Government Threatens to Dump Lenders from VA Loan Program
Nine lenders have been warned by the U.S. that they will be kicked out of a top mortgage program within months unless they find ways to stop costly rapid refinances of veterans’ loans.
The warnings stem from a probe by Ginnie Mae, a government-owned corporation that makes mortgages cheaper by protecting bond investors against homeowner defaults. Ginnie Mae guarantees about $2 trillion in bonds containing loans backed by agencies including the Department of Veterans Affairs.
Some lenders have boosted their revenue through repeated, unneeded refinancing of veterans’ home loans, according to regulators. That process, called “churning,” lowers prices investors are willing to pay for bonds, effectively raising rates for veterans, first-time home buyers and others whose loans are included in Ginnie Mae-backed securities.
The targeted lenders include NewDay Financial and Nations Lending Corp., which were given 30 days to respond to the letter, according to a person familiar with the matter. Others, including Freedom Mortgage Corp., LoanDepot.com LLC and Flagstar Bank, were given 60 days, according to the person.
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