Protect Our Veterans as They Protected Us

The veterans who protect America need protection from bad actors who may have been abusing them via rapid refinancing of their mortgages through Veterans Administration programs. Veteran borrowers appear to have been put into loans that do not appear to materially improve their financial situation but likely result in the imposition of significant fees.

SIFMA is working with the Veterans Administration (VA) and Ginnie Mae to help stop these abusive refinancings, and we fully support their efforts to achieve this goal.

Unnecessary refinancing of VA loans securitized in Ginnie Mae-guaranteed mortgage-backed securities (MBS) directly harm the veteran borrowers, along with the mutual funds, 401k plans, and other savers invested in Ginnie Mae MBS. Ginnie Mae MBS also support FHA and other borrowers under federal guarantee programs, and all of them are harmed when the MBS are devalued as it makes their loans more expensive.

In 2017, SIFMA sent a letter to Ginnie Mae expressing its strong support for the development of a joint Ginnie Mae/VA task force. This initiative investigated issues that were raised by market participants and members of Congress with respect to the refinancing of Veterans Affairs loans which are securitized in Ginnie Mae-guaranteed mortgage-backed securities.

Ginnie Mae has also undertaken its own efforts to police the users of the VA program to ensure that it and the market understand why significant variations in loan performance occur, and to ensure that actions that harm consumers or the liquidity of the MBS market are stopped.

Recently, the Department of Veterans Affairs issued interim final rules to address the issues raised by market participants and members of Congress with respect to refinancing. SIFMA today filed a comment letter on those rules, expressing our support of this ongoing effort to protect our veterans.

In our letter, we also make suggestions which we believe will result in a safer program for VA borrowers and a safer environment for investors to buy Ginnie Mae MBS backed by VA loans, since the interests of VA borrowers and MBS investors are aligned. There are some instances, particularly in the net tangible benefit test outlined in the rules, where a bad actor could evade the rules to continue these types of refinancings. SIFMA suggests ways to tighten the rules to ensure they are harder to evade, thus protecting our veterans as well as the investors for whom Ginnie Mae MBS comprise part of their retirement or other savings.

It is important for us to protect VA borrowers from the abuses of bad actors and help ensure that and other borrowers who depend on GNMA MBS funding will also not be harmed.

Kenneth E. Bentsen, Jr. is president and CEO of SIFMA, the voice of the nation’s securities industry. He is also chairman of the Global Financial Markets Association (GFMA), of which SIFMA is the U.S. regional member.