November 2016

A snapshot of 

servicemember 

complaints

A review of issues related to VA mortgage refinancing
1 SNAPSHOT OF SERVICEMEMBER COMPLAINTS

As of November 1, 2016, the Consumer Financial Protection Bureau had received over 12,500

mortgage complaints from servicemembers, veterans, and their dependents. Based on a key 

word search of complaint narratives, approximately 14% (about 1,800) of servicemember

mortgage complaints concern the topic of refinance.1

Since 2011, homeowners’ equity has grown and nearly recovered to the 2005 pre-mortgage crisis 

highs. During late 2015, the 30-year fixed-rate mortgage rate hovered around 4% but has dipped 

notably since the start of 2016, reaching near-historic lows in July and August. 2 Increased 

equity, coupled with low interest rates, sets the stage for a market primed for refinancing.

Consumers and lenders alike have an interest in refinancing – even more so for the thousands of 

qualified veteran homeowners3 who have access to the additional refinance programs offered by 

the U.S. Department of Veterans Affairs (“VA”).4

The VA offers two different refinance options to qualifying borrowers, the VA Cash-Out 

Refinance and the VA Interest Rate Reduction Refinance Loan (IRRRL). The IRRRL allows 

current VA home loan borrowers to potentially refinance up to 100% of their home’s value with 

“no money out of pocket” 5; while the VA Cash-Out Refinance can be used by VA borrowers to 

 

1 We identified complaints that were related to refinance topics by conducting a word search of consumers’ narrative 

descriptions of their complaints using the term, “refinance.” There may be additional complaints about refinance 

topics among the entire sample of servicemembers’ mortgage complaints that were not identified because the 

narratives did not contain the search term. 

2 Data Source: Freddie Mac Primary Mortgage Market Survey via Bloomberg LLC.

3 While VA Home Loan eligibility extends to, among others, active duty personnel, this report will refer to eligible 

borrowers as “veterans”. For a complete list of VA Home Loan eligibility categories see 

http://www.benefits.va.gov/homeloans/purchaseco_eligibility.asp. 

4 Among other factors, increased homeowner equity may have contributed to the large growth in VA Cash-Out 

refinances since 2011, most especially in 2015. For reference to the VA Cash-Out growth, not the conclusions drawn,

see U.S. Department of Veteran’s Affairs, FY 2015 Annual Benefits Report, Home Loan Guaranty Section, page 8, at 

http://benefits.va.gov/REPORTS/abr/ABR-LoanGuaranty-FY15-01272016.pdf. 

5 http://www.benefits.va.gov/homeloans/irrrl.asp, “No money out of pocket” may mean that all closing costs are 

rolled into the new loan or the interest rate is high enough that the lender covers the costs of providing the refinance. 

The IRRRL can only be done if the borrower is refinancing from a VA loan to another VA loan. 
2 SNAPSHOT OF SERVICEMEMBER COMPLAINTS

refinance an existing VA or non-VA loan into a VA-guaranteed loan.

6 When executed 

appropriately, these programs can be useful opportunities for veterans to reduce their interest 

rate, shorten their loan term, or turn existing equity into cash for things like home improvement 

or repairs. 

As with many financial products and services, what can provide an opportunity to benefit a 

borrower may also have the potential to cause financial harm. For lenders, VA refinances can be 

considerably quicker and easier than other types of refinance and origination loans because they 

do not require an appraisal or even conventional underwriting. In addition, a portion of the

lender’s investment is protected from loss by the VA guarantee, which may lead these companies 

to advertise refinances aggressively to veterans, potentially leading them down the wrong 

financial path.

We hear from many military consumers about issues they experienced when refinancing their 

mortgage loans. As displayed in Figure 1 below, the types of issues veterans are experiencing 

with mortgage refinances have changed over time. As the housing market has rebounded, we 

hear 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 are using 

it as a tool to get potentially more favorable loan terms.

 

6 http://www.benefits.va.gov/homeloans/purchasecashout.asp, VA Cash-Out Refinance borrowers must still satisfy 

all the eligibility requirements associated with obtaining a VA-guaranteed home loan. Detailed eligibility 

requirements can be found here: http://www.benefits.va.gov/homeloans/purchaseco_eligibility.asp.
3 SNAPSHOT OF SERVICEMEMBER COMPLAINTS

FIGURE 1: PERCENTAGE OF MORTGAGE COMPLAINTS SUBMITTED BY SERVICEMEMBERS, VETERANS 

AND THEIR DEPENDENTS CONTAINING THE WORD “REFINANCE”, BY ISSUE, OVER-TIME7

Veterans report aggressive solicitations, misleading advertisements, and 

failed promises by lenders.

We receive many complaints from veterans who believe they are being targeted with aggressive 

solicitations by lenders to refinance using one of the VA programs. Often, the veteran has no 

desire to change their current mortgage structure or has just completed a refinance, but cannot 

get the solicitations to cease, even after repeated requests. As one veteran stated:

I have been contacted multiple times by my mortgage company, [company] in 

reference to refinancing. I have advised them multiple times that I have 

recently refinanced but the calls continue. I have also advised them that I no 

longer wish to be contacted about the issue but the calls still are occurring on a 

daily basis.

