Tips for Avoiding VA Loan Scams
VA loans are recognized as one of the best home financing options for those who meet the VA loan requirements, but recently there’s been an uptick in the frequency of scams targeting homeowners with this type of loan. It’s always important to be aware of common scams and fraudulent schemes so you can protect yourself from becoming a victim, and that’s especially true when the scammers are more aggressive.
Recently, the Department of Veterans Affairs and the Consumer Financial Protection Bureau have issued warnings related to some specific scams that target veterans, service members, and their spouses. While most of these scams are not new, the fraudsters are using the COVID-19 pandemic as leverage to increase fear and create panic.
Overview of the Scams
There are different types of scams, but most involve someone pretending to work for the government or a mortgage company that’s holding the VA loan. They may call victims on the phone or send postcards by mail. Typically, they attempt to convince veterans to refinance their home loans, make modifications to the loan, or start making payments to someone other than the loan servicer.
In most cases, the scammers tell homeowners that this action is necessary because they are behind on payments, facing foreclosure, or owe significant late fees. With so many people struggling financially and already stressed about their ability to pay bills, the scammers are able to take advantage of the situation.
Fraudsters are also promising things like lower interest rates through refinancing or loan modifications to provide solutions for financial troubles.
Related: Use our VA Loan Calculator to accurately calculate your mortgage payment
How to Avoid VA Loan Scams
The first step to prevent being victimized is to recognize potential scams. Be aware that phone numbers can be spoofed and you cannot rely on caller ID to know for sure who is calling you. Some scammers have called victims from phone numbers that appear to be from the VA office or the loan service provider.
The scammers will often use high-pressure tactics to force victims to act immediately or sign paperwork without reviewing it. Right now, fraudsters are trying to convince homeowners that aid programs are ending and they need to take immediate action or face consequences from being behind on payments.
In general, you should be skeptical of anyone who:
- Proactively reaches out to you and claims to work for a government agency or mortgage company. If you’re unsure, go to the government agency or mortgage company directly to verify this person’s legitimacy.
- Asks you to pay upfront fees for a service like a refinance or a loan modification. One of the most common schemes is to convince homeowners to pay a fee to someone who doesn’t actually represent the government or the mortgage company.
- Tells you to make your mortgage payment to someone else or to send it to a different address. They may tell you that your mortgage has been transferred to another company. You should verify any changes by calling or visiting a local office.
- Instructs you to make a mortgage payment by money order or gift cards. This is a telltale sign of a scam. These payment methods can’t be traced.
- Pressures you to sign paperwork quickly without reviewing it. Scammers will claim the situation is urgent and prey on fear to get people to sign papers that haven’t been reviewed.
You should also be suspicious if something seems too good to be true. Scammers are promising extremely low interest rates to entice victims. They’re also promising or guaranteeing that they can prevent foreclosure. If something seems too good to be true, it’s a strong warning sign of a scam.
The CFPB suggests contacting the VA or your mortgage service provider if you have questions or suspicions of a scam. If it’s not a legit offer, you should stop communicating with the scammer and report it to your State Attorney General’s office and to the Federal Trade Commission (FTC).
