An investigation has been opened by a government-owned mortgage company into purported shady lending practices targeting veterans and service members.
Ginnie Mae, a government agency that helps make home loans more affordable, is conducting the probe. Loans backed by Ginnie Mae support some federal housing initiatives, including loans made through the Department of Veterans’ Affairs.
The issue is that some lenders are pressuring veterans and service members bullying them to refinance loans multiple times over a short time, a process known as churning. and that they have been bundled into Ginnie securities.
The issue gained national traction when Senator Elizabeth Warren (D-MA) sent a letter dated Sept. 6 to Ginnie Mae Acting President, Michael Bright, asking whether some lenders were engaging in aggressive tactics.
In a written response to Warren on Thursday, Bright said Ginnie and the VA created a task force to explore potential churning, as well as other illegal practices by lenders. While the letter does not name any companies engaging in churning, the agencies could implement restrictions, and ban certain lenders.
“It appears that other evasive mechanisms are now being employed by some issuers active in aggressive VA loan churning,” the letter reads. “There are clearly some Ginnie Mae approved issuer companies who appear to be taking advantage of the VA program to aggressively market and churn loans in our securities.”
Banks that provide loans through the VA offer friendlier terms that aren’t available to most would-be borrowers, such as waiving the requirement for a down payment.
“I am glad that Ginnie Mae and the VA have created the Lender Abuse Task Force and have committed to working with me to crack down on lenders who are exploiting veterans in order to line their own pockets,” Warren said in a statement. “These abusive practices are wrong, and lenders who engage in them shouldn’t benefit from any taxpayer backing.”
In Warren’s letter sent to Bright, she referenced a 2016 report from the Consumer Financial Protection Bureau (CFPB) that concluded “many complaints from veterans who believe that they are being targeted with aggressive solicitations they receive are potentially misleading.”