79–006 

115TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 2d Session 115–983 

PROTECT AFFORDABLE MORTGAGES FOR VETERANS ACT 

OF 2018 

SEPTEMBER 26, 2018.—Committed to the Committee of the Whole House on the 

State of the Union and ordered to be printed 

Mr. HENSARLING, from the Committee on Financial Services, 

submitted the following 

R E P O R T 

[To accompany H.R. 6737] 

The Committee on Financial Services, to whom was referred the 

bill (H.R. 6737) to amend the Economic Growth, Regulatory Relief, 

and Consumer Protection Act to clarify seasoning requirements for 

certain refinanced mortgage loans, and for other purposes, having 

considered the same, report favorably thereon without amendment 

and recommend that the bill do pass. 

PURPOSE AND SUMMARY

On September 7, 2018, Rep. Lee Zeldin introduced H.R. 6737, the 

‘‘Protect Affordable Mortgages for Veterans Act of 2018.’’ H.R. 6737 

would amend section 306(g) of the National Housing Act (12 U.S.C. 

1721(g)(1)), as amended to provide a technical fix so that recently 

executed loans refinanced by the U.S. Department of Veterans Affairs (VA) Home Loans can remain eligible for pooling in the Government National Mortgage Association (Ginnie Mae) securities. 

BACKGROUND AND NEED FOR LEGISLATION

The goal of H.R. 6737 is to provide a technical correction that 

will allow previously executed loans refinanced by VA Home Loans 

to remain eligible for pooling into securities issued by the Government National Mortgage Association (‘‘GNMA’’ or ‘‘Ginnie Mae’’). 

In recent years, the proportion of VA guaranteed loans in Ginnie 

Mae pools has grown, and in 2017, Ginnie Mae noted unusually 

fast prepayment speeds in its securities. Ginnie Mae’s internal research and work with the VA shows a market for VA loans that 

is somewhat saturated with lenders and brokers making dozens of 

calls and sending dozens of letters to veterans in an attempt to get 


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these homeowners to refinance their mortgages. Some lenders in 

the VA Home Loan space engaged 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. During these instances, the borrower may be left no better 

off and, in some cases, worse off in the long term. 

In response to these market dynamics, Ginnie Mae, in consultation with VA, decided in late 2016, that the most expeditious approach to curbing abuse in the short-term was to change its program standards for pooling streamline refinanced loans. Additionally, in December 2017, Ginnie Mae published APM 17–06, which 

instituted seasoning requirements on streamlined and cash-out refinances (encompassing loans from the Federal Housing Administration, VA, and U.S. Department of Agriculture). 

On May 24, 2018, President Trump signed into law S. 2155, the 

‘‘Economic Growth, Regulatory Relief, and Consumer Protection 

Act’’ (Pub. Law 115–174]. Section 309 of EGRRCPA added new requirements that were specific to VA refinances. Section 309 was effective upon enactment. Section 309(a) provides new requirements 

that must be met for refinanced Veterans Affairs loans to obtain 

a guarantee and be eligible for guaranteed timely principal and interest payments by Ginnie Mae. Those requirements include: 

1. Fee recoupment within 36 months 

2. Net tangible benefits to the borrower, measured as a decrease of at least 50 basis points in the interest rate in the 

case of a fixed-to-fixed refinance, and at least 200 basis points 

in the interest rate in the case of a fixed-to-floating refinance; 

and 

3. Seasoning of the initial loan for at least 210 days, calculated from the date of the first payment made by the borrower to the note date of the refinanced loan (at least six 

monthly payments must also be made by the borrower). 

To implement Section 309, Ginnie Mae revised its Mortgage 

Backed Securities (MBS) pooling eligibility requirements and 

amended its MBS Guide to specify how Ginnie MBS are affected 

by the EGRRCPA. Ginnie Mae delineated that securities with an 

issuance date of May 1, 2018 or earlier were unaffected even if they 

do not meet the condition of the EGRRCPA, and Ginnie Mae securities with an issuance dated June 1, 2018 or later would comply 

with the new pooling requirements and conditions of the Act. As 

a result, 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 31, 2018 date of Ginnie’s 

notice regarding the new seasoning requirements. 

