The U.S. is investigating lenders for allegedly pressuring veterans and members of the military into unneeded mortgage refinances — unsavory conduct that not only leads to higher consumer costs but has consequences for one of the world’s largest bond markets, Bloomberg News reported today. The probe is being conducted by Ginnie Mae, a government-owned corporation whose purpose is to make mortgages more affordable. It does so by guaranteeing repayment on $2 trillion of mortgage bonds even if borrowers default on the underlying loans. Ginnie-backed securities support several federal housing initiatives, including programs in which loans are made through the Department of Veterans Affairs. The concern is that some lenders are improperly pushing veterans and servicemembers to refinance loans that have been wrapped into Ginnie securities. Lenders are hounding consumers to refinance loans over and over again in a short period of time, according to Ginnie Acting President Michael Bright. The practice, known as churning, generates high fees for lenders but can leave servicemembers with larger loan balances.
