Ginnie Mae clamps down on loan churning; QM Points and Fees bill passed through The House last week
A few weeks back we discussed the investigation that was launched by a Ginnie Mae & Department of Veterans Affairs, joint task force (that always sounds so official). The task force was assembled to address the issue of loan churning, specifically targeting the VA Refinance products. I won’t delve into too much detail about the lenders that were put on notice, but Ginnie Mae did threaten to remove the lenders from the VA program if corrective action is not taken. You can read more about the specifics here.
What’s interesting to me is that there were two specific reasons for launching this investigation. The first being the most obvious, in that the consumer is being taken advantage of… and most notably because this “consumer” is a servicemember who protects our freedom. Now, to me this is enough to launch the investigation as borrowers should not be charged big fees associated with refinancing and seeing minimal return (you know what I mean… Net Tangible Benefit and all that jazz). However, the bigger issue is that faster prepayment speeds don’t allow investors to make their desired returns on the Ginnie Mae backed security and if investors decide to stop investing in Ginnie Mae MBS… we might have a much bigger problem on our hands as the programs Ginnie offers might become less attractive to lend on as the return for the lender is diminished… interesting stuff all around.
Have you heard about the latest bill that was passed through The House? Well… it just might make lending a little easier. The bill would exclude certain fees from the QM calculation regardless of whether the company is an affiliate… so not a ton of detail, but what we can conclude is that lenders who own their own title company or AMC can remove those fees from the QM points and fees test, right? If that is right… that opens the doors to possibly (I say that with the upmost hopefulness) increasing compensation levels for mortgage brokers… making way for the small, one to two-person shops to bring on another processor or back office ops person so that the broker/LO can sell.
I wouldn’t get your hopes up though as this is the second time that a bill like this has been passed through The House… but Congress and the White House look a lot different now… so who knows.
Photo by Nathan Bingle on Unsplash
The opinions expressed in this post are the sole view of the writer and do not reflect the opinion of Princeton Mortgage Corporation.