The Department of Veterans Affairs is cracking down on mortgage companies that aggressively target veterans to repeatedly refinance their homes.

The new policy, announced by VA officials last week, ensures that any product mortgage companies offer to veterans will be beneficial and not for the sole purpose of profit. The move follows the signing of a new federal law called the Economic Growth, Regulatory Relief and Consumer Protection Act, which guards veterans from predatory lenders when obtaining VA-guaranteed home-refinance loans.

Unnecessary refinancing options were marketed to veterans, said Marine Lt. Col. Aniela Szymanski, MOAA's director of Government Relations for Reserve and National Guard and Veterans Benefits. As soon as one deal closed, another deal was often triggered.

“If a veteran did refinance their home loan, they would pay all these fees again,” Szymanski said. “Every time you do a new VA home loan, you pay higher and higher fees.”

Veteran service organizations and Congress were eventually alerted to these practices. Now the law ensures that any product mortgage companies offer to veterans will be beneficial and not for the sole purpose of profit, Szymanski said.

“I'm really encouraged by the fact that … if there's no benefits to refinancing your home, there's no reason veterans should be encouraged to do so,” she said.

The VA's new policy follows a January Senate Veterans' Affairs Committee hearing during which Sen. Thom Tillis, R-N.C., talked about 50,000 VA home loans in his state being refinanced between April 2017 and August 2018.

Most of those Tillis said most of those loans originated from good actors, but this legislation addresses a pool of refinanced loans - more than 40,000 nationwide - that could've come from abusive lending practices.

“Unfortunately, a few bad actors are taking advantage of the program,” Tillis said, “…often leading to higher loan amounts and putting families in a worse financial position than they started off.”

The VA estimates fewer than 10 percent of lenders are engaged in serial refinancing activities.

Experts said repeatedly refinancing a home can be dangerous because it can be costly when fees and closing expenses are added up.

An average fixed-rate to fixed-rate refinance can result in $6,000 in fees that on average take more than five years for veterans to pay off. Other hardships could include declining credit scores, surprise payment increases or even foreclosure.

The new law requires that interest rates on refinanced loans meet specific requirements. If those conditions are not met, the VA will not guarantee the loan. The VA has guaranteed more than 2 million home loans over the past three years.

The VA recently implemented another policy protecting homeowners that requires lenders to provide veteran borrowers with a comparison of their existing loan to the proposed one when refinancing. That veteran borrowers understand the costs of refinancing, the monthly payment savings and the overall impact on their finances.

Amanda Dolasinski is MOAA's staff writer. She can be reached at amandad@moaa.org. Follow her on Twitter @AmandaMOAA.