Veterans Pay High Price as Lenders Push Cash-Out Home Loans

Eric Kandell is making his pitch to veterans. Wearing a red T-shirt, with the words “Low VA Rates” emblazoned across his chest, he looks fit and muscular, as if he had stepped off an Army base himself. In this YouTube video and others, he tells current and former service members how they can take tens of thousands of dollars in cash out of their homes. They can pay off credit cards, remodel a kitchen, install a swimming pool, or travel to Las Vegas. “Do whatever you want,” he tells them. “Imagine your home is like an ATM.”

Kandell is targeting borrowers from the U.S. Department of Veterans Affairs mortgage program. He’s the 43-year-old president of a company whose very name is a come-on: Low VA Rates LLC. It’s among the lesser-known financial outfits dominating the business of selling cash-out VA mortgage refinancing, which totaled $41 billion worth of new loans over the past year.

This boom is alarming federal regulators. Lenders, who can charge thousands of dollars in fees, are encouraging veterans to extract as much as 100 percent of their home equity. Many of the borrowers have poor credit and low incomes, and they could soon find themselves deep underwater. Multiple refinancing helped spark the 2008 financial collapse. In a recent Federal Register notice, the VA itself says financial companies are reviving “subprime lending under a new name.”

Lenders say they’re providing a valuable service to cash-strapped veterans. Many borrowers use the money to pay off high-rate credit cards, medical bills, or home repairs. “These guys were asked to put their life on the line, and we trusted them to make the right decision in defending our freedom,” Kandell says in an interview. “Yet we want to dictate what they do with their finances. I don’t find that to be American.”

Founded in 1944, the VA loan program began as a way to offer a hand up to returning World War II service members. In the event of a default, the government guarantees 25 percent of the loan; the lender is responsible for the rest. Government-owned Ginnie Mae backs bonds based on these loans, which are packaged and sold to investors, such as pension and mutual funds.

The loans have helped generations of veterans buy homes. But refinancing can be a costly way to free up money. In a cash-out transaction, borrowers get a new loan for more than they owe on their current mortgage. A VA borrower must pay as much as 3.3 percent of the loan amount to the federal government as a fee that offsets defaults. (Historically, default rates have been relatively low.) Closing costs and lender fees typically add 1 to 3 percentage points more, according to David Battany, executive vice president for capital markets at San Diego-based Guild Mortgage. Lenders say many borrowers take the option of paying a higher mortgage rate, rather than upfront fees.

A veteran with a $250,000 home loan who pulls out $20,000 in cash can easily end up paying more than $14,000 in fees, Battany says. “Customers rightfully complain when they have a $2 ATM charge,” he says. “This is, in effect, a $70 charge on a $100 withdrawal.” Even if customers pay off a high-rate credit card, they’ve extended the term of their debt for decades. And, unlike with credit card debt, if they fail to make mortgage payments, they can then lose their homes. The VA estimates that more than half of borrowers who take cash out of their home are vulnerable to predatory lending behavior, which includes poor disclosure or making loans with little benefit to the borrower.

Larry Speights, a veteran who spent 24 years in the Army, says he called a lender named NewDay USA after watching one of its TV commercials, pulling out $20,000 from his VA mortgage in 2017 to pay off credit cards. The refinancing required more than $14,000 in closing costs and fees, he says, and NewDay called him six months later in 2018 to refinance again, offering a lower rate that he says should have been given to him in the first place. He took the loan. “I know people got to make money, but I think they should be more cautious when messing with veterans,” says Speights, who lives in Waleska, Ga. “We’ve already been through a lot.”

Citing customer privacy, NewDay declined to comment on individual borrowers. Robert Posner, NewDay’s chief executive officer, says borrowers often lower their overall debt payment by hundreds of dollars a month, and may improve their credit scores, by putting the proceeds of a refinancing toward credit cards and other high-interest debt. “I’m not saying, at the end of the day, that a VA cash-out loan is perfect,” Posner says. “But it’s a heck of a lot better than paying 21 to 23 percent on a credit card. This is cheap money.”

