A small group of issuers have been warned by the Government National Mortgage Association about rapidly refinancing home loans to veterans.
At issue are mortgages guaranteed by the Department of Veterans Affairs that are packaged into Ginnie Mae mortgage-backed securities.
The government-owned corporation first addressed the issue of VA churning in 2016 by changing its program rules for refinancing VA loans.
That was followed by the
formation of a task force with VA in October 2017 and new restrictions for streamline and cashout refinances in December.
On Thursday, the Washington-based company issued a statement indicating that it has notified a small number of outlier issuers
on the metric of prepayment speeds. The companies are participants in Ginnie’s multi-issuer MBS.
The issuers that are notified will need to provide Ginnie
with a corrective action plan identifying immediate strategies to bring prepayment speeds in line with their peers.
Issuers that cannot show Ginnie they are improving their performance could be restricted from access to multi-issuer pools — leaving them with access only to custom pools.
Ginnie Mae Executive Vice President and Chief Operating Officer Michael Bright noted in today’s statement that a quick response is expected from notified issuers.
“We have an obligation to take necessary measures to prevent the lending practices of a few from impairing the performance of our multi-issuer securities, and thus raising the cost of homeownership for millions of Americans,” Bright said. “By addressing the anomalous performance of a few lenders, Ginnie Mae is acting to protect veterans, the broader Ginnie Mae program, the American taxpayer and the consumers we serve.”
Bright added that the vast majority of issuers genuinely help support responsible lending.