How to use the 3 month bank statement program and new multifamily financing

Speaker1: [00:00:00] Hello, everyone, and welcome to today's webinar with Acra lending, where brokers will be learning how to use three month bank statement programs and new multifamily financing products. Im Richard Torne, a US news editor of Mortgage Professional America, and I'll be your host today for what promises to be an exciting look at how brokers can capture more business by learning how to successfully structure and market three month bank statement files, as well as delving into the commercial space with multifamily financing. Before we begin in earnest, a few housekeeping notes to run through. If you need any technical support during this webinar, please use the chat box as we have a team on hand to help you with any issues. We would also love to hear your feedback on the poll questions, so be sure to participate when prompted. Last but not least, this webinar recording will be made available to all SMDs after the event. So if you have any distractions during the live feed, don't worry us and get another opportunity to watch it at the end of the presentation. There will also be a question and answer session, so be sure to type any questions you have into the corresponding Q&A box. Remember, the more feedback we get, the more we know about the issues you're facing with clients, so please engage with us today using the Q&A function. Now back to the subject matter at hand and Anchor Landing's view that brokers could be missing out on business by ignoring its three month bank statement program. And the reason for that is that it's much simpler to generate than twelve or twenty four month bank statement programs. It requires less documentation, has simpler guidelines and accepts transfers for qualifying income. And if that wasn't enough, there's even more of today as we'll be looking at the commercial sector with that new product. Multifamily financing designed specifically to finance apartment buildings of between five to twenty nine units. Borrowers will be able to qualify strictly off a property debt service coverage ratio instead of having to qualify with full tax return and income documents. In fact, this program is ideal for investors with complicated tax returns. With all that said, show us how to capture more business by learning how to master these products. I'm delighted to introduce Joe Tomasello, SVP Regional Sales Manager for Lending. Joe has been with the company for just over five years, starting as an account executive before being quickly promoted to area sales manager and finally SVP Regional Sales Manager, skilled at building relationships and dynamic networks. Joe manages one of the largest producing sales divisions in non-combat aircraft, taking great pride in guiding and mentoring his team to best serve their broker partners. So Joe, over to you.

Speaker2: [00:02:48] Ok, thanks, Richard, and thanks for having me. It's it's great to be here. So today we're going to discuss two of our programs that are in very high demand right now. The first being our three month banks program. We're going to talk about how you can utilize this program to expand your offerings and to capture more business. And then secondly, we're going to cover our our new multifamily product, which is designed to finance apartment buildings up to twenty nine units and to qualify solely off DSCR. Ok, so to start off, let's jump into our three month big salmon program, and before I dive into how the program works, I want to go over a few bullet points with you to give you an idea of what the program can do. So first number one is we can go up to three million dollars. Loan amounts in this program will go up to seventy five percent LTV on a purchase and we'll go up to 70 percent LTV on a refinance. It is for self-employed borrowers only. Borrowers need to be self-employed for a minimum of two years in order to qualify for the program. We do require a minimum six seventy five FICO Score. It's for owner occupied transactions only. We do have options for first time homebuyers in this program, and the big number one selling point for this program is that transfers can be used for qualifying income, and we're going to talk a little bit more about that a little bit. This the three month bank statement program and is available on all owner occupied transactions.

