The Government National Mortgage Association, also called Ginnie Mae, is planning to crack down on aggressive predatory lending practices aimed at home refinance schemes targeting U.S. veterans that have U.S. Department of Veterans Affairs (VA) home loans.
Ginnie Mae was urged to take action by Senator Elizabeth Warren, D-Massachusetts, on the heels of a report by the Consumer Financial Protection Bureau (CFPB) which indicated it receives numerous complaints from veterans about “aggressive solicitations” from lenders encouraging them to refinance.
Many veterans also reported that despite having recently refinanced their homes or having no desire to refinance, they couldn’t get the solicitations to cease despite repeated requests to stop them.
These programs, when veterans do use them, often leave them in no better or in worse financial shape, while racking up heavy fees for the lenders involved.
The report also said that many veterans report that the solicitations are confusing or even misleading. For example, some vets reported receiving letters with a lower interest rate in large print highlighted on the front. But then in small print on the back of the letter, there would be a clarification that the rate was for an Adjustable Rate Mortgage with a charge for discount points.
The problem is that a vet may start the home refinance process without being aware of all necessary information, and then at closing, they end up with worse loan terms than they had originally. Delay tactics are reportedly also being used to slow the loan process and cause rate locks to expire so vets don’t get the rate they were initially promised. Or they may be given the option of paying a cash fee for a rate extension.
Vets also reported stringent loan guidelines which disqualified them from loans, which they weren’t made aware of until they were deep into the loan application process. For instance, they may have learned that they were required to have made strict on-time payments for a full two-year period prior to seeking the new loan.
What Action Is Ginnie Mae Taking?
Michael Bright, COO of Ginnie Mae, said that the government entity recently put new rules in place to help prevent originators from doing quick loan refinances to deliver into standard Ginnie Mae security in an effort to reduce high-pressure refi tactics and loans; however, he said that some lenders with questionable practices are already finding ways to evade the new rules.
Therefore, working in conjunction with the U.S. Department of Veterans Affairs (VA), Ginnie Mae has formed a new Lender Abuse Task Force to further analyze the problem and develop a plan of action to address it.
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