Rep. Porter Report Details Exploitation in VA Home Loan Program
Congresswoman documents how repeat offenders continue to exploit vulnerable servicemembers, veterans, and military families with bad loans
Washington, August 3, 2021
Congresswoman Katie Porter (CA-45) today released a report revealing how predatory mortgage lenders are still exploiting military borrowers, despite years of efforts to prevent such abuses. “AWOL: How Watchdogs Are Failing to Protect Servicemembers from Financial Scams” analyzes new government data and shows that NewDay USA and The Federal Saving Bank, two lenders that have been punished in the past for misconduct, charge veterans tens of thousands of dollars more for the same loan than their competitors.
“It is despicable that corporate executives would prey on veterans and military families to line their pockets,” said Porter, a longtime consumer advocate. “My report calls out the lenders that are continuing to single out vulnerable military borrowers for overpriced, cash-out refi mortgages. The Administration has a duty to step in and prevent these scams from happening.”
NewDay USA and The Federal Savings Bank present themselves as helping veterans, but they engage in the kinds of practices that the Veterans Affairs Department (VA) once called “subprime lending under a new name.”
The U.S. government is in an ongoing fight against predatory VA loans. In recent years, scammers have focused on overpriced cash-out refinancings and loan “churning,” when lenders pressure borrowers to refinance their mortgages early and often against their interests in order to harvest a second round of closing costs. Despite a 2018 law aimed at reducing churning and strengthening consumer protections for veteran borrowers, the number of predatory loans remains significant, according to Porter’s analysis.
Read the full report “AWOL: How Watchdogs Are Failing to Protect Servicemembers from Financial Scams” HERE.
“Churning VA loans hurts all veterans,” said Andrew Pizor, a staff attorney at the National Consumer Law Center. “The VA and Ginnie Mae have taken important steps toward addressing this abuse, but more is needed. We also urge the CFPB to assist by investigating abusive lending practices. The National Consumer Law Center thanks Representative Porter for her work to help veterans.”
“Military families face a housing crisis on multiple fronts – one prominent challenge being predatory lending behavior,” said Besa Pinchotti, Executive Director and CEO, National Military Family Association. “Even as military families continue to serve around the globe, they must remain vigilant at home, deciphering near-constant loan churning attempts and too-good-to-be-true offers. The National Military Family Association appreciates and commends Representative Katie Porter’s in-depth report, highlighting the realities facing military and veteran families using VA home loan benefits. Such exploitation of one’s service and earned benefits for profit is harmful to the short- and long-term economic wellbeing of military families and must be stopped.”
“New Day consistently charges veterans exorbitantly high prices for VA guaranteed loans, including higher origination fees and interest rates, when compared to other VA lenders,” said Jason Richardon, Director of Research and Evaluation at the National Community Reinvestment Coalition. “Since large banks have chosen not to make VA loans, veterans have only a small number of lenders from which to choose. There is no conventional mortgage product that offers Veterans the same path to homeownership that the VA loan program does. It is regrettable that New Day has used this opportunity to leverage its outsized role in the market to push a higher-cost product rather than putting veterans on the path to homeownership with a lower-cost loan.”
A longtime commercial law professor and consumer protection advocate, Porter has made consumer protection a top priority in Congress. Her work to strengthen consumer protections for veterans and servicemembers includes language signed into law that protects servicemembers in privatized base housing from retaliation for making complaints. Porter has also secured language signed by the president that studies online exploitation of servicemembers and their families by predatory lenders, for-profit colleges, and health care providers.