A government agency is targeting lenders who aggressively push military veterans to refinance their home loans, leading the borrowers in some cases to rack up thousands of dollars in unnecessary fees, the Wall Street Journal reported today. Ginnie Mae, the government-owned corporation that guarantees certain mortgage securities, said that it is planning to discuss with at least half a dozen lenders their refinance practices. It is also contemplating civil legal action against some lenders, and recently has formed a “Lender Abuse Task Force” with the Department of Veterans Affairs. Michael Bright, Ginnie Mae’s acting president, said in an interview that the consequences of refinance “churning” — where loans are refinanced more often than normal, usually at no benefit to the borrower — have rippled across the mortgage ecosystem. This creates uncertainty for investors and higher prices for many borrowers, he added. Ginnie Mae this year instituted new rules to curb rapid refinancing, including telling lenders that in some cases they would have to wait until a loan was at least six months old before refinancing it. But Bright said in a recent letter to Sen. Elizabeth Warren (D-Ma.) that some lenders are intentionally trying to evade efforts meant to curb churning. “When people say the mortgage industry has learned its lesson, this seems to suggest that that may not be the case,” Bright said, referring to the financial crisis.
