Ginnie Mae Notifies Select Market Participants to Take Corrective Action to Control ‘Churning’

Ginnie Mae Notifies Select Market Participants to Take Corrective Action to Control ‘Churning’

WASHINGTON – (RealEstateRama) — Ginnie Mae continues to take steps to address churning in its mortgage-backed security (MBS) program. These efforts are designed to keep mortgage rates affordable for veterans and first-time home buyers, in addition to preserving the liquidity of the security around the globe. To that end, Ginnie Mae has notified a small number of issuers who are outliers among market participants in the Ginnie Mae multi-issuer MBS on the metric of prepayment speeds. Such deviations from market norms are not acceptable and put a veteran earned benefit at risk. This work builds off the “Ginnie Mae – VA Loan Churn Task Force,” which has been ongoing since September 2017.

Ginnie Mae

Issuers who have been notified are expected to deliver a corrective action plan that identifies immediate strategies to bring prepayment speeds in line with market peers. In the event issuers are unable to demonstrate a path to improved performance, said issuers risk being restricted from access to Ginnie Mae multi-issuer pools. Thereafter, those issuers may only have access to Ginnie Mae custom pools.

“We have an obligation to take necessary measures to prevent the lending practices of a few from impairing the performance of our multi-issuer securities, and thus raising the cost of homeownership for millions of Americans,” said Michael Bright, Ginnie Mae Executive Vice President and Chief Operating Officer. “By addressing the anomalous performance of a few lenders, Ginnie Mae is acting to protect veterans, the broader Ginnie Mae program, the American taxpayer and the consumers we serve. We expect issuers receiving these notices to respond quickly, produce a corrective action plan and come into compliance with our program.”

Denise Rohan, National Commander of the American Legion added, “On behalf of two million members of the American Legion, I applaud the efforts of Ginnie Mae to curb misleading mortgage refinancing marketing targeting veterans and the unscrupulous practice known as “churning” – the refinancing of a loan multiple times to generate profits for lenders at the expense of veterans. Aggressive home mortgage churning creates uncertainty for investors and higher interest rates for borrowers. Our veterans didn’t serve their country around the globe in order to be taken advantage of by unscrupulous lenders at home. The American Legion stands with Ginnie Mae and Senators Warren and Tillis as they work to protect veterans from predatory home lending and ensure veterans have an affordable pathway to home ownership.”

Ginnie Mae’s issuance of these notices directly follows recent announcements of program changes, APM 17-06, Pooling Eligibility for Refinance Loans and Monitoring of Prepay Activity, and APM 18-02, Risk Parameters Applicable to Single Family Issuers. These APMs outline acceptable risk parameters for mortgages backing Ginnie Mae securities and ongoing issuer evaluation.

“We are focusing on outliers that are harming Ginnie Mae’s program, not at issuers that genuinely help support responsible lending,” continued Bright. “The vast majority of our issuers fall squarely in the latter category, and we look forward to continuing to work with them to provide refinance opportunities to veterans, rural communities, and low to moderate-income homeowners.” This action comes after Ginnie Mae completed a comprehensive review of issuer performance, which included an in-depth evaluation of prepayment speeds on the MBS pools of individual issuers. This analysis identified a small number of issuers with prepayment speeds that substantially deviate from the mean for an extended period of time.

About Ginnie Mae

Ginnie Mae is a wholly owned government corporation that attracts global capital into the housing finance system to support homeownership for veterans and millions of low- to moderate-income homeowners throughout the country. Ginnie Mae MBS programs directly support housing finance programs administered by the Federal Housing Administration, the Department of Veterans Affairs, the HUD Office of Public and Indian Housing and the Department of Agriculture Rural Housing Service. Ginnie Mae is the only MBS to carry the explicit full faith and credit of the United States Government. 

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Contact: Michael Huff

(202) 475-4933

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Ginnie Mae

At Ginnie Mae, we help make affordable housing a reality for millions of low- and moderate-income households across America by channeling global capital into the nation's housing markets. Specifically, the Ginnie Mae guaranty allows mortgage lenders to obtain a better price for their mortgage loans in the secondary mortgage market. The lenders can then use the proceeds to fund new mortgage loans available. Without that liquidity, lenders would be forced to keep all loans in their own portfolio, meaning they would not have adequate capital to make new loans.

Unlike the GSEs, Ginnie Mae is profitable. We do not buy or sell loans or issue mortgage-backed securities (MBS). Therefore, our balance sheet doesn't use derivatives to hedge or carry long term debt.

Contact:

Phone: (202) 708-0926

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