Characterized as “protecting veterans from predatory lending,” S.2155, the Economic Growth, Regulatory Relief and Consumer Protection Act, passed by the United States Senate on March 14, 2018 (the “Senate Bill”), imposes material conditions on the eligibility of non-cash-out refinancings for government guaranty under the Veterans Affairs (“VA”) Loan Guaranty Program.

While the legislation has received significant attention for the loosening of rules under the 2010 Dodd-Frank Act applicable to banks, this particular provision should be of significant interest to government-insured or guaranteed residential mortgage loans. Specifically, the Senate Bill would add a new provision to federal statutes governing the VA’s Loan Guaranty program to impose three requirements on all non-cash-out refinance loans before the loans could become eligible for VA guarantees. This Legal Update discusses these restrictions, which stem from the perceived negative effects of frequent refinancings of VA-guaranteed loans on veteran borrowers and Ginnie Mae securities holders.

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