For more than a year, Ginnie Mae has been fighting what it calls “churning”—the practice of repeatedly pushing veterans into unnecessary refinancing. Ginnie Mae temporarily suspended VA loans from NewDay and others from being included in some of the pools of mortgages for bonds it guarantees. Posner says NewDay will refinance only if it provides a cost savings to the veteran and will do so only once. “NewDay USA does not churn and has never churned,” he says.

Ginnie Mae now requires borrowers to wait at least six months between deals, and Congress started mandating that refinances provide an “actual benefit” to military families by, for instance, lowering rates. But, after lobbying from lenders, Congress left a loophole: Cash-out refinances required no such benefit, other than the cash itself. Cash-outs accounted for 86 percent of VA refinancing in September, up from only about 30 percent two years earlier, according to an analysis of federal data from the American Enterprise Institute, a conservative think tank. As interest rates rise, “lenders and brokers are increasingly desperate for business because the refinancing wave has run its course,” says Michael Bright, Ginnie Mae’s chief operating officer. “What’s left? Cash-out refinancings, where the guardrails are not tight.”

Even after the crackdown, the proportion of borrowers who took cash out of their mortgage and then refinanced again in six to eight months rose over the past year, to 7 percent from 6 percent, according to data compiled by Ginnie Mae. It’s now considering further restrictions on refinancing and kicking more lenders out of some pools of mortgages it backs. Along with the effect on veterans, government regulators fear that frequent refinancing could turn off bond investors looking for stable income payments, ultimately raising interest rates for all consumers. Goldman Sachs Group Inc., Pacific Investment Management Co., and other big bond investors recently complained that high VA loan prepayments might lead them to scale back purchases.

In December, the VA proposed subjecting cash-out to the “actual benefit” standard. Kandell, the Low VA Rates president, said the rules wouldn’t slow down business much, since nearly all deals could meet that condition.

Meanwhile, companies such as NewDay keep pitching cash-out refis. The lender keeps a high profile. Former Baltimore Orioles star shortstop Cal Ripken Jr. once worked as a pitchman. In one online video featuring a rippling American flag, Ripken says he’s proud to represent the Fulton, Md.-based lender, a hometown institution. “As a veteran, you’ve earned the right to apply for a loan that lets you borrow up to 100 percent of your home’s value,” he says. Through a spokesman, Ripken says his relationship with NewDay ended.

Tom Lynch, a retired U.S. Navy rear admiral, gushes in his own video spot for NewDay: “You gave 100 percent to your country. Let NewDay give 100 percent to you!” In another, veterans cheer: “Thank you, Admiral!”

Another major VA refinancer, Illinois-based Federal Savings Bank, sent a flyer to Frank Preciado, an Iraq War veteran in Phoenix. “Expiration notice,” it reads. “Our review has indicated that the waiting period has been marked as expired … you have not accessed your equity reserves of $4,068.34.”

Preciado says the notice seemed designed to appear as if it were from the federal government. The bank uses an eagle as its symbol. The company says the notice “clearly identified that it came from Federal Savings Bank.” Says Preciado, who works as a mortgage broker: “Federal Savings Bank knows better, and those practices need to stop.”

– Bloomberg Businessweek 



Fed Agency Charged With Being Cop On Beat To Protect Vets From Shady Lending Practices—Like For LI Mortgages—Is No Longer Effectively Policing Industry 

Schumer Wants Consumer Financial Protection Bureau (CFBP) Back On The Beat To Patrol Lenders; Cites LI Homeowner’s Troubling Experience To Help Make Case 

Schumer: The Feds Need To Hook Loan Sharks Targeting LI Service Members—Not Allow Them To Feed on Our Brave Servicemembers 

Standing alongside an active duty Long Island service member and other vets, U.S. Senator Charles E. Schumer revealed today that greedy and now emboldened lenders could be especially targeting Long Island vets. Schumer highlighted a recent and poor decision by the federal government’s top consumer watchdog—the CFPB—to allow shady banks, credit card companies and other lenders to go largely unpoliced across the vet-lending industry that puts service members and their families at risk. Schumer demanded the CFPB get back on the beat and detailed a Long Island story to make the case to the feds. According to vets and consumer advocates, tens of thousands of veterans have been affected by fraudulent lending practices that break the rules of the Military Lending Act in recent years. And that the CFPB’s job has been to prevent this from happening, something they had success on prior to the recent policy changes.

