Friday evening, Ginnie Mae announced it was booting several lenders from its Department of Veterans Affairs securities programs. Now, lenders are reacting, but their responses couldn’t be more opposite.

Back in April, Ginnie Mae booted NewDay USA and Nations Lending from its primary mortgage bond program.

After being booted from the program, Nations Lending submitted a response letter to Ginnie Mae providing a detailed description of the steps it had taken to address its prepayment speed issue and was therefore reinstated to the program. Continued access to Ginnie Mae II multi-issuer pools is conditioned in part on Nations Lending maintaining compliance with the prepayment speed requirements.

NewDay USA, however, remains restricted and was joined by Freedom Mortgage and SunWest Mortgage last week.

Now, the lenders are responding.

“NewDay is proud of its established track record in providing veterans access to their VA home loan benefits,” the company said in a statement to HousingWire. “NewDay will continue to issue Ginnie Mae MBS in custom pools. Our record is absolutely clear – NewDay does not churn veteran loans. We have been an outspoken supporter of measures to end the shameful practice of loan churning.”

But NewDay doesn’t stop there. It goes on to claim that policy changes recommended by Ginnie Mae will do nothing to stop loan churning.

“Policy changes recommended by Ginnie Mae will do virtually nothing to stop the unprincipled practice of veteran loan churning but in all likelihood, will force the elimination of much-needed benefits and financial services for tens of thousands of veterans – especially those veterans struggling with poor credit,” the company said.

Freedom Mortgage also expressed its views on loan churning, saying it stands strongly against it and is committed to acting in the best interest of veterans. However, unlike NewDay, Freedom said it welcomed the increase in transparency.

“We welcome the increased transparency for MBS investors, and are completely aligned with GNMA in this pursuit,” the company said in a statement to HousingWire. “Over the last several months, we have been working closely and cooperatively with GNMA to make sure that Freedom’s prepay speeds are in line with other market participants.”

The company expressed its support for slower prepay speeds and even commended Ginnie Mae for its diligence.

“At Freedom Mortgage, we know the value of MBS investors to our industry and have a great appreciation for the importance they bring to the mortgage system,” the company stated. “Fortunately, the new legislation signed by President Trump last week has significantly leveled the playing field for both MSR investors and MBS investors, whose interests in slower prepay speeds are now completely aligned. We support the new legislation and commend Ginnie Mae for their diligence in protecting the MSR and MBS investor.”

NewDay, however, offered several suggestions to Ginnie Mae which it says could virtually end loan churning, but says those suggestions have not been acted upon.

Here are some of the changes NewDay suggested:

  • End loan origination fees charged on the VA Interest Rate Reduction Refinance Loan program. These unnecessary fees represent a substantial cost, thousands of additional dollars, to veteran families.
  • Only allow lenders the ability to refinance a borrower using the IRRRL program once a year. Under existing rules, these loans can be refinanced after just six months.
  • Ensure veterans have a tangible benefit when they refinance their home loans. Negligible reductions in interest payments don’t help them.

“Roughly one out of four customers of NewDay says they have been rejected by major banks while applying for the VA benefits they are entitled to receive,” NewDay said in its defense. “When veterans cannot access their VA financial benefits, they are forced to pay much higher credit card interest rates or use extremely high-interest, payday lenders.”

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