Why veterans end up paying more for mortgages than they should

Veterans and servicemembers make up 20 percent of homebuyers, and in theory, they are supposed to get better deals on their mortgages thanks to VA Home Loans, which are provided by private lenders with the U.S. Department of Veteran Affairs guaranteeing a portion of the loan.

But a new study found that too often, they end up paying more than they should.

The study, which was conducted by technology company Own Up and first reported by NPR, found several reasons for this, including lenders setting higher profit margins on VA loans; a proliferation of “churning” schemes designed to increase refinancing; and the charging of high origination fees, which VA lenders are authorized to do.

Own Up, which was founded by two former mortgage bankers, is geared toward helping people find better deals on mortgages. The company’s study relied on 2019 lending data showing rates from the top 20 providers of VA loans.

“When we looked at the spread, candidly, we were quite surprised that it was as wide as it was,” said Patrick Boyaggi, Own Up’s CEO. “The best lenders and the worst lenders were so far apart from one another.”

Navy Federal Credit Union, one of the country’s largest credit unions, offered the lowest rates, the study showed. New Day USA, a lender founded in 1999, had the highest.

New Day told NPR in a statement that the study’s methodology was flawed because it had categorized two different types of loans in the same bucket. The company said it aimed “to assist servicemembers and veterans to receive the benefits that they so rightly deserve.”

But Mike Calhoun of the Center for Responsible Lending told NPR that did not add up.

“The information from this lender does not explain why their borrowers are being charged so much more than other lenders are charging their VA borrowers,” he said. [NPR] — Sylvia Varnham O’Regan