Ginnie Mae is continuing its fight against VA loan churn, announcing that it is implementing a proposal to remove VA cash-out refinances with high loant-to-value ratios from its top securities.
Ginnie Mae has been moving to tamp down VA churn since 2016. Churn occurs when lenders convince borrowers to unnecessarily refinance their mortgage, and results in unusually fast prepayment speeds. Churn in VA mortgages has made all government-backed mortgages – particularly those made to veterans – more expensive, according to a recent study by the Urban Institute. Ginnie Mae has attempted to discourage churn through strategies including issuing restrictions against specific lenders that barred them from participating in some securitization programs.
Now Ginnie Mae is barring a specific loan type from its top-level securities, the company has announced.
“Effective with mortgage-backed securities guaranteed on or after November 1, 2019, High LTV VA Cash-Out Refinance Loans (those with LTV ratios above 90%) are ineligible for Ginnie Mae I Single Issuer Pools and Ginnie Mae II Multiple Issuer Pools,” Ginnie Mae wrote in a press release.
High-LTV cash-out refinances can still be pooled into Ginnie Mae II Custom Pools, the company said.
“The new policy moves Ginnie Mae’s MBS pooling eligibility requirements closer to that of Fannie Mae, Freddie Mac and the Federal Housing Administration (FHA),” Ginnie Mae wrote in the release. “It also continues to provide veterans who use their earned benefit access to the government-guaranteed MBS market. Furthermore, it provides global investors with increased certainty in the performance of the Ginne Mae security, which ultimately lowers mortgage rates for all borrowers served by the program.”