Some VA loans that had been closed, but not yet securitized by 

May 24, 2018, the day that S. 2155 became law, were prevented 

from being eligible for GNMA securitization. Approximately 2,500 

loans are designated as ‘‘orphan’’ loans when they were eligible for 

GNMA securitization at the time of closing but lost such eligibility 

after S. 2155 was enacted. 

As a result of the changes, some lenders now hold VA-guaranteed 

refinances that are not eligible for Ginnie Mae pooling, despite the 

fact that the loans were eligible at the time of closing. For some 

lenders, this situation has the potential to create liquidity strains. 

H.R. 6737 appropriately strikes the Ginnie Mae seasoning proviVerDate Sep 11 2014 01:16 Oct 02, 2018 Jkt 079006 PO 00000 Frm 00002 Fmt 6659 Sfmt 6602 E:\HR\OC\HR983.XXX HR983

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sion to address the orphaning of existing loans and prevent future 

problems regarding re-performing loans, loss mitigation activities, 

and cash-out refinances, while doing nothing to weaken important 

anti-churning requirements. 

Nothing in this bill eliminates the VA loan seasoning and antichurning protections. While the language in H.R. 6737 removes 

Ginnie Mae’s seasoning provision for its MBS, this was a duplicative and unnecessary requirement for Ginnie Mae. Section 309 of 

S. 2155 also contained similar loan seasoning requirements for 

loans originated through the VA, which Ginnie pools into its MBS. 

This provision of law will still be in effect and veterans will continue to have protection against loan churning. 

H.R. 6737 addresses concerns raised by Senators Thom Tillis (R– 

NC) and Elizabeth Warren (D–MA). Senators Tillis and Warren 

sent a letter to the Department of Housing and Urban Development on June 11, 2018 that stated, ‘’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 Mae’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.’’ The legislation ensures that certain loans, currently ineligible for GNMA 

securitization at closing, will continue to be eligible. 

HEARINGS

No hearings were held on H.R. 6737. 

COMMITTEE CONSIDERATION

The Committee on Financial Services met in open session on 

September 13, 2018, and ordered H.R. 6737 to be reported favorably to the House, without amendment, by a recorded vote of 49 

yeas to 0 nays (Record vote no. FC–202), a quorum being present. 

COMMITTEE VOTES

Clause 3(b) of rule XIII of the Rules of the House of Representatives requires the Committee to list the record votes on the motion 

to report legislation and amendments thereto. The sole recorded 

vote was on a motion by Chairman Hensarling to report the bill favorably to the House without amendment. The motion was agreed 

to by a recorded vote of 49 yeas to 0 nays (Record vote no. FC–202), 

a quorum being present. 


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COMMITTEE OVERSIGHT FINDINGS

Pursuant to clause 3(c)(1) of rule XIII of the Rules of the House 

of Representatives, the findings and recommendations of the Committee based on oversight activities under clause 2(b)(1) of rule X 

of the Rules of the House of Representatives, are incorporated in 

the descriptive portions of this report. 

PERFORMANCE GOALS AND OBJECTIVES

With respect to clause 3(c)(4) of rule XIII of the Rules of the 

House of Representatives, the Committee advises that the bill contains no measure that authorizes funding, so no statement of general performance goals and objectives for which any measure authorizes funding is required. 

NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, AND TAX

EXPENDITURES

The Committee has not received an estimate of new budget authority contained in the cost estimate prepared by the Director of 

the Congressional Budget Office pursuant to Sec. 402 of the Congressional Budget Act of 1974. In compliance with clause 3(c)(2) of 

rule XIII of the Rules of the House, the Committee opines that 

H.R. 6737 will not establish any new budget or entitlement authority or create any tax expenditures. 

