Bill Would Rein In Mortgage Companies Targeting Veterans

Backers of a bill aimed at cracking down on mortgage lending companies that target veterans say the measure is gaining support.

The bill's sponsors — U.S. Sens. Elizabeth Warren and Thom Tillis — said Thursday that the goal of the legislation is to protect veterans, particularly those who purchase homes through a U.S. Department of Veterans Affairs home loan program.

Warren, a Massachusetts Democrat, said while most mortgage companies are working to help homebuyers, some are trying to get veterans to refinance their mortgages just to rake in fees, whether or not it makes sense for the veteran.

She said those refinancing offers can sometimes come less than a year after the original mortgage.

"This (bill) requires that any refinances of veteran mortgages be to the financial benefit of the veteran and not the mortgage company pushing the refinancing," Warren told The Associated Press Thursday.

Warren said that between April 2016 and November 2017 more than 6,000 veterans in Massachusetts refinanced their VA mortgages. Of those, more than 400 have been flagged by Ginnie Mae as potentially predatory because they were issued less than six months after the initial mortgage.

Warren said the problem could be wider because Ginnie Mae only flagged those refinances that were under the six-month window.

Tillis, a North Carolina Republican, said in his state the number of flagged VA mortgages was closer to 1,000.

"What we're trying to do with the bill is address a minority population of lenders who have engaged in this practice," Tillis told the AP.

Tillis said the practice is known as "churning" — the refinancing of a home loan over and over again to generate fees and profits for lenders at the expense of veterans and their families.

Rick Bettencourt, president-elect of the National Association of Mortgage Brokers, a trade association representing mortgage professionals, said while the practice of "churning" isn't widespread, the group supports the goal of protecting veterans.

"We are 100 percent against any unscrupulous practices targeting our veterans," said Bettencourt, who cautioned that he hadn't had a chance to read the details of the bill yet.

The bill would require that a lender only submit a refinance loan for VA insurance if it certifies that all associated fees would be recouped through lower monthly payments within three years.

A lender could also only receive VA insurance under the bill or get a Ginnie Mae guarantee for a refinance loan if the refinance comes more than six months after the initial loan.

Finally, the lender could only receive VA insurance for a refinance loan if the loan has a fixed rate 50 basis points lower than the earlier fixed-rate loan — or 200 basis points lower if the new refinanced loan is an adjustable rate mortgage.