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Mortgage

Ginnie Mae reveals new requirements for VA refinances

Continues fight against predatory lending

Ginnie Mae recently announced new requirements for its Department of Veterans Affairs refinance loans in order to protect service members from predatory lending.

The company issued an All Participants Memorandum which announced the implementation of changes to pooling eligibility requirements for VA insured or guaranteed mortgages.

Under the new guidelines, all refinance loans insured or guaranteed by the VA are only eligible for Ginnie Mae securities if it meets both of the following conditions:

1. The date is 210 days after the date on which the first monthly payment was made on the mortgage being refinanced.

2. The date on which six full monthly payments have been made on the mortgage being refinanced.

These changes will go into effect for all security issuances on or after June 1, 2018, but do not affect the guaranty or composition of MBS issued before that date.

“Ginnie Mae is engaging with issuers to implement a cure for pools that have been submitted with non-compliant loans,” the company said in its release. “Ginnie Mae expects that the law will be effective in helping curb abuses that have been identified in connection with certain refinance programs utilized by veterans.”

In the second half of last year, Ginnie Mae announced that it was launching an investigation into mortgage lenders that were aggressively targeting service members and military veterans for quick and potentially risky refinances of their mortgages.

The investigation came on the heels of a letter from Sen. Elizabeth Warren, D-Massachusetts, who cited a report from the Consumer Financial Protection Bureau, which covered complaints received from veterans about VA mortgage refinancing.

Warren’s letter claimed that there may be lenders “aggressively and misleadingly marketing the refinancing of mortgages backed by the Department of Veterans Affairs, generating fees for themselves at the expense of veterans and American taxpayers.”

Then, early this year, Ginnie Mae announced that it was warning a “small number” of lenders to get their VA refinance programs under control, or they will no longer be allowed to participate in Ginnie Mae multi-issuer mortgage-backed securities.

But some experts, including Wells Fargo, predicted that warning was only the beginning in the agency’s effort to clean up VA loan churning.

As it turns out, they were right. In April, Ginnie Mae reportedly followed through on that threat and booted NewDay USA  and Nations Lending from its primary mortgage bond program.

NewDay denied that it was involved in loan churning and said that it has even offered recommendations to both Ginnie Mae and the VA that “could virtually end loan churning.”

Nations Lending also denied any wrongdoing, saying it was confident the matter would be resolved in the very near future.

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