“Our Long Island service members and vets have served, or are serving, this country with great honor, so it would be a giant disgrace for the federal government to hide its head in the sand when real concerns of predatory lending rear its ugly head,” said U.S. Senator Charles Schumer.

“The Feds need to hook loan sharks targeting Long Island service members, not allow them to go on a feeding frenzy in Freeport, or anywhere else across Long Island. And I worry that with the administration taking the financial cops off the beat, who ensure the Military Lending Act is being followed to the letter of the law, will have a domino-like effect on many vets who could become new victims to financial fraud. The CFPB needs to get back to doing the full job Congress empowered it to do and protect vets because as long as there are loans, there will be predatory lenders who try and target our nation’s service members and trick them into ridiculously high interest rates, unjustified closing costs and other bad deals that can plummet them into disastrous debt,” Schumer added.

“Due to the high prevalence of predatory lending against veterans and active duty military and a lack of education in the VA loan process, our service men and women are at a high risk for being the victims of bad actors looking to make a buck,” said Michael Aharoni, Founder of VetsEDU. “I want to thank Senator Schumer for sounding the alarm on this issue and for pushing back on this silly decision by the CFPB.”

“After dutifully serving our country overseas it’s a sad state of affairs that when they come home, our veterans and active military face financial predators looking to fill their pockets off of their hard earned sacrifices,” said Freeport Mayor and Vietnam Veteran Robert Kennedy. “That’s why it’s important we keep the cop on the beat, so to speak. I want to thank Senator Schumer for advocating for veterans everywhere and pushing the CFPB to do the right thing.”

“Our veterans deserve the best when they come home and look to lay down roots in our community, not a new battle for their financial security,” said Assemblyman Steve Stern. “As a member of the Veteran Affairs Committee of the New York State Assembly, I have worked to help educate the men and women who serve all of us about the financial dangers they face from predatory lenders. I want to thank VetsEDU and Senator Schumer for their advocacy and strong commitment to our veterans on Long Island and across our great nation.”

According to new warnings and an advertisement issued by Long Island’s Veterans Education Success, service members have been targeted by predatory lenders with renewed vigor, “with 300% interest rates and other abuses.” Congress acted against these abuses by passing the Military Lending Act, the result of a bipartisan effort to protect service members against financial fraud and high interest rates. The MLA’s protections include guidelines for bank and non-bank lenders. Amongst other protections, the MLA protects active-duty service members and their families by capping their interest rates at 36%. Additionally, lenders cannot push service members into forced arbitration or charge a penalty for early payment.

Long Island service member, Kerry-Ann Haughton, a member of the Army Joint Task Force, was recently a victim of predatory lending practices when a bank approached her to help facilitate the mortgage on her Freeport home. The bank inflated Ms. Haughton’s closing costs and payments after she was issued a pre-approval from the bank to buy a home and after she finished her home-hunting process. Her closing costs were tens of thousands of dollars more than she was told to expect. Mrs. Haughton explained her situation and noted many vets experience these kinds of things.

In response to these concerns, this past August, Schumer, along with other senators, sent a letter to Mick Mulvaney, the Director of the Office of Management and Budget and Acting Director of the Bureau of Consumer Financial Protection citing grave concerns that the Consumer Financial Protection Bureau (CFPB) will no longer protect service members and their families by including the Military Lending Act (MLA) as part of the CFPB’s routine lender examinations due to a purported lack of authority. They urged the CFPB to continue protecting service members under the MLA. But now Schumer worries the lax protections have emboldened shady lenders to do their worst, and potentially target places like Long Island. So, he is sounding the alarm locally and urging the feds to step in and police the beat.

