your existing loan servicer in the dark about your plans or activities related to the mortgage. 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.
The same goes for any third party asking you to take your name off the deed of your home.
Offering Cash Back On a VA Purchase Loan
If you go into a VA home loan application expecting to get unrestricted cash back above $500, you will be disappointed. That’s because VA mortgages for purchasing a home do not allow cash back at closing time except for bona fide refunds of money paid upfront for things later financed into the loan amount.
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.
>> Interested in a no PMI, zero down payment possible home loan? For a no-obligation, free consultation regarding your VA Loan eligibility, please go here.
About the author
Joe Wallace is a 13-year veteran of the United States Air Force and a former reporter/editor for Air Force Television News and the Pentagon Channel. His freelance work includes contract work for Motorola, VALoans.com, and Credit Karma. He is co-founder of Dim Art House in Springfield, Illinois, and spends his non-writing time as an abstract painter, independent publisher, and occasional filmmaker.