CONGRESSIONAL BUDGET OFFICE ESTIMATES

The cost estimate prepared by the Director of the Congressional 

Budget Office pursuant to Sec. 402 of the Congressional Budget Act 

of 1974 was not submitted timely to the Committee. 

FEDERAL MANDATES STATEMENT

This information is provided in accordance with section 423 of 

the Unfunded Mandates Reform Act of 1995. 

The Committee has determined that the bill does not contain 

Federal mandates on the private sector. The Committee has determined that the bill does not impose a Federal intergovernmental 

mandate on State, local, or tribal governments. 

ADVISORY COMMITTEE STATEMENT

No advisory committees within the meaning of section 5(b) of the 

Federal Advisory Committee Act were created by this legislation. 

APPLICABILITY TO LEGISLATIVE BRANCH

The Committee finds that the legislation does not relate to the 

terms and conditions of employment or access to public services or 

accommodations within the meaning of the section 102(b)(3) of the 

Congressional Accountability Act. 

EARMARK IDENTIFICATION

With respect to clause 9 of rule XXI of the Rules of the House 

of Representatives, the Committee has carefully reviewed the provisions of the bill and states that the provisions of the bill do not 


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contain any congressional earmarks, limited tax benefits, or limited 

tariff benefits within the meaning of the rule. 

DUPLICATION OF FEDERAL PROGRAMS

In compliance with clause 3(c)(5) of rule XIII of the Rules of the 

House of Representatives, the Committee states that no provision 

of the bill establishes or reauthorizes: (1) a program of the Federal 

Government known to be duplicative of another Federal program; 

(2) a program included in any report from the Government Accountability Office to Congress pursuant to section 21 of Public 

Law 111–139; or (3) a program related to a program identified in 

the most recent Catalog of Federal Domestic Assistance, published 

pursuant to the Federal Program Information Act (Pub. L. No. 95– 

220, as amended by Pub. L. No. 98–169). 

DISCLOSURE OF DIRECTED RULEMAKING

Pursuant to section 3(i) of H. Res. 5, (115th Congress), the following statement is made concerning directed rule makings: The 

Committee estimates that the bill requires no directed rule makings within the meaning of such section. 

SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION

Section 1. Short title 

This section titles the bill as the ‘‘Protect Affordable Mortgages 

for Veterans Act of 2018.’’ 

Section 2. Requirements for Ginnie Mae guarantee of securities 

Section 2 amends paragraph (1) of section 306(g) of the National 

Housing Act (12 U.S.C. 1721(g)(1)) by striking the second sentence 

(as added by section 309(b) of Public Law 115–174). 

CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

In compliance with clause 3(e) of rule XIII of the Rules of the 

House of Representatives, changes in existing law made by the bill, 

as reported, are shown as follows (existing law proposed to be omitted is enclosed in black brackets, new matter is printed in italic, 

and existing law in which no change is proposed is shown in 

roman): 

CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

In compliance with clause 3(e) of rule XIII of the Rules of the 

House of Representatives, changes in existing law made by the bill, 

as reported, are shown as follows (existing law proposed to be omitted is enclosed in black brackets and existing law in which no 

change is proposed is shown in roman): 

NATIONAL HOUSING ACT 

* * * * * * * 

TITLE III—NATIONAL MORTGAGE ASSOCIATIONS 

* * * * * * * 


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MANAGEMENT AND LIQUIDATION FUNCTIONS—GOVERNMENT

NATIONAL MORTGAGE ASSOCIATION

SEC. 306. (a) To carry out the purposes set forth in paragraph (c) 

of section 301, the Association is authorized and directed, as of the 

close of the cutoff date determined by the Association pursuant to 

section 303(d) of this title, to establish separate accountability for 

all of its assets and liabilities (exclusive of capital, surplus, surplus 

reserves, and undistributed earnings to be evidenced by preferred 

stock as provided in section 303(d) hereof, but inclusive of all rights 

and obligations under any outstanding contracts), and to maintain 

such separate accountability for the management and orderly liquidation of such assets and liabilities as provided in this section. 

