New Guidances on VA Refinances Raises MBA Concerns

Last week, the Veterans Administration and Ginnie Mae each issued guidance implementing provision of S. 2155, the Economic Growth, Regulatory Relief and Consumer Protection Act. However, these guidance have raised new concerns with the Mortgage Bankers Association and other industry trade groups.

The implementation process and interpretations of the effective dates of various provisions of the legislation have created some market disruptions that MBA and other trade associations are trying to address. Specifically:

–Originally, the effective date interpretation threatened to block issuance of real estate mortgage investment conduits, known as REMICs, that included earlier-issued Ginnie mortgage-backed securities. Last week, Ginnie Mae issued a bulletin ( that addresses new loan seasoning requirements for VA refinances, based on S. 2155.

The bulletin outlines how Ginnie Mae requires an extension:
–210 days after the first payment on the initial loan; or
–the date on which six full monthly payments have been made on the initial loan.

Ginnie Mae said refinances that do not meet the condition defined in the APM are ineligible for inclusion in any new pool or loan package in the Ginnie Mae I or Ginnie Mae II MBS Program, including refinances that closed prior to the date of this announcement.

“Ginnie Mae is engaging with issuers to implement a cure for pools that have been submitted with non-compliant loans,” the agency said. “Ginnie Mae expects that the law will be effective in helping curb abuses that have been identified in connection with certain refinance programs utilized by veterans.”

However, Dan Fichtler, MBA Director of Housing Policy, said this changes will adversely affect lenders who have certified new pools for June issuance that contain VA refis that are not compliant, even if the note date of the VA refi is prior to the date of the APM or enactment of the law. “Ginnie is currently reaching out to individual lenders who may now have defective loans in pools that were certified for June issuance,” he said.

Fichtler noted Ginnie securities issued before June will not be affected. MBA is in constant communication with Ginnie Mae regarding the matter and will continue to work with them and individual lenders to deal with issues as they arise,” he wrote in an item for the MBA Advocacy Update.

MBA noted there remains problems with the delivery of certain loans into Ginnie pools scheduled for June issuance. For VA refinance loans with application dates before May 25 where the prior loan does not meet the seasoning requirement, these loans are eligible for a VA guarantee, but Ginnie Mae currently believes these loans are not eligible for pooling.

“While the impacted population of loans is likely a relatively small part of the overall VA market, it may be large for some lenders,” MBA said. “MBA and other financial trades have been in contact with key Senators to seek a technical correction that would apply the provisions governing Ginnie Mae MBS issuance on a prospective basis. We are looking to develop both the fix, and to identify a path for quick enactment.”

MBA said lenders should also be exploring alternative executions for those VA-guaranteed refinance loans that cannot be issued in Ginnie MBS.

On Friday, Ginnie Mae announced it placed restrictions on three VA mortgage lenders from its main securities programs. It restricted VA single-family guaranteed loans pooled by Freedom Mortgage Corp., SunWest Mortgage Co. Inc. and NewDay USA in Ginnie Mae pools to Ginnie Mae II custom pools only. All three issuers are restricted from including VA single-family guaranteed loans in Ginnie Mae I securities or Ginnie Mae II multi-issuer securities.

Freedom and SunWest remain approved Ginnie Mae issuers and remain authorized to pool FHA and RHS single-family insured mortgages in all eligible Ginnie Mae pool types. The restriction for both issuers of their VA single-family loans to Ginnie Mae II custom pools is effective for July 1, 2018 issuances and concludes with January 1, 2019 issuances.

NewDay remains an approved Ginnie Mae issuer and remains authorized to pool FHA and RHS single-family insured mortgages in all eligible Ginnie Mae pool types. NewDay’s restriction to Ginnie Mae II custom pools commenced with its April 1, 2018 issuances and concludes with its October 1, 2018 issuances.