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Ginnie Mae Asks Lenders to Address ‘Churning’

refinance-appGinnie Mae, the government-owned corporation that attracts global capital into the housing finance system, has notified a small number of issuers in the Ginnie Mae multi-issuer mortgage-backed security (MBS) pool to take steps to address churning in its MBS program, the company said in a release on Thursday.

Ginnie Mae’s efforts in this area have been designed to keep mortgage rates affordable for veterans and first-time home buyers, as well as to preserve the liquidity of the security around the globe.

“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, EVP, and COO at 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, they would be restricted from accessing Ginnie Mae’s multi-issuer pools.

“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,” Bright said.

“Churning” is a process where a lender solicits an existing borrower to refinance their current mortgage for a better offer with a different or the same investor. Some lenders use this practice to refinance a loan multiple times and generate profits for lenders.

This notice from Ginnie Mae comes on the heels of its recent announcements on changes to its APM 17-06, Pooling Eligibility for Refinance Loans and Monitoring of Prepay Activity, and APM 18-02, Risk Parameters Applicable to Single Family Issuers programs.

“We are focusing on outliers that are harming Ginnie Mae’s program, not at issuers that genuinely help support responsible lending,” Bright said. “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.”

About Author: Radhika Ojha

Radhika Ojha, Online Editor at the Five Star Institute, is a graduate of the University of Pune, India, where she received her B.A. in Commerce with a concentration in Accounting and Marketing and an M.A. in Mass Communication. Upon completion of her master’s degree, Ojha worked at a national English daily publication in India (The Indian Express) where she was a staff writer in the cultural and arts features section. Ojha also worked as Principal Correspondent at HT Media Ltd and at Honeywell as an executive in corporate communications. She and her husband currently reside in Dallas, Texas. You can contact her at Radhika.Ojha@theMReport.com.

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