(b) For the purposes of this section and to assure that, to the 

maximum extent, and as rapidly as possible, private financing will 

be substituted for Treasury borrowings otherwise required to carry 

mortgages held under the aforesaid separate accountability, the Association is authorized to issue, upon the approval of the Secretary 

of the Treasury, and have outstanding at any one time obligations 

having such maturities and bearing such rate or rates of interest 

as may be determined by the Association with the approval of the 

Secretary of the Treasury, to be redeemable at the option, of the 

Association before maturity in such manner as may be stipulated 

in such obligations; but in no event shall any such obligations be 

issued if, at the time of such proposed issuance, and as a consequence thereof, the resulting aggregate amount of its outstanding 

obligations under this subsection would exceed the amount of the 

Association’s ownership under the aforesaid separate accountability, free from any liens or encumbrances, of cash, mortgages, 

and obligations of the United States or guaranteed thereby, or obligations, participations, or other instruments which are lawful investments for fiduciary, trust, or public funds. The proceeds of any 

private financing effected under this subsection shall be paid to the 

Secretary of the Treasury in reduction of the indebtedness of the 

Association to the Secretary of the Treasury under the aforesaid 

separate accountability. The Association shall insert appropriate 

language in all of its obligations issued under this subsection clearly indicating that such obligations, together with the interest thereon, are not guaranteed by the United States and do not constitute 

a debt or obligation of the United States or of any agency or instrumentality thereof other than the Association. The Association is authorized to purchase in the open market any of its obligations outstanding under this subsection at any time and at any price. 

(c) No mortgage shall be purchased by the Association in its operations under this section except pursuant to and in accordance 

with the terms of a contract or commitment to purchase the same 

made prior to the cutoff date provided for in section 303(d), which 

contract or commitment became a part of the aforesaid separate accountability, and the total amount of mortgages and commitments 

held by the Association under this section shall not, in any event, 

exceed $3,350,000,000: Provided, That such maximum amount 

shall be progressively reduced by the amount of cash realizations 

on account of principal of mortgages held under the aforesaid separate accountability and by cancellation of any commitments to purchase mortgages thereunder, as reflected by the books of the AssoVerDate Sep 11 2014 01:16 Oct 02, 2018 Jkt 079006 PO 00000 Frm 00007 Fmt 6659 Sfmt 6602 E:\HR\OC\HR983.XXX HR983

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ciation, with the objective that the entire aforesaid maximum 

amount shall be eliminated with the orderly liquidation of all mortgages held under the aforesaid separate accountability: And provided further, That nothing in this subsection shall preclude the 

Association from granting such usual and customary increases in 

the amounts of outstanding commitments (resulting from increased 

costs or otherwise) as have theretofore been covered by like increases in commitments granted by the agencies of the Federal 

Government insuring or guaranteeing the mortgages. There shall 

be excluded from the total amounts set forth in this subsection the 

amounts of any mortgages which, subsequent to May 31, 1954, are 

transferred by law to the Association and held under the aforesaid 

separate accountability. 

(d) The Association may issue to the Secretary of the Treasury 

its obligations in an amount outstanding at any one time sufficient 

to enable the Association to carry out it functions under this section, such obligations to mature not more than five years from their 

respective dates of issue, to be redeemable at the option of the Association before maturity in such manner as may be stipulated in 

such obligations. Each such obligation shall bear interest at a rate 

determined by the Secretary of the Treasury, taking into consideration the current average rate on outstanding marketable obligations of the United States as of the last day of the month preceding 

the issuance of the obligation of the Association. The Secretary of 

the Treasury is authorized to purchase any obligations of the Association to be issued under this section, and for such purpose the 

Secretary of the Treasury is authorized to use as a public debt 

transaction the proceeds from the sale of any securities issued 

under chapter 31 of title 31, United States Code, and the purposes 

for which securities may be issued under chapter 31 of title 31, 

United States Code, are extended to include any purchases of the 

Association’s obligations hereunder. 