According to reports, the CFPB has effectively protected service members and their families with its oversight and proactive checks on lenders. Since 2011, CFPB’s enforcement actions have resulted in more than $130 million in relief to affected service members and they have handled more than 72,000 consumer complaints. Schumer explains that if the administration rolled back their proactive checks on lenders, the CFPB would rely solely on service member complaints to identify lenders in violation with the MLA.

A multitude of agencies, advocacy groups, and attorneys general including but not limited to the National Military Family Association, AMVETS National Headquarters, High Ground Veterans Advocacy, and Attorney General Josh Stein have also urged the administration to continue to protect service members against predatory lenders under the Military Lending Act. Schumer also said that high-interest loans can have devastating effects on service members and their families. A high-interest loan could prevent a service member from owning a home, buying a car, or ultimately providing for their family due to substantial debt and bad credit.

Schumer wants all service members and their families to be aware of mortgage offers that sound too good to be true. The Consumer Financial Protection Bureau and the VA have issued past warnings detailing what predatory tactics to look out for. These include:

  • Operational Environment –Predatory VA lenders may create a hostile environment using aggressive and potentially misleading advertising and sales tactics.
  • Deceptive advertisement tactics to watch out for according to the CFPB:
    • Offers to skip one or two mortgage payments
    • Offers to receive an escrow refund
    • Low-interest rates without specific terms
    • Aggressive sales tactics

Schumer’s and colleagues letter to OMB Budget Director Mulvaney appears below:

Dear Director Mulvaney:

We write regarding reports that the Consumer Financial Protection Bureau (CFPB) will no longer protect service members and their families by including the Military Lending Act (MLA) as part of the CFPB’s routine lender examinations due to a purported lack of authority.  These reports are puzzling because the CFPB already possesses the authority to enforce the MLA and examine many types of lenders for the purposes of “detecting and assessing risks to consumers and to markets for consumer financial products and services.”  The CFPB should not be abandoning its duty to protect our service members and their families, and we seek your commitment that you will utilize all of the authorities available to the CFPB to ensure that service members and their families continue to receive all of their MLA protections.

By enacting the MLA, Congress sent a clear bipartisan message that high-cost lending is a clear risk to military consumers that must be addressed to also protect military readiness.  Indeed, among its provisions, the MLA caps the annual interest rate for an extension of consumer credit to a service member or his or her dependents at 36%.  CFPB examinations and the CFPB’s Office of Servicemember Affairs have been critical components of ensuring the detection and prevention of risks to military consumers.  Such examinations serve as the early warning system for MLA deficiencies so that they do not snowball into costly losses for service members and avoidable litigation costs and penalties for lenders.

Given your senior role at the Office of Management and Budget, we are sure you are aware that the MLA also helps the Department of Defense (DOD) to save taxpayer funds based on the following DOD justification for its MLA rule:

“Losing qualified Service members due to personal issues, such as financial instability, causes loss of mission capability and drives significant replacement costs. The Department estimates that each separation costs the Department $58,250.  Losing an experienced mid-grade noncommissioned officer (NCO), who may be in a leadership position or key technical position, may be considerably more expensive in terms of replacement costs and in terms of the degradation of mission effectiveness resulting from a loss of personal reliability for deployment and availability for duty.”

Needlessly stopping MLA examinations altogether and choosing instead to rely on reports of MLA violations after they occurred is further perplexing given that the CFPB is already conducting lender examinations of credit products that are also subject to the MLA.  Such a policy decision would be both inefficient and irresponsible to require a CFPB examiner to ignore as part of his or her examination risks to military consumers who are protected by the MLA.  In addition, for our service members, especially those who are deployed overseas facing hostile fire, it is unreasonable to place the burden of detecting and reporting MLA abuses on service members, especially when they should be given every opportunity to focus squarely on their missions.

