Government officials have taken at least two lenders out of one of the more favorable finance programs for VA loans in an effort to curb the practice of “loan churning” that allegedly has been hurting veterans and putting the benefit at risk.

NewDay USA has been restricted, at least temporarily, from pools of money that are open for other lenders through Ginnie Mae, a government corporation that oversees the process for ensuring the success of the government’s mortgage-backed securities guarantee. Ginnie Mae took similar action this week against Nations Lending, according to Bloomberg.com.

NewDay USA VA loans will still be placed in specialized loan pools under Ginnie Mae, but won’t be mingled with other lenders, so the terms won’t be as good for borrowers. Thus, one mortgage banking industry source said, the action may limit NewDay USA’s ability to make loans to veterans with low credit scores; Nations Lending faces a similar fate, per Bloomberg.

“Our record is absolutely clear. NewDay does not churn veteran loans,” the company said in a statement to Military Times. “We have been an outspoken supporter of measures to end the shameful practice of loan churning.”

A response was not immediately available from Nations Lending. However, the lender’s chief administrative officer provided a statement to Bloomberg noting that the company recently underwent a routine VA examination, and the company doesn’t have issues with its VA loan program.

About 99 percent of VA loans are secured into a Ginnie Mae mortgage-backed security and then sold in the secondary mortgage market with a full faith and credit guaranty from Ginnie Mae, which is also responsible for policing their program to protect against loss.

The “churn“ begins when VA loan users are targeted with an onslaught of mortgage-refinance solicitations, often shortly after they’ve closed on a home loan. Some borrowers have been convinced to refinance their loan multiple times in a year, often with little or no financial benefit. Fees attached to the deals increase the overall loan amount each time it’s refinanced.

These rapid refinances remove the loan from the Ginnie Mae pool, along with the return expected from monthly principal and interest payments. Thus, investors are less willing to pay a premium price for Ginnie Mae bonds. As bond prices fall, interest rates to borrowers increase.

Ginnie Mae is continuing to take steps to ensure that loans with refinance speeds that are higher than the market norm aren’t mingled with its main programs, said Michael Bright, Ginnie Mae executive vice president and chief operating officer, in a statement provided to Military Times. “This ensures the integrity of our bonds, and strengthens the support they provide to veterans and other homebuyers.”

“Roughly one out of four customers of NewDay says they have been rejected by major banks while applying for the VA benefits they are entitled to receive,” per NewDay’s statement. “When veterans cannot access their VA financial benefits, they are forced to pay much higher credit card interest rates or use extremely high interest payday lenders.”

In February, Ginnie Mae put nine lenders on notice that they’d be removed from the primary finance program for VA loans if they didn’t stop the alleged loan churning practices. Information was not available from Ginnie Mae about whether punitive action has been taken against any of the other seven lenders. The lenders had varying deadlines for responding to the initial Ginnie Mae notification.