(e) Notwithstanding any other provision of law, the Association 

is authorized, under the aforesaid separate accountability, to make 

commitments to purchase, and to purchase, service, or sell any obligations offered to it by the Secretary of Housing and Urban Development, or any mortgages covering residential property offered to 

it by any Federal instrumentality, or the head thereof. There shall 

be excluded from the total amounts set forth in subsetion (c) the 

amounts of any obligations or mortgages purchased by the Association pursuant to this subsection. 

(f) Notwithstanding any of the provisions of this Act or of any 

other law, an amount equal to the net decrease for the preceding 

fiscal year in the aggregate principal amount of all mortgages 

owned by the Association under this section shall, as of July 1 of 

each of the years 1961 through 1964, be transferred to and merged 

with the authority provided under section 305(a), and the amount 

of such authority as specified in section 305(c) shall be increased 

by an amount so transferred. 

(g)(1) The Association is authorized, upon such terms and conditions as it may deem appropriate, to guarantee the timely payment 

of principal of and interest on such trust certificates or other securities as shall (i) be issued by the corporation under section 304(d), 

or by any other issuer approved for the purposes of this subsection 

by the Association, and (ii) be based on and backed by a trust or 


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pool composed of mortgages which are insured under the National 

Housing Act, or which are insured or guaranteed under the Servicemen’s Readjustment Act of 1944, title V of the Housing Act of 

1949, or chapter 37 of title 38, United States Code; or guaranteed 

under section 184 of the Housing and Community Development Act 

of 1992. øThe Association may not guarantee the timely payment 

of principal and interest on a security that is backed by a mortgage 

insured or guaranteed under chapter 37 of title 38, United States 

Code, and that was refinanced until the later of the date that is 

210 days after the date on which the first monthly payment is 

made on the mortgage being refinanced and the date on which 6 

full monthly payments have been made on the mortgage being refinanced.¿ The Association shall collect from the issuer a reasonable 

fee for any guaranty under this subsection and shall make such 

charges as it may determine to be reasonable for the analysis of 

any trust or other security arrangement proposed by the issuer. In 

the event the issuer is unable to make any payment of principal 

of or interest on any security guaranteed under this subsection, the 

Association shall make such payment as and when due in cash, 

and thereupon shall be subrogated fully to the rights satisfied by 

such payment. In any case in which (I) Federal law requires the 

reduction of the interest rate on any mortgage backing a security 

guaranteed under this subsection, (II) the mortgagor under the 

mortgage is a person in the military service, and (III) the issuer 

of such security fails to receive from the mortgagor the full amount 

of interest payment due, the Association may make payments of interest on the security in amounts not exceeding the difference between the amount payable under the interest rate on the mortgage 

and the amount of interest actually paid by the mortgagor. The Association is hereby empowered, in connection with any guaranty 

under this subsection, whether before or after any default, to provide by contract with the issuer for the extinguishment, upon default by the issuer, of any redemption, equitable, legal, or other 

right, title, or interest of the issuer in any mortgage or mortgages 

constituting the trust or pool against which the guaranteed securities are issued; and with respect to any issue of guaranteed securities, in the event of default and pursuant otherwise to the terms 

of the contract, the mortgages that constitute such trust or pool 

shall become the absolute property of the Association subject only 

to the unsatisfied rights of the holders of the securities based on 

and backed by such trust or pool. No State or local law, and no 

Federal law (except Federal law enacted expressly in limitation of 

this subsection after the effective date of this sentence), shall preclude or limit the exercise by the Association of (A) its power to 

contract with the issuer on the terms stated in the preceding sentence, (B) its rights to enforce any such contract with the issuer, 

or (C) its ownership rights, as provided in the preceding sentence, 

in the mortgages constituting the trust or pool against which the 

guaranteed securities are issued. The full faith and credit of the 

United States is pledged to the payment of all amounts which may 

be required to be paid under any guaranty under this subsection. 