What the CFPB is reported to be contemplating is equivalent to forcing our armed forces to stop using radar, sonar, and other early warning technologies and instead react to threats as they occur.   No one would force our armed forces to do so, and the CFPB should not similarly force any of its examiners to turn a blind eye.  For generations, Americans have set partisanship aside and have made every effort to provide service members and their families with all the resources and protections they deserve. We ask no less of you and, as such, seek your commitment that you will continue the CFPB’s tradition of ensuring that service members and their families receive all of their MLA protections by utilizing all of the authorities available to the CFPB.


U.S. Senator Charles Schumer

Special tax and financial benefits just for the military

As America recognizes Veteran’s Day in a few weeks, it’s an excellent time to thank those who have served and are currently serving our country in the armed forces.

One way the country shows that appreciation are financial and tax benefits that are available only to veterans and active-duty military members. Here are a few, and more can be found at the Veterans Benefit Administration.

Members of the military and veterans with qualifying service have access to VA home loans, which can offer mortgages with advantages that aren’t available to borrowers who use conventional loans. VA mortgages have several unique features specifically designed to help vets and eligible borrowers. Most notable is that a qualifying individual can obtain a mortgage with no down payment and no private mortgage insurance (PMI.) That’s in contrast to conventional loans that require expensive PMI for borrowers who don’t put down at least 20 percent.

Other features of a VA loan include limited closing costs, no penalty for early repayment and the ability to transfer the loan, which can help you sell the house down the road.

Sometimes veterans’ pay can be tax-free. For example, disabled vets may be eligible to claim a federal tax refund on the disability pay or Combat Related Special Compensation they receive from the Department of Veterans Affairs. To claim the federal tax refund, a disabled vet needs to file an amended tax return, Form 1040X, to correct the tax return previously filed that included the special pay.

Also, veterans’ disability benefits from the VA are tax-free and shouldn’t be included in gross income. This includes several payments, including disability compensation and pension payments for disabilities paid to veterans and their families.

Other forms of disability-related payments are tax-free, such as grants for home modifications designed for wheelchair living, special motor vehicle modifications for veterans who’ve lost the use of their limbs and benefits for dependent care assistance.

Under the Combat Injured Veterans Tax Fairness Act, which went into effect in 2017, veterans who suffer combat injuries and are separated from the military aren’t taxed on the one-time lump-sum disability severance payment they receive. The law requires the Department of Defense to contact any veterans who were taxed on these payments to help them file amended tax returns and claim a refund.

Free financial coaching is available to veterans through a special program offered through the Consumer Financial Protection Bureau, Office of Servicemember Affairs. The Financial Coaching Initiative, managed through the Armed Forces Services Corporation (AFSC), is designed to help veterans with their financial goals and provides personalized financial support services.

Several unique tax deductions are available to members of the military, which are outlined in in Publication 3 – Armed Forces’ Tax Guide. Some of these include:

  • Moving expenses: Unreimbursed expenses that exceed moving allowances may be deductible for those on active duty. If the move is because of a permanent change of station and the expenses are unreimbursed, use Form 3903 to figure the amounts that you can claim. Under the new tax law, this deduction was eliminated for civilians, but it remains for active-duty military.
  • Duty-related travel expenses: Reservists who incur expenses to travel to reserve-related duties more than 100 miles from their home can deduct their unreimbursed travel expenses. You can claim this on Form 2106, or Form 2106-EZ, even if you don’t itemize deductions.
  • Uniform expenses: When regulations prohibit you from wearing certain uniforms off-duty, the costs of these items can be deductible. Example include dress and utility uniforms that you can’t off-duty and articles such as insignia of rank, epaulets, and swords.

