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GMAC Testing Rewards with Some Veterans

By Bonnie Sinnock  |  National Mortgage News  |  October 17, 2011
This article appeared in the October issue of National Mortgage News.

GMAC Mortgage, Fort Washington, Pa., is promising certain VA borrowers who are underwater on their loans eventual cash rewards if they make all their mortgage payments on time and could expand the offer more broadly in the future.

"It's part of our efforts to preserve homeownership efforts everywhere," GMAC spokesman Jim Olecki told this publication.

"This is a pilot," he added. "Depending on how the pilot goes, it will be re-evaluated at a later date and possibly expanded beyond VA loans." When asked why the company was starting with VA borrowers in particular, Olecki cited their service to the country.

GMAC is offering the payment rewards in conjunction with Loan Value Group, Rumson, N.J., which has been setting up the reward program for several market participants, including mortgage insurer PMI.

GMAC said in a press release that the effort involves a voluntary pilot program for 4,000 military borrowers and their families who have obtained streamlined refinance mortgages guaranteed through the Veterans Administration.

The reward has "never been specifically applied to veterans before," Frank Pallotta, executive vice president at LVG, told this publication. "This is the first time."

The rewards program is a financial instrument separate and distinct from the mortgage note that does not violate the terms of any securitization agreement so the fact the VA loans are in Ginnie Mae pools is not a concern, Pallotta said. VA borrowers are known for having relatively strong payment histories even though their loan-to-value ratios can be relatively high compared to the larger market.

When asked if the program was in response to any change in that, Olecki said, "I don't think there's anything that raised a flag to us. We'll monitor the performance of this pilot and re-evaluate the program at a later date based on that."