There shall be excluded from the total amounts set forth in subsection (c) the amounts of any mortgages acquired by the Association as a result of its operations under this subsection. 


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(2) Notwithstanding any other provision of law and subject only 

to the absence of qualified requests for guarantees, to the authority 

provided in this subsection, and to the extent of or in such amounts 

as any funding limitation approved in appropriation Acts, the Association shall enter into commitments to issue guarantees under 

this subsection in an aggregate amount of $110,000,000,000 during 

fiscal year 1996. There are authorized to be appropriated to cover 

the costs (as such term is defined in section 502 of the Congressional Budget Act of 1974) of guarantees issued under this Act by 

the Association such sums as may be necessary for fiscal year 1996. 

(3)(A) No fee or charge in excess of 6 basis points may be assessed or collected by the United States (including any executive 

department, agency, or independent establishment of the United 

States) on or with regard to any guaranty of the timely payment 

of principal or interest on securities or notes based on or backed 

by mortgages that are secured by 1- to 4-family dwellings and (i) 

insured by the Federal Housing Administration under title II of the 

National Housing Act; or (ii) insured or guaranteed under the Serviceman’s Readjustment Act of 1944, chapter 37 of title 38, United 

States Code, or title V of the Housing Act of 1949. 

(B) The fees charged for the guaranty of securities or on notes 

based on or backed by mortgages not referred to in subparagraph 

(A), as authorized by other provisions of law, shall be set by the 

Association at a level not more than necessary to create reserves 

sufficient to meet anticipated claims based upon actuarial analysis, 

and for no other purpose. 

(C) Fees or charges for the issuance of commitments or miscellaneous administrative fees of the Association shall not be on a competitive auction basis and shall remain at the level set for such fees 

or charges as of September 1, 1985, except that such fees or 

charges may be increased if reasonably related to the cost of administering the program, and for no other purpose. 

(D) Not less than 90 days before increasing any fee or charge 

under subparagraph (B) or (C), the Secretary shall submit to the 

Congress a certification that such increase is solely for the purpose 

specified in such subparagraph. 

(E)(i) Notwithstanding subparagraphs (A) through (D), fees 

charged for the guarantee of, or commitment to guarantee, 

multiclass securities backed by a trust or pool of securities or notes 

guaranteed by the Association under this subsection, and other related fees shall be charged by the Association in an amount the Association deems appropriate. The Association shall take such action 

as may be necessary to reasonably assure that such portion of the 

benefit, resulting from the Association’s multiclass securities program, as the Association determines is appropriate accrues to mortgagors who execute eligible mortgages after the date of the enactment of this subparagraph. 

(ii) The Association shall provide for the initial implementation 

of the program for which fees are charged under the first sentence 

of clause (i) by notice published in the Federal Register. The notice 

shall be effective upon publication and shall provide an opportunity 

for public comment. Not later than 12 months after publication of 

the notice, the Association shall issue regulations for such program 

based on the notice, comments received, and the experience of the 

Association in carrying out the program during such period. 


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(iii) The Association shall consult with persons or entities in such 

manner as the Association deems appropriate to ensure the efficient commencement and operation of the multiclass securities program. 

(iv) No State or local law, and no Federal law (except Federal law 

enacted expressly in limitation of this clause after the effective 

date of this subparagraph) shall preclude or limit the exercise by 

the Association of its power to contract with persons or entities, 

and its rights to enforce such contracts, for the purpose of ensuring 

the efficient commencement and continued operation of the 

multiclass securities program. 

* * * * * * * 

Æ 


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