Active-duty military receive many types of pay, including basic pay, special pay, combat zone or hazardous-duty pay and allowances for living, moving and travel. Some of these are included in their taxable income, but other types of pay are excluded and therefore not taxed. Here are a few types of pay that are typically provided in the form of an additional allowances and excluded from taxable income:

  • Combat zone pay: Pay while actively serving in a designated combat zone or hazardous duty area is fully excluded for enlisted members, and a limited amount is tax-free for officers. Note that while this pay is exempt from taxable income, it does count toward figuring the income limits for contributions and deductions for IRAs.
  • Family allowances: Specific allowances paid for educational expenses of dependents, evacuation and separation costs are also received tax-free.
  • Living allowances: Basic Allowance for Housing, or BAH, is tax-free. And even if you use your BAH to pay for a house you own, you can still take a deduction for mortgage interest and real estate taxes. Pay received for Basic Allowance for Subsistence (BAS) and Overseas Housing Allowance (OHA) is also tax free.
  • Death allowances: Amounts received for burial services, payments to survivors and travel of dependents to a burial site is excluded from taxable income.
  • Moving allowances: Reimbursements for moving expenses related to being dislocated, base reassignment, temporary lodging and the expenses related to moving and storage of personal and household affects are exempt from taxable income.

Finally, if a member of the armed forces is killed while in active duty in a combat zone or dies from wounds received during a military or terrorist action, the deceased individual’s tax liability in the year of death, or even in prior years (during the period of active duty combat service), can be forgiven. The forgiven tax will never have to be paid.

Survivors filing a return for a deceased service member should write the name of the military action and KIA, such as “Desert Storm – KIA” or “KITA” (if killed in a terrorist action), in bold letters at the top of the tax return. When the IRS receives the return, it will help to determine the amount of the tax to be forgiven, or if already paid, to be refunded.


VA Home Loans: Everything America’s Military Veterans Need To Know

What is a VA loan?

Veterans Affairs mortgages, better known as VA loans, offer considerable benefits for eligible military veterans, service members and spouses who want to buy a home.

The main draw of VA loans is that they make it easier to get financing by offering no down-payment loans and more lenient credit and income requirements than conventional mortgages.

The loans have competitive rates compared with traditional bank financing. VA loans consistently offer the lowest rates on the market, according to reports by mortgage software firm Ellie Mae.

These home loans are made through private lenders and are guaranteed by the Department of Veterans Affairs, so they don’t require private mortgage insurance, known as PMI. The U.S. Department of Veterans Affairs is not a direct lender. The loan is made through a private lender and partially guaranteed by the VA, as long as guidelines are met.

If you think you may be eligible for a VA loan, here are some things to know about the program.

What are the VA loan eligibility requirements?

Most members of the regular military, veterans, reservists and National Guard are eligible to apply for a VA loan. Spouses of military members who died while on active duty or as a result of a service-connected disability also can apply.

Active-duty military personnel generally qualify after about six months of service. Reservists and members of the National Guard must wait six years to apply, but if they are called to active duty before that, they gain eligibility after 181 days of service.

You may qualify if you:

  • Served 90 consecutive days of active service during wartime
  • Served 181 days of active service during peacetime
  • Have been an active member of the National Guard or Reserves for 6 years or more
  • Are married to a service member who died in the line of duty or as a result of a service-related disability

Do VA loans require PMI?

Unlike other low down-payment mortgage options, a VA loan doesn’t require PMI.  Federal Housing Administration (FHA) loans and conventional loans with less than 20 percent down require PMI, which can end up costing the borrower thousands over the life of the loan.

The benefit translates into significant monthly savings for VA borrowers. For instance, a borrower who makes a 3.5 percent down payment on a $200,000 FHA-insured mortgage would pay $100 a month for mortgage insurance alone.

What are VA loan funding fees?

Although the costs of getting a VA loan are generally lower than other types of low-down-payment mortgages, they still carry a one-time funding fee that varies, depending on the amount of the down payment and military category. This fee helps offset taxpayers’ costs since there’s no PMI or down payment required.

A borrower in the armed forces getting a VA loan for the first time, with no money down, would pay a fee of 2.15 percent of the loan amount. The fee is reduced to 1.25 percent of the loan amount if the borrower makes a down payment of 10 percent or more. Reservists and National Guard members normally pay about a quarter of a percentage point more in fees than active-duty members pay.

