Many borrowers have sterling credit, but fall outside the narrow box that defines “traditional” mortgage customers. Now a new program is giving those borrowers a choice
One of the main problems with traditional mortgages is that they’re best for people who fit into a very narrow box. Prospective homebuyers who fall outside that box – even ones with good credit and a sterling history of repayment – might find it hard to get a loan. Now a leader in the non-prime space has introduced an innovative product to help those customers.
Citadel Servicing Corp. (CSC) has announced a new one-month bank statement program. The new program will let a self-employed borrower qualify for a mortgage based on just one month’s bank statement.
“This is probably the most innovative way to put a borrower in a home if they’re self-employed and take full advantage of the US tax code, and they show they’re responsible with paying their bills,” said Will Fisher, CSC’s senior vice president of national sales and marketing. “If you’re a solid, self-employed borrower with good credit – you pay your bills on time, but maybe you don’t fit into traditional income qualification rules – then this qualification type is designed for you.”
The new product, however, isn’t for everyone. The one-month bank statement program is geared toward borrowers with a consistent history of financial responsibility.
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“This is geared toward borrowers with very good credit,” Fisher said. “The minimum score is 700, and additionally there can be no credit events in the last five years – no charge-offs, collections, or tax liens. On the bank statement, there can be no NSF fees.”
The program is geared toward the purchase or refinance of an owner-occupied home. It’s not limited for cash-in-hand for a refinance, to a maximum loan amount of $3 million. Maximum loan-to-value for the program is 70% for purchase loans and 65% for refinances.
Fisher said that although the borrower only had to show one month’s bank statement, CSC felt that the loan’s strict credit requirements would match the program with the right customers.
“Why do we like this loan? Because as far as ability to repay goes, it shows that the borrower, due to their stellar credit history, has a proven history of ability and willingness to repay –the borrower will be attesting to their income,” Fisher said. “That gives us a lot of confidence.”
He said that the loan’s 70% LTV also meant the borrower would have a vested interest in keeping the loan current.
“People talk about skin in the game – a 30% down payment is quite a bit of skin in the game,” Fisher said. “And if they do have a job loss or other life event that could cause them to default, it gives them room to sell the house, take their equity, and purchase again when the time is right.”
And while this program does drastically cut the documentation necessary for a loan, it’s not a pre-crisis-style subprime program, Fisher said.
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“We think that some of the sins of the past were allowing programs much more aggressive than this, with no money down – and quite frankly, they went off the rails,” he said. “We service all our loans here at Citadel, so we’re fairly comfortable with certain loan-to-values and their performance, when appropriately deployed to the right borrowing base. We don’t see it as being too aggressive.”
And the company has had great success with innovative programs before. The latest one, he said, fills a need that other programs in the mortgage space aren’t filling.
“We don’t need to do this program – our other programs are very innovative already – but we see an underserved need in the marketplace for a specific borrower who’s proven to make payments, so we’re extending this opportunity,” Fisher said.
For more information about the one-month bank statement program, click here.