Speaker2: [00:04:15] So we could use it for a purchase. We could use it for a rate and term refinance, and we can also use it for cash out as well. And on cash out, we don't we do not have a max cash in hand at LTVs, at 60 percent or below property types. It's available on all single families condos. It's also available for non-harmful condos and we can also use it for townhomes as well. We do have interest only options available in the three month bank statement program, and we have two Io options that you can utilize. The first is a five year IO, which is on a 30 year term. And then secondly, we also have a 10 year IO that's on a 40 year term, which are both available. And then lastly, we also offer linear paid comp, which is available up to two and a half percent. Ok, so let's talk about real quick the difference between our three month bank statement program and your traditional twelve and twenty four month bank statement programs. If I if I had to guess, I would imagine the majority of the people on this call have some experience utilizing either a twelve or twenty four month bank statement program. And in those programs, typically deposits that are being used for qualifying income must be coming from the borrower's business source. So in other words, if a borrower has deposits coming into an account that isn't coming from the business, typically you can't use those deposits as qualifying income. And a lot of times underwriters will condition you to source some deposits to show proof that they are coming from the borrower's business. And then lastly, typically in these programs, transfers are not allowed. It's typically just looking at deposits that are coming into that account for what you can use for qualifying income. Now, compare that to our three month bank statement program. It's really the exact opposite. Ok, number one is deposits do not need to necessarily come from the borrower's business. In fact, we don't really care where the deposits are coming from. Secondly, we can use transfers coming into the account that you're using to qualify as qualifying income. Ok, so I always like to use the following example. You can have a borrower that has zero deposits in month one. They have zero deposits in month two and then a month three. They have a big one lump sum, ninety thousand dollars transfer coming in. And then boom, you've got a qualifying income of thirty thousand. It's that simple. You don't have to source that transfer. We're not worried about where it came from. We just want to see the cash flow coming into the account in order to use it as qualifying income. So this program is great for borrowers who are cash heavy, but maybe they have trouble showing income deposits coming into one account. A lot of times you'll have borrowers that maybe have a lot of cash sitting in savings, or maybe they have it in a brokerage account. All they have to do is simply just make one big lump sum transfer into their personal checking account that you want to use to qualify with. And so we'll we'll be able to use that in your three month average for qualifying income. Ok, so let's talk about a little bit who to market this program to and who exactly is for? Ok, so number one is just like most all bank statement programs, this program is for self-employed borrowers only, and the borrower must be self-employed for a minimum of two years in order to qualify for it. Now, to show proof of this, typically what we'll use is either articles of incorporation. If the borrower has an entity set up, or if you have a borrower who doesn't have an entity set up, maybe there are a sole proprietor, or maybe they're on it to ninety nine. We can have their CPA provide a letter to verify how long that they've been filing self-employed income for, and we just require a minimum of two years to be eligible for the program. Secondly, this program is great for any self-employed borrower that cannot qualify for twelve or twenty four months bank statements for whatever reason. So as soon as you have a borrower that maybe just doesn't meet the DTI requirements when looking at their twelve or twenty four month deposit average, their next best option is going to be this three month bank statement program. Ok, and the three month Bank Saver program can also help you save a lot of deals that maybe you submit and initially try to qualify with 12 months bank statements. And if that DTI number comes up a little bit short, you can swap it over to the three month Banks Saver program to help save that deal. Again, it's great for borrowers who are cash heavy, but maybe they have trouble showing consistent deposits. It's great for borrowers who use multiple bank accounts for the same business, and maybe you can't qualify with one account and you need to use both the three months. You simply just have the borrower transfer funds from one account over to the other, and then you can use that for qualifying income. It's also great for borrowers who maybe have a business that is just picking back up again, and maybe they need to qualify off the most recent months instead of looking at the full past year or two years. And then lastly, the best part about this program is it's so easy to process. I mean, it's all we need is three bank statements compared to having to go get twelve or twenty four months of statements. And for all of us in the industry, we all know that the last document documentation that's required the better and to also the happier our borrowers are throughout the process as well. Ok, now it's time for some poll questions, so Richard, I'll pass it back over to you,

Speaker1: [00:09:40] Right, yes. We've got a series of questions here, and the first one that we've got here is transfers are allowed as qualifying income in the three month bank statement program. Is that true or false? We'll give you a little time to to answer and then we'll we can we can submit that now. We're getting some answers coming through now. Ok. I think that's. People are still thinking about their way out. Ok, so Joe, up to you? True or false?

Speaker2: [00:10:37] Ok, so the answer to this, of course, is true. All right. And this is the biggest selling point to the three month bank stamp program is that we can use transfers coming in. So remember when you're working with borrowers and if they have a big lump sum of cash somewhere, you can coach them on how to structure this, this particular file. All they need to do is make one big transfer into the account that you want to use to qualify with, and that will be allowed as qualifying income. Ok. Question number two back over to you, Richard.

Speaker1: [00:11:08] Ok, second question of three is all deposits. Transfers need to come from the borrower's business source in order to be used as qualifying income. Is that true or false? Ok. People are thinking about this one bit longer. I think that's it. What's the answer, Joe?