Those using the VA loan program for the second time, without a down payment, would pay 3.3 percent of the total loan amount.

Can existing VA borrowers lower their interest rates?

The Interest Rate Reduction Refinance Loan (IRRL) gives existing VA loan holders the opportunity to get a lower interest rate. This option requires borrowers to refinance their current VA loan into another VA loan.

The advantages of the IRRL is that credit and appraisal underwriting packages are not required. Additionally, you won’t have to pay cash out of pocket for an IRRL. It’s structured so than any fees are rolled into the new loan or the interest is adjusted so that the lender’s costs are covered.

Are there VA loan home occupancy requirements?

VA loans typically require borrowers to move into their home within 60 days of purchase and to use it as their primary residence. However, exceptions can be made depending on the circumstances, says Chris Birk, director of education at Veterans United.

“Lenders will evaluate occupancy scenarios on a case-by-case basis. For active duty service members, a spouse can fulfill the occupancy requirement when the military member cannot. A service member’s minor child can also satisfy occupancy in some cases,” Birk says.

Borrowers can’t use VA loans to buy investment properties or second homes.

What are VA loan underwriting requirements?

The VA doesn’t require a minimum credit score for a VA loan, but lenders generally have their own internal requirements. Most lenders want an applicant with a credit score of 620 or higher.

Borrowers must show sufficient income to repay the loan and shouldn’t have a heavy debt load, but the guidelines are usually more flexible than for conventional loans.

VA guidelines allow veterans to use their home-loan benefits a year or two after bankruptcy or foreclosure.

The limit on VA loans varies by county, but the maximum guaranty amount for 2018 is $453,100 and up to $679,650 in high-cost areas in the continental United States and even higher in parts of Hawaii.

Help for struggling VA borrowers

Another advantage of a VA loan is the assistance offered to struggling borrowers. If the borrower of a VA loan can’t make payments on the mortgage, the VA can negotiate with the lender on behalf of the borrower.

VA’s financial counselors can help borrowers negotiate repayment plans, loan modifications and other alternatives to foreclosure, he says.

Regardless of whether they have VA loans, veterans who are struggling to make their mortgage payments can call (877) 827-3702 for assistance.

How to apply for VA Loan Certificate of Eligibility

Before you can apply for a VA loan, you must prove you are eligible. Applicants must get a Certificate of Eligibility (COE).

Eligible service members, veterans and spouse must meet one of the following criteria:

  • You’ve served 181 days of service during peacetime.
  • You’ve served 90 days of service during war time.
  • You’ve had six years of service in the Reserves or National Guard.
  • You are a surviving spouses of a service member who died in the line of duty.

There are three ways to apply for the COE:

Request a COE from your lender. Lenders have access to a database which can produce your COE within minutes.

Apply for the COE online at VA.Gov. You’ll have to log into your account and navigate to the COE application page.

Mail in your application. Print out this form, fill it out and include applicable proof of eligibility.

Documents required for COE:

Veterans and current or former National Guard or Reserve members in Federal active service

  • DD Form 214 – This must include a copy showing the type of service and the reason for leaving.

Active duty service members, Current National Guard or Reserve members who have never been Federal active service

  • An up-to-date statement of service signed by the adjutant, personnel office or commander of the unit or headquarters. It must include your name, Social Security number, date of birth, entry date of active duty, duration of lost time and the name of the command providing the data.

Current National Guard or Reserve member who has never been Federal active service

  • An NGB Form 22, report of separation and record of service for each period of National Guard service.
  • An NGB Form 23, Retirement Points Accounting and proof of the character of service.

Discharged member of the Selected Reserve who has never been activated for Federal active service

  • A copy of your latest annual retirement points statement and evidence of honorable service.

Surviving Spouse receiving DIC (Dependency & Indemnity Compensation) benefits

  • Submit VA form 26-1817 and veteran’s DD214 ( if available)
  • You must include the veteran’s and surviving spouse’s social security number on the 26-1817 form.

