Following Warren Letter, Ginnie Mae Announces New Task Force to Crack Down on Lenders that Scam Veterans
Washington, DC - United States Senator Elizabeth Warren (D-Mass.) today praised Ginnie Mae's commitment to crack down on lenders who aggressively and deceptively market refinancing mortgages backed by the U.S. Department of Veterans Affairs (VA) in an effort to generate profits for themselves at the expense of veterans and American taxpayers. The Senator raised concerns about this problem in a letter sent last week to Ginnie Mae, the government corporation responsible for approving lenders to securitize VA-backed mortgages and obtain a government guarantee.
In response to the letter, Acting President of Ginnie Mae Michael Bright acknowledged that there are "some Ginnie Mae-approved issuer companies who appear to be taking advantage of the VA program to aggressively market and ‘churn' loans," in Ginnie Mae's securities. According to Mr. Bright, this conduct appears "designed to market products that evade Ginnie Mae and VA program rules, and, in our view, may not be designed to help veteran homeowners." Mr. Bright also stated that this churning "is having a negative impact on Ginnie Mae securities," which means that "some VA borrowers may now likely pay a higher mortgage rate than they otherwise would."
While Ginnie Mae has previously taken some steps to curtail such behavior, certain issuers have continued to aggressively market VA refinances and sidestep Ginnie Mae guidelines. Mr. Bright noted the recent creation of a joint Ginnie Mae-VA "Lender Abuse Task Force" to delve into and address this problem for veterans and taxpayers, and pledged to work with Senator Warren and other key federal agencies to hold lenders accountable.
"I am glad that Ginnie Mae and the VA have created the Lender Abuse Task Force and have committed to working with me to crack down on lenders who are exploiting veterans in order to line their own pockets," said Senator Warren. "These abusive practices are wrong, and lenders who engage in them shouldn't benefit from any taxpayer backing."
In her initial letter to Ginnie Mae, Senator Warren referenced a November 2016 report from the Consumer Financial Protection Bureau (CFPB) that the agency had received "many complaints from veterans who believe that they are being targeted with aggressive solicitations by lenders to refinance using one of the VA programs," and that "the solicitations they receive are potentially misleading." She also noted market analysis showing that certain VA mortgage servicers are significantly more likely to "churn" loans - a possible indication that those companies engage in aggressive marketing tactics.
According to Ginnie Mae's analysis, the VA loan market is "somewhat saturated with lenders and brokers making dozens of calls and sending dozens of letters to veterans attempting to get these homeowners to refinance their mortgages. When a refinance occurs, the lender collects refinance fees, but the borrower may be left no better off and, in some cases, worse off in the long-term."
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