Protecting Veterans from High-Pressure Mortgage Refinances
By Debbie Gregory.
After volunteering to protect their country, servicemembers and veterans are often targeted by disreputable forces at home: predatory lenders.
Government-owned Ginnie Mae, whose purpose is to make mortgages more affordable, is conducting an investigation into unscrupulous mortgage lenders who allegedly pressured servicemembers and veterans into unneeded mortgage refinances.
Ginnie Mae backs loans made through the Department of Veterans Affairs.
Under investigation are lenders who push consumers to refinance loans over and over again in a short period of time, a practice known as churning.
Senator Elizabeth Warren, an outspoken critic of the finance industry sent a letter to Ginnie Mae’s Acting President, Michael Bright, asking whether some lenders were abusing Ginnie Mae’s program by engaging in aggressive marketing tactics.
Bright replied that Ginnie Mae and the Department of Veterans Affairs have created a task force to address abusive practices by lenders approved to issue Ginnie Mae-backed bonds.
VA loans do not require a down payment and closing costs are added to loan balances, so borrowers don’t have to pay them at the time of the sale. But this also makes these loans prime targets for churning.
Some lenders are persuading servicemembers to refinance loans at rates that barely reduce their mortgage payment.
Ginnie Mae has been trying to slow down the refinancing rush by putting a six-month moratorium between new mortgages and a refinance.
However, once the six-month mark passed, Bright said Ginnie Mae saw a blitz of lenders once again preying on servicemembers. Bright said that some lenders apparently targeted veterans for a refinance at “six months and one day.”
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