Ginnie Mae overlooked lenders’ violations, default rates: investigation

No less than 36 lenders have been able to skirt their way around violations or get away with unsafe banking practices in the past few years while holding onto their endorsements by the Government National Mortgage Association, a new joint investigation by the Washington Post and the Center for Public Integrity has revealed. Also known as Ginnie Mae, the lesser-known government-sponsored loan giant that insures mortgage-backed securities, the company was once a relatively small player on the mortgage market compared with siblings Fannie Mae and Freddie Mac. But as small lenders ran out of places to turn for financing in the wake of the housing crash, Ginnie Mae catapulted to the forefront of the mortgage market, bringing dozens of troubled, and sometimes reckless, lenders along for the ride. Sixteen Ginnie Mae-approved lenders have been cited by federal regulators for violations like unsafe banking practices or insufficient capital, and many others have been fined, sanctioned, or have Federal Housing Administration loans that are defaulting at unusually high rates, according to the investigation. Long Island-based Lend America, which just this month ceased operations after losing its FHA-approved status, received Ginnie Mae’s endorsement last June despite retaining a top executive convicted of mortgage fraud and being involved in a civil suit that alleged the company was falsifying loan documents. Ginnie Mae turned nearly all of Lend America’s 6,500 new loans into securities during the past 18 months.