The letter was in response to Sen. Warren, who initially addressed the aggressive practices in a letter to Ginnie Mae on September 6, 2017. Warren warned that the marketing practices are negatively impacting Ginnie Mae securities without necessarily benefiting veteran borrowers.
After researching the unusually fast prepayment speeds Ginnie Mae was noticing in its securities, as well as conducting conversations with its partners at the VA, with Ginnie Mae issuers, and the investor community, in 2016 Ginnie Mae decided to change a few program standards.
“The APM put in place a limitation on the delivery of so-called “streamline refinance” loans into standard Ginnie mortgage-backed-securities until six consecutive monthly payments were made on the initial mortgage loans,” Michael Bright, President and CEO of Ginnie Mae said in the letter.
According to Bright, this means that an originator cannot do a quick refinance of a loan and deliver it into a standard Ginnie Mae security until the borrower has made six months of payments. This restriction went into effect in February of this year, but after a successful six months, Ginnie Mae noticed more streamlined refinancing appearing in their pools. Some VA loan issuers are now using other “evasive mechanisms.”
“Ginnie Mae’s efforts, along with its partners in government, industry, Congress, and other stakeholders, seek to fully root out these questionable lending practices that harm veterans and harm the Ginnie Mae security, which also notably means harm to FHA and other government backed loan program borrowers,” Bright said.
To see the letter to Sen. Warren, including the types of tactics Ginnie Mae is seeing, click here.