(THIS ARTICLE IS COURTESY OF POLITICO NEWS)
Federal investigators have issued subpoenas to several mortgage lenders that make loans to military veterans, seeking information on delinquencies and payments.
The investigation is being led by the Department of Veterans Affairs Office of Inspector General in cooperation with the U.S. attorney in the Eastern District of New York, according to four people with knowledge of the subpoenas.
At least eight lenders, and likely more, have been asked to turn over hundreds of files on VA home loans made between 2013 and 2017, according to two people with knowledge of the request.
The requests include questions about quality control and loan audits.
Some VA lenders have drawn scrutiny from regulators after they sold short-term, adjustable-rate mortgages to military homeowners as interest rates climbed. One VA program in particular — the Interest Rate Reduction Refinance Loan, or IRRRL — allows lenders to put existing VA borrowers into new loans without an appraisal or underwriting and was ripe for abuse.
Michael Nacincik, a spokesperson for the Department of Veterans Affairs OIG, and John Marzulli, a spokesperson for the U.S. attorney in Brooklyn, declined to comment. Both said they could neither confirm nor deny the existence of any investigation.
Jeffrey London, executive director of the VA’s Loan Guaranty Service, did not respond to requests for comment.
On Friday, Ginnie Mae said it was weighing whether to exclude some of those VA loans from its pooled securities in an effort to tackle a wave of rapid-fire mortgage refinancings that have left some military service members deeper in debt.
In a 14-page request for input, the government mortgage agency called the practice, known as churning, “unhealthy” for the agency.
The loan documents requested by investigators weren’t limited to IRRRLs, according to one person with knowledge of the subpoenas.
The VA subpoenas are landing as HUD is taking steps to rein in the prosecution of lenders who sell mortgages backed by the Federal Housing Administration.
Many of the nation’s largest banks, including JPMorgan Chase, stopped offering FHA loans after the government, under former President Barack Obama, used the False Claims Act to extract billions of dollars in settlements from dozens of big lenders.
FHA Commissioner Brian Montgomery, an appointee of President Donald Trump, has said those cases went too far and that the Trump administration is working with the DOJ to change how the False Claims Act is used against lenders.