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Preying on Veterans, Mortgage Brokers Could Hurt Big Bond Market

  • Ginnie Mae concerned brokers are urging unneeded refinances
  • Goldman and Pimco said to warn about impacts on Ginnie bonds

Photographer: Chris Rank/Bloomberg

Mortgage brokers and lenders appear to be skirting new rules that are meant to protect U.S. military veterans from abusive loan practices.

In September, there was a clear sign that someone might be preying on homeowners. Roughly 5,000 veterans and active military members took cash out of their homes by refinancing loans, according to estimates from Ginnie Mae, a government-owned corporation whose job is making mortgages more affordable. The figure startled Ginnie officials because with interest rates rising, they expected about 50 borrowers to pull equity from their homes.