Protect Affordable Mortgages for Veterans Act of 2018

Floor Speech

BREAK IN TRANSCRIPT

Mr. ZELDIN. Mr. Speaker, I thank the gentleman for yielding.

Mr. Speaker, I rise to urge passage of my bill, H.R. 6737, the Protect Affordable Mortgages for Veterans Act, which is bipartisan legislation that passed the committee with a unanimous vote of 49-0.

This legislation would provide a technical fix so that recently issued loans refinanced by the Department of Veterans Affairs can remain eligible for the secondary market.

This fix is essential to prevent a liquidity crisis in the veterans home loan market and ensure that the brave men and women who have served our Nation in uniform have access to affordable mortgages.

Through passage of this bill, we can ensure that VA home loans are not adversely impacted by issues in the veterans mortgage market created by the unintended consequences of S. 2155.

The Economic Growth, Regulatory Relief, and Consumer Protection Act, S. 2155, contained some very important bipartisan reforms to protect veterans from predatory lending and deceptive marketing. These provisions of S. 2155 are now the law of the land and essential to protect the VA home market. But unclear timelines laid out in the legislation and the way the Government National Mortgage Association, also known as Ginnie Mae, chose to implement the requirements of the new law have left an estimated 2,500 or more VA home loans boxed out of the secondary market.

These mortgages are now considered orphan loans, because they are no longer eligible for Ginnie Mae securitization, even though they met all Federal requirements and are backed by the VA.

My bill would prevent a government-triggered liquidity crisis in the VA mortgage market by fixing this problem and restoring eligibility for these orphan loans.

Addressing this ensures that veteran homeowners or prospective home buyers who have earned access to the VA home loan program through their military service aren't harmed by a fluke in S. 2155.

Without this bill, potential damage to the overall VA home loan market is likely because VA lenders may have to sell or finance these orphan mortgages at a loss. This would have a negative impact on the brave men and women who have served our country and deserve a path to homeownership and the American Dream.

If lenders aren't able to securitize VA home loans through Ginnie Mae, closing costs and borrowing costs could go up and opportunities to borrow or refinance could go down.

Mr. Speaker, veterans have some of the lowest default and foreclosure rates in the Nation, and they have earned access to VA home loans through their selfless service to our country.

As I mentioned earlier, it is estimated that 2,500 or more VA home loans that were issued earlier in May or June of this year may now be boxed out of the market due to a minuscule legislative error. Even one VA home loan negatively impacted by a minor mistake is one too many when it comes to giving our veterans access to homeownership.

That is why we must pass this bipartisan bill. I thank my lead bipartisan cosponsors, Claudia Tenney of New York and Kyrsten Sinema of Arizona. I also thank Chairman Hensarling, Ranking Member Waters, and Housing and Insurance Subcommittee Chairman Sean Duffy for supporting this important bipartisan reform.

I also thank the great staff of the House Financial Services Committee for all their help throughout this process. They certainly have shown a tremendous amount of care and compassion for our Nation's veterans with this bill and so many others.

Mr. Speaker, I include in the Record a letter from Senator Tillis and Senator Warren expressing the need to address the issue of these orphan VA loans. I urge adoption of this important bipartisan bill. U.S. Senate, Washington, DC, June 11, 2018. J. Paul Compton, Jr., General Counsel, U.S. Department of Housing and Urban Development, Washington, DC.

Dear Mr. Compton: As you know, S. 2304--the Protecting Veterans from Predatory Lending Act of 2018 (Act)--was introduced and subsequently included in S. 2155, the Economic Growth, Regulatory Relief, and Consumer Protection Act, which President Trump signed into law on May 24, 2018. The Act was introduced to protect veterans from targeted predatory home loan practices by requiring lenders to demonstrate a material benefit to consumers when refinancing their mortgage. As such, the legislation included: (1) a fee recoupment requirement; (2) a net tangible benefit test; and (3) a loan seasoning requirement.

The aforementioned actions and subsequent signature of the president were taken after witnessing some bad actors in the U.S. Department of Veterans Affairs (VA) Home Loan space engage in the practice of ``churning''--the refinancing of a home loan over and over again to generate fees and profits for lenders at the expense of the consumer and taxpayers. Upon enactment of the legislation, questions arose surrounding whether Ginnie Mae (Ginnie) is statutorily authorized to continue to accept previously guaranteed Ginnie Mortgage-Backed Securities (MBS) as eligible multiclass securities collateral under its multiclass securities programs, given the requirements of the legislation--i.e. the MBS are backed by a refinanced loan that is guaranteed by the VA benefit program and do not meet the conditions required by the Act.

Specifically, the Act requires that to be included as eligible collateral for a Ginnie guaranteed MBS, a VA refinance loan must be refinanced after the later of: (1) the date that is 210 days after the date on which the first monthly payment is made on the mortgage being refinanced, and (2) the date on which six full monthly payments have been made on the mortgage being refinanced. To implement the Act, Ginnie revised its MBS pooling eligibility requirements and amended its MBS Guide to specify how Ginnie MBS are affected by this Act. Ginnie delineated that securities with an issuance date of May 1, 2018 or earlier are unaffected even if they do not meet the conditions of the Act, and that Ginnie securities with an issuance dated June 1, 2018 or later will comply with the new pooling requirements and conditions of the Act. Ginnie also determined that given the above-mentioned congressional reasons for enacting S. 2155, there was never an intent by Congress to impact Ginnie's ability to continue to guaranty multiclass securities that are collateralized by Ginnie MBS guaranteed prior to the enactment of the Act that may contain VA guaranteed refinanced loans that do not meet the requirements of the Act.

We recognize that there are a small number of loans that do not conform with the Act's requirements that were either originated or in the process of being originated before the May 31st date of Ginnie's APM regarding new seasoning requirements. It was not our intention to ``orphan'' those loans, and we urge Ginnie and the VA to work with lenders and other federal agencies to attempt to ensure that those loans are not adversely affected by the enactment of the Act.

We support the steps that Ginnie has taken, and look forward to working with Ginnie and the VA to further protect veterans from loan ``churning.'' Sincerely, Thom Tillis,

United States Senate. Elizabeth Warren,

United States Senate.

BREAK IN TRANSCRIPT

Source