Refinancing Schemes Target Veterans

December 01, 2017

The Government National Mortgage Association (Ginnie Mae) and the Department of Veterans Affairs (VA) have announced the formation of a task force to examine issues related to refinancing schemes that target veterans.

The task force will look at what the Consumer Financial Protection Bureau (CFPB) has described as aggressive solicitations and misleading advertisements from companies trying to convince veterans to use one of the VA refinance programs. VA refinances can be quicker and easier for lenders than other types of loans because they don’t require an appraisal or conventional underwriting, according to the CFPB.

While VA refinance programs can help veterans reduce borrowing costs and loan terms, there have been reports of loan churn and repeated refinancing that generate fees for lenders but leave borrowers with negative equity for only modest reductions in monthly payments.

According to Ginnie Mae and the VA, the task force will determine what policy and program changes are needed to make sure refinancing programs don’t pose an undue risk or burden to veterans. The task force has started by considering time frames for recoupment of fees associated with refinancing, examining the impact of stronger seasoning requirements for VA-guaranteed loans backed by Ginnie Mae, and ensuring veterans understand the costs associated with refinancing.

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