Market Update for September 8 2014: The Irrationality of VA Loans

By chrisking • September 9th, 2014

The “Irrationality of Rationality.” This is one of my favorite sociological concepts first promulgated by Max Weber. His point, in short, is that we create bureaucracies with good intentions. They seek to solve problems, ensure predictability, provide stability and create structure. These are all “rational” goals. The “irrationality” enters the picture when bureaucracy becomes too cumbersome and rule-bound such that it stops producing positive results or that the positive results take too long and become too complicated to achieve.

Unfortunately, “irrationality” is where the Veterans Administration is today. Veterans who have been honorably discharged from duty have an “entitlement” that enables them to obtain excellent mortgage financing vis-à-vis VA Loans. The process, in theory, should be no more difficult than obtaining a conventional loan, but obtaining VA financing in today’s market is a ridiculously convoluted process where even the most simple things become complicated. For example, one of my clients needed what is called his Certificate of Eligibility. He has his original Certificate from the 70s. But now, VA issues new ones on their website. If the Veteran creates a profile on VA’s website, he or she should be able to request and obtain the Certificate online.

This particular client created his profile (which was a convoluted process on VA’s cumbersome website, in the first place), and per VA’s online request, he uploaded a copy of his original Certificate as a PDF document. Two weeks later, VA sent him an email stating that they could not process his request because he did not enter his service dates nor did he submit his original Certificate of Eligibility. VA was wrong on both counts: the Certificate lists his service dates (1), and he had uploaded the certificate, so VA should have been able to confirm anything that was improperly typed into their form anyhow (2). Over two weeks more have passed, and the client still has not received his Certificate from VA.

It’s hard to say that we truly value the service of our Veterans when their ENTITLEMENTS are this difficult to obtain. And it’s difficult for the mortgage industry to operate in a functional way when governmental agencies and big banks operate irrationally, creating more work and more processes than is needed for things that should be simple. Things are better, but we have a long way to go to unwind some of our nation’s most irrational, rational systems.


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