Speaker2: [00:12:09] Ok, so answer here is false. And again, this is the second biggest selling point that is beneficial for the three month Bank Statement program is that deposits and transfers that we want to use for qualifying income does not have to necessarily come from the borrower's business source. And it's one of the main things that separates the three month bank statement program from your traditional twelve and twenty four month programs as well. Now I do want to address another topic. I could see a couple of questions coming in on the chat here real quick. And one of those questions is how what is the percentage of deposits that you can use when qualifying? So when we're qualifying with a three month bank statement program, we can use either a personal bank account or business bank account. Ok. And and the way we qualify, it is all we're looking at is all the deposits and transfers coming into that account. And then we take that three month average to derive your qualifying income. Now, if you're qualifying with a personal bank account, then we can then use one hundred percent of all of the deposits and transfers coming into the account. Now that assumes that the borrower does have a separate business account that they use for their business expenses. Secondly, if you're qualifying with a business account will then use 50 percent of all of the deposits and transfers coming into the account. There is an exception to that, and that is if you have a borrower who has a business that has a lower expense ratio than 50 percent, we can have the borrower CPA verify what their actual expense ratio is and we would allow down to a twenty five percent expense ratio. So in that scenario, if you have a borrower that has a twenty five percent expense ratio for their business, that would allow us to use seventy five percent of all of the deposits and transfers coming into a business account. Ok, so now let's shift gears here real quick, and let's dive into our multifamily product, which I'm very excited about over the last couple of years. When COVID hit back in early two thousand twenty or excuse me, two thousand twenty, the financing options for small balance commercial properties quickly started to disappear. So over the last couple of years, there's been a lot of apartment building investors that have just been sitting on the sidelines waiting for options to come back, available to be available again as well. So this product here is one of the very first multifamily financing options to hit the market back again. So there's a huge demand out there for it. If you haven't marketed to apartment buildings in the past, it's great timing right now to dive back into the space, and this particular product is a great product to get familiar with the space right off the bat, OK, and to go over the bullet points of the program and how it works. The number one selling point for this product is that we qualify solely off DSCR, OK, which basically means that we don't need any documentation, any income documentation from the borrower whatsoever. So no tax returns required. No bank statements, no nothing. So all we're looking at here on this is we're looking at your gross rents that you're going to get straight off the rent rolls, then you're going to deduct the operating expenses out to give you your net rental income. And then we're going to compare that to your full PITI payment that's on the subject property. And the next biggest selling point of this program is that to qualify, all we need is a minimum VCR of one point zero. And that is it, which basically means that the net rental income, all it has to do is cover your mortgage payment and you're qualified and you're off and running. This makes it super easy for a lot of different borrowers to qualify throughout this program. Typically in the past with multifamily financing options, and if you compare it to the agency side, they require much higher DSCR ratios to qualify with. So this gives you a lot more flexibility. There will also allow for FICO scores down to six twenty five. In this program. We'll take a loan amounts all the way up to seven and a half million. We'll also look at some of the bigger deals as well on a case by case basis. We'll go up to 80 percent LTV on a purchase and on a rate and term refinance, and then we'll go up to seventy five percent on a cash out refinance. The program is available for foreign nationals. It also has options for short term rentals. It has options for student housing.

Speaker2: [00:16:31] And then lastly, a couple of areas where the program is a lot more flexible when it comes to qualifying is our minimum net worth for the borrower. Requirement is only 50 percent of the loan amount. Whereas if you compare that to agency, typically agency lenders are going to require the borrowers net worth to be at least one hundred percent of the loan amount. Same thing on reserves. We only require six months of reserves for liquidity on the agency side. Typically, they require 12 months reserves, so again gives you a lot more flexibility from that standpoint as well. So again, just to kind of recap multifamily. Talk about timing. Being right for a product right now is an amazing time to market towards multifamily apartment buildings. There's a huge demand out there because there simply just hasn't been a whole lot of options for these borrowers over the last two years. And secondly, this is a very, very easy, straightforward program to qualify with. It's going to help you capture a lot more borrowers than what you would be able to capture solely off agency and a lot of these borrowers. Also to keep in mind, a lot of these borrowers have very complicated tax returns because their investors and they have variable portfolios. So if you have an apartment borrower investor who has complicated tax returns, this is an amazing product to push these deals through quick and efficient and efficiently. So again, we're very excited about this program and we're expecting big things with it. Ok, Richard, back over to you for another question.

Speaker1: [00:18:07] Final question for you, Joe. And for our guests today, we have quite a numerous list is multifamily requires full income documentation for qualifying. Is it true or false? Halfway through the responses. That's. Ok, over to you, Joe. Is it true or false?