Surviving Spouse not receiving DIC (Dependency & Indemnity Compensation) benefits

  • You must submit VA form 21-534.
  • You must submit form DD214 (if available), which proves discharge orders.
  • Include a copy of your marriage license.
  • Include the death certificate or DD Form 1300 – Report of Casualty.
  • Send the VA 21-534 to the mailing address in your state. You can find that information on the following link. PMC States

How to apply for a VA loan

Once you have your certificate of eligibility (COE), you can apply for the VA loan. The application process is straightforward, however keep in mind that not all lenders originate VA loans. Here’s what you’ll need to do to apply:

  1. Find a VA lender. You can do this by searching on the VA website, getting recommendations from friends or doing your own research online. Be sure to shop around for the best offer, as lender’s terms vary.
  2. Apply for the VA loan through the lender.

Other uses for VA loan

Buying a house is just one way you can use a VA loan. Borrowers can also use VA loans in the following ways:

  • Cash-out refinance
  • Interest rate reduction refinance loan (IRRL)
  • Native American Direct Loan program
  • Adapted housing grants

Courtesy of

New Requirements Apply to VA Refinances

Back in May, Congress passed and the president signed into law a new bill known as the Economic Growth, Regulatory Relief, and Consumer Protection Act.

Like many acts passed into law, this bill applies to numerous sections of the legal code, and it would probably help to have a couple of days and access to a dictionary to get through it all. For now, the thing that’s important to note is that it could have a major effect if you’re looking to refinance your VA loan.

We’ll cut through the jargon to go over what this means for eligible active-duty service members, veterans and surviving spouses.

Extended Timeline Between New Loans

The first big change involves the timeline to get a new VA loan if you have a current mortgage loan. You sometimes hear this referred to by lenders as seasoning. It really just refers to how old your current loan is.

Under the new law, if you’re looking to refinance into a VA loan or go from one VA loan to another, there’s now a minimum waiting period of 210 days measured from the day you make your first payment on your existing loan to the closing date of your new one.

Tangible Benefits for Veterans

One of the big requirements of the new legislation is intended to protect VA clients from getting into mortgage loans that don’t necessarily benefit them financially.

In order to meet this goal, the bill puts a couple of new requirements in place for VA Streamlines. Depending on where you look, you may also see these referred to as an Earl or IRRRL (which stands for Interest Rate Reduction Refinance Loan). These VA Streamline requirements apply when a veteran or eligible non-veteran is refinancing a previously existing VA loan into a new one.

In order to give VA clients tangible benefits with their new loans, the VA requires a minimum interest rate reduction for Streamlines:

  • If you’re going from a fixed-rate loan into another fixed rate loan, your interest rate must drop by at least 0.5%.
  • If you’re going from a fixed-rate loan to an ARM, the rate must fall by at least 2%.

While the test on its face is simple, there are additional stipulations if you buy down your interest rate with mortgage discount points to make your loan work.

Mortgage Points and Appraisal Requirements

Mortgage discount points represent one way to lower your interest rate by prepaying a certain amount of interest upfront at closing.

Briefly, the basic formula works like this: one point is equal to 1% of the loan amount. You can buy points in increments as small as 0.125%.

Let’s say paying for one point upfront on a $200,000 loan saves you $50 per month on your payment. You break even and start making money on the deal after 40 months. ($2,000/$50).

This will give you more info on points, but how does this apply to your VA Streamline?

If you’re buying mortgage discount points to meet the rate test, buying one point or less allows you to refinance up to the full value of your home, even if you don’t have equity.

If you do buy more than one point, you have to have at least 10% equity in your home in order to qualify for the new VA loan.

In addition to the financial considerations of this, be aware that there’s the possibility that your refinance could take just a little bit longer in some cases because your equity amount has to be verified by appraisal. You build equity based on making your payment every month, but the equity you have can also fluctuate with your home value.

If home values are rising, you may have more equity than you think. If they’re going down, not so much. The appraisal helps verify your home value and equity amount.