MBANow: MBA Chairman Dave Motley, CMB, on VA Loan ‘Churning’
The Mortgage Bankers Association released a new video featuring MBA Chairman Dave Motley, CMB, who discusses his recent testimony on Capitol Hill and how the lending community is addressing “churning” of VA loans.
The video can be viewed at https://www.youtube.com/watch?v=5WOPUKVHmYg&feature=em-uploademail.
Testifying Jan. 10 before the House Veterans Affairs subcommittee on Economic Opportunity, Motley, president of Colonial Savings FA, Fort Worth, Texas, said lenders that mislead veterans through churning–a practice by which lenders encourage veterans to refinance loans, sometimes repeatedly and at higher rates, in such a way that it strips equity–should face consequences for their practices.
Motley said the VA Interest Rate Reduction Refinancing Loan program is important because it allows veterans to refinance their loan in a fairly quick and cost-effective manner.
“It’s a streamlined process; you don’t have to get an appraisal; there’s no credit qualifying necessary, so long as you’re reducing the veteran’s payment and interest rate,” Motley said. “But what the committee was concerned about here was that there were reports that some lenders are serially refinancing borrowers on a regular basis–two or three times a year, maybe even more. And every time that happens, typically more fees are added to the veteran’s principal balance and I think that’s not a good thing.”
In his testimony, Motley urged the VA to correct the issue and take steps to prevent further harming of veterans. “It appears to be an isolated problem,” he said.
Among MBA’s recommendations: create a “net tangible benefit” requirement, similar to that required of FHA loans. “It allows for the most flexibility for lenders to work with the veteran” he said. “You could also cap the amount of fees a lender can charge.”
Other videos in the MBANow series can be viewed at the MBA YouTube channel, https://www.youtube.com/watch?v=Swk2VUJeZFI&feature=em-uploademail. The videos are also available on the MBA Insights landing page, https://www.mba.org/publications/insights/insights-publication##SubscriberID####RND##&PageID=21109.
