Standards could be higher, suggests leading LO
They’re a prominent way of helping veterans take the first steps on the path to homeownership – but is industry knowledge of the VA loan space up to scratch?
For many loan officers and mortgage professionals, VA lending represents a tiny sliver of annual business, with clients in that space few and far between.
The information being provided to prospective VA clients leaves a lot to be desired, both from the mortgage and real estate industries and the military, according to a leading loan officer specializing in those product types.
Patton Gade (pictured top), national director of military lending at UMortgage, told Mortgage Professional America that a substantial knowledge gap was apparent when it came to the advice many veterans were getting on their mortgage options.
“There’s so much misinformation out there with VA loans and it’s perpetuated by realtors,” he said. “So many realtors just don’t know all the real details around VA loans. You can go on Facebook pages and there’s a ton of VA-specific Facebook pages.
“But on there you’ll see other borrowers going, ‘My loan officer said this…’ and it’s just complete hooey. It’s just absolutely wrong – but they’re people repeating and repeating… and it’s this echo chamber of people with wrong information.”
Where does advice in the VA space need to improve?
VA loans allow veterans to access loan programs offered through the Department of Veterans Affairs, with that government department setting loan qualification rules, arranging mortgage terms, and guaranteeing loans in the program.
The Department of Veterans Affairs has "strongly encourage[d]" loan servicers to implement a foreclosure moratorium on VA loans through December 31st, 2024.
— Colin Robertson (@mortgagetruth) May 30, 2024
The current freeze was set to expire tomorrow, but more time is needed to roll out a new last-resort foreclosure… pic.twitter.com/uIlGwNbPXa
Still, Gade said the military needs to step up to the plate more than it’s currently doing when it comes to providing the right information. “The military does a horrible job of educating young soldiers, sailors and airmen on what the truth really is about their benefits – especially when it comes to VA stuff,” he said.
What’s more, the rapid spread of information through social media platforms has helped to drive and perpetuate misconceptions about the space. “I see TikTok videos… I see people saying stuff about VA loans and they have hundreds of thousands of views, have gone viral… and they’re so wrong,” Gade added. “They’ve got hundreds of thousands of people believing the wrong stuff.”
While the VA space has its ups and downs in terms of activity like any other market, it’s less contingent on the interest rate environment and tends to heat up based around the cycles of the military and how they move people, according to Gade.
The spring and summer are especially busy times because with children out of school, they offer the opportunity for the military to move families with little upheaval and few complications.
“Those are naturally going to be higher times for VA loans, but I’d say VA loans in general are less impacted by fluctuations in rates,” Gade said. “When the army says ‘move,’ you’re not timing the market. The army is telling you to move, and so you have to buy a house for your family – you’ve got to have the place for them to live.”
A strong advantage of VA loans is the option to tap into an interest rate reduction refinance loan (IRRRL), allowing eligible borrowers to replace their current loan with a new one featuring different terms.
That represents a “fast, cheap, simple” loan for borrowers who qualify, allowing them to refinance into a lower interest rate as long as they meet specific criteria, Gade said.
How can the issue be rectified?
Still, the sphere is marked by low levels of expertise among the loan officer community, a gap Gade and UMortgage are attempting to bridge through a new program aimed at improving standards in the sector.
“I still see way too many borrowers that are going, ‘Hey, I got denied by this company or that company,’ and I look at their denial or reason for it, and I’m like, ‘That doesn’t make any sense. The loan officer didn’t know what he was talking about,’” Gade said.
“You’ve got a very small percentage of loan officers that are truly competent when it comes to VA loans. And so I think that’s probably the biggest issue in my mind… You have to seek out good training. There are a number of places out there, a number of training platforms where people can go to pay to learn VA loans. I would say if you want to truly serve this customer, you need to go get schooled on it, or be around people like that.”
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