Wednesday, September 27, 2017

Refinancing Schemes Target Veterans Security

Government cracks down on home refinancing scheme targeting veterans 
Chicago Tribune
Kenneth R. Harney
September 26, 2017
In an interview, Michael R. Bright, acting Ginnie Mae president, said some of the abuses he is seeing hark back to 2005 and 2006 — heyday years of the boom before the bust. 

Iraq war veteran Vernon Poling, 44, walks through a courtyard past a giant American flag at Potter's Lane, an apartment complex made out of shipping containers in Midway City, Calif. 
Federal officials plan to crack down on what they view as predatory lending schemes — reminiscent of the toxic practices seen during the housing boom — targeted at thousands of veterans nationwide who have U.S. Department of Veterans Affairs home loans.
The alleged abuses involve serial refinancings that generate hefty fees for lenders and loan brokers but leave borrowers in worse financial shape than they were before the transaction. Lenders are accused of dangling teaser interest rates, “cash out” windfalls and lower monthly payments, sometimes purportedly using shady marketing materials that resemble official information from the Department of Defense. Not infrequently, say officials, borrowers end up in negative equity positions, owing more on their loan balance than their house is worth.
Officials at the Government National Mortgage Association, better known as Ginnie Mae, say some veterans are being flooded with misleading refi offers and are signing up without assessing the costs and benefits. Some properties are being refinanced multiple times a year, thanks to “poaching” by lenders who aggressively solicit competitors’ recent borrowers to refi them again and roll the fees into a new loan balance, officials say. 

“We’re seeing borrowers refinance three times in less than six months and (their) loan balances going up.” Homeowners also are dumping fixed-rate loans for riskier adjustables" Michael Brightread more here