 

7 When submitting a mortgage complaint, consumers have the ability to select which part of the mortgage process 

their mortgage complaint most closely relates to. This selection is reflected in the “issue” categories in the chart.
4 SNAPSHOT OF SERVICEMEMBER COMPLAINTS

In addition to complaints about the repeated calls and letters, we also hear from veterans who 

state that the solicitations they receive are potentially misleading. In one complaint, the veteran 

questioned why a company (that specializes in VA home loans for the military) would send out 

an advertisement that highlighted a 2.38% APR on the front but only clarified, in smaller print 

on the back, that the rate being offered was actually an Adjustable Rate Mortgage which 

included a charge for discount points. Such an ad may encourage a veteran to start a refinance 

process without the necessary information for the veteran to make an informed consumer 

decision.

Veterans report 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, because processing delays, like large time gaps in document requests, can cause rate 

locks to expire which can drive up the rate originally promised. Borrowers often have to choose 

between the higher rate or putting cash towards a rate extension. Many times, these veterans

feel compelled to continue the process with their lender, even after the terms change, because 

their credit has already been pulled:

“...Reluctantly, I moved forward after they had pulled my credit because I was 

unsure as to whether or not I would be able to switch companies at this point 

since my credit score would certainly have be affected.”

Lenders’ aggressive solicitations to veterans are often unclear about the 

specific underwriting requirements to obtain the loan.

We hear from military borrowers who see ads that specifically target veterans but the ads often 

fail to inform consumers of all the conditions that must first be met. Borrowers report that 

lenders are persistent and often lead the consumer through the application process before 

revealing key contingencies that ultimately disqualify the borrower for the loan – like a strict 

requirement of on-time payments within the previous two years. 

“For an extended period I received weekly mail solicitations from [company] to 

urge veterans to take advantage of a valuable financial benefit to apply for a 

loan up to 100% of home value. The [company’s] 100% VA loan [program] was 

reportedly created to help veterans...after an extensive interview process...I was 

told I was more than qualified and we began the detailed loan application 

process. After submitting every document required, I was eventually told I did 
5 SNAPSHOT OF SERVICEMEMBER COMPLAINTS

not qualify because I was earning income from a personal "S" Corporation. 

Then after being denied, I continued to receive solicitation emails...”

Lenders’ poor communication during the refinance process can create

consumer confusion.

It is important for lenders to clearly communicate to the veteran what they should expect

regarding changes to their monthly payment and escrow once the refinance is completed. 

Refinances are often pitched to borrowers as an easy to way to skip a monthly payment (or even 

two, in some circumstances)8; however, this can easily lead to problems if the timeline for 

closing does not go as planned.

We also receive reports from military consumers who experience problems with their escrow 

account during and after closing of their refinance. Frequently, these problems exist because of 

poor communication from the lender about what will happen to the money in their old escrow 

account after closing. One veteran wrote to us expressing frustration that an assessment done 

after completing refinance with their current lender showed a shortage in their new escrow 

account – raising their monthly payment by $300. They did not understand why the $2000 left

over in their old account was not rolled over into the new one at the time of closing, or provided 

to them via check a few weeks later. After complaining to the Bureau, they discovered the lender 

had applied those escrow funds to credit the old loan’s payoff statement, decreasing the amount 

of the new loan by $2,000 but leaving the veteran to cover the shortage in the escrow by 

additional monthly payments. This information was not clearly conveyed to the consumer 

during the refinance process or even after closing.

Is a refinance right for you?

1. You don’t have to respond to the marketing – though an ad may sound or look 

officially related to your veteran status or the VA, you don’t have to refinance your home 

 

8 Due to the timing of the refinance closing, borrowers may have a lag between when their last mortgage payment is 

due under their old mortgage note and when their first mortgage payment will be due under their new mortgage 

note. 
6 SNAPSHOT OF SERVICEMEMBER COMPLAINTS

unless you decide it’s in your best interest. Take a look at how long you will pay the new 

loan, and whether the interest rate will change, not just at the monthly payment. 

2. Be a savvy consumer – look at everything an advertiser has to say about the 

product they’re selling. Many times, specific terms and conditions are hidden 

throughout the advertisement. Be proactive about asking questions, so you can be sure 

you know what you are signing up for.

3. Understand the risks – not every ad directed towards your military status is 

a guarantee. You may not always qualify for the rates and terms being advertised to 

you. Before applying, ask your lender up front about all the qualifications required and 

understand what needs to be met before the process is finalized.

4. Remember to shop around – within a limited time (14-45 days), you can 

shop around for a mortgage and it will be counted as a single inquiry 

affecting your credit score. Don’t limit your lender choices just because your credit 

has already been pulled by one lender. The impact of an inquiry is small, while shopping 

around for the best deal can potentially save you a lot of money in the long run.

5. Know the process – we’re here to help you with financing your home. Learn 

what to expect and what questions to ask. There are tools and resources to help you 

make decisions, such as our Owning a Home tool.

9

 

9 http://www.consumerfinance.gov/owning-a-home/.
7 SNAPSHOT OF SERVICEMEMBER COMPLAINTS

More about the CFPB

Website www.consumerfinance.gov

Address: Consumer Financial Protection Bureau

1700 G Street, NW

Washington, DC 20552

To reach the CFPB’s Office of Servicemember Affairs:

By email military@cfpb.gov

To submit a complaint:

Online consumerfinance.gov/complaint

By phone Toll-Free: (855) 411-CFPB (2372)

Español: (855) 411-CFPB (2372) 

TTY/TDD: (855) 729-CFPB (2372)

By mail Consumer Financial Protection Bureau

PO Box 4503

Iowa City, Iowa 52244

By fax (855) 237-2392

Press and media requests

By email press@consumerfinance.gov

Additional resources to assist homebuyers

Owning a Home

http://www.consumerfinance.gov/owning-a-home/

Ask CFPB

http://www.consumerfinance.gov/askcfpb/