WASHINGTON — The Department of Veterans Affairs proposed rule changes to its home loan guarantee program that aim to stop lenders from aggressively targeting and pressuring veterans to refinance their home loans.
According to STARS AND STRIPES Magazine, members of the House Committee on Veterans’ Affairs on Wednesday discussed the problem of some mortgage firms attempting to coerce veterans who use the VA home loan program into unnecessarily refinancing their loans, racking up fees and lengthening their debt repayment.
There is a practice gthat is referred to as “loan-churning,” was highlighted when Ginnie Mae – a government-owned entity that aims to make mortgages more affordable – announced an investigation into lenders improperly pressuring veterans to repeatedly refinance loans with little or no benefit.Loan-churning happens more often with VA mortgages than loans insured by other agencies, said Michael Bright, vice president of Ginnie Mae.
Jeffrey London, director of the VA loan guaranty service, said the agency is working on a remedy. The VA and Ginnie Mae formed a task force in October and drafted regulations that the VA plans to release soon for public comment, London said.
The regulations could include a requirement for a lender’s refinancing to meet a certain tangible net benefit for veterans, like what the Federal Housing Administration already compels lenders to prove before refinancing loans that it insures.