Speaker2: [00:19:05] Ok, so of course, the answer to this one is false. And again, it's the biggest selling point of this program. The multifamily program does not require any income documentation from the borrower whatsoever. We're solely just qualifying off of DSCR, which will make these deals significantly simpler to process and also to get done in quickly time frame. Ok, let's see, so take away, sir real quick today. It was short and sweet, but we covered no one. We covered the three month banks payment program, how it works and how it differs from your typical twelve and twenty four month banks standard programs. We talked about how to structure these three month program, three month bank statement programs for success. So remember, if you have a borrower that has cash somewhere but is light on deposits in their accounts, all you have to do is coach them on just transferring funds from wherever they have now into an account that you want to use to qualify with, and then you're off and running. We talked about how to market the three month bank statement program and who it's best suited for. And then lastly, we dove into the new multifamily financing, which is now available, qualified solely off DSCR. And we know about the big demand that's out there for it. They're just not being very many options over the last couple of years, so it's a great area for all mortgage brokers to dive into and concentrate on here in twenty twenty two. Ok, Richard, back over to you, I know we have some questions.

Speaker1: [00:20:33] Yes. I'm just going through them at the moment. One. This looks quite interesting. Do you need to be licensed in the state? The property is in to sell a multifamily DSCR deal.

Speaker2: [00:20:47] So it depends on the state. Every state is different. We do have a big matrix that shows licensing requirements per state. So feel free to reach out to me or your after this offline and we can verify for you the licensing requirements in the particular state that you're in.

Speaker1: [00:21:07] Are any of these programs available in New York?

Speaker2: [00:21:11] So the three month banks they have a program is not available in New York. Unfortunately, multifamily, however, is and in addition to multifamily, we do have a DSCR program that's available for all investment property transactions that is also available in New York as well.

Speaker1: [00:21:28] I have a few questions about net worth requirements. One says please elaborate on network liquidity requirement for multifamily product.

Speaker2: [00:21:40] Yeah, so net worth requirements is basically just going to cover. You know, what the borrower provides is a personal financial statement, which is just going to cover all of their assets and liabilities and the net, the minimum net worth that is required to qualify as the borrower needs to have a minimum net worth of at least 50 percent of the actual loan amount that they're requesting, which typically in this space is pretty. It's pretty lenient, pretty flexible. In the past, we've seen a lot of lenders require a minimum net worth of one hundred percent of what the actual loan amount is that they're requiring or requesting. So it makes this program a lot more flexible.

Speaker1: [00:22:18] Ok, here's another one, is there a pre-pay or EPO for the multifamily product?

Speaker2: [00:22:23] There is a multifamily comes with a base five year prepayment penalty. EPOs is just going to depend on how you structure with comp if you go with borrower paid. There isn't any POS, but if you go with lender paid comp, we need to get at least a minimum of six payments prior to refinancing that that particular file. But base pricing does include a five year prepayment penalty.

Speaker1: [00:22:49] Ok. Here's another one. Can you qualify with a personal or a business bank account on the three month bank statement program?

Speaker2: [00:22:56] Yeah, you sure can't. So just keep in mind that we can't use a combination of the two. We have to use one or the other. But you can use either a borrower's personal account or business account. And just remember that if you have deposits or light in the account that you want to use to qualify with all you really need, the borrower to do is make a transfer from the other account into the account that you want to use to qualify with, and that we can use that to help the borrower qualify on the income side.

Speaker1: [00:23:27] Ok, and another one is the three month bank statement program available on all all on all occupancy transactions.

Speaker2: [00:23:37] Great question. So it's not so. The three month banks statement program is only available on owner occupied transactions only. Now the good news is is for investment properties. We have a separate DSCR program, which is also very simple and easy to use and doesn't qualify or doesn't require any income documentation as well. So regardless of what the occupancy is on your transaction, we'll have a good option for you to navigate with.

Speaker1: [00:24:05] Ok. It does multifamily require a minimum DSCR ratio to qualify?

Speaker2: [00:24:12] It sure does. So multifamily, we have to have a minimum 1.0 DSCR ratio to qualify, which is a big selling point. Ok, because all that simply means that we just need the net rental income to cover your mortgage payment by one dollar and then you're good to go. And typically, on all these apartment buildings, typically these find these cash flow well. Otherwise it doesn't make a whole lot of sense to own it if it doesn't. So again, having that minimum VCR ratio at one point zero is a great selling point, and it will help you capture a lot more of these, a lot more of these deals.

Speaker1: [00:24:49] Ok. On here, let me just bring it up. This is interesting one in your professional opinion, how much experience do you require the investor or the borrower to have with multifamily properties?

Speaker2: [00:25:04] Yeah, great question. So we we don't. What we will ask for is a resume of if the borrower has any experience managing the income producing properties. If you're a first time investor and if they don't have any experience at all, we want to see the borrower utilize a management company to manage the the apartment building for them. Outside of that, they still qualify and we'll still be able to use this program for them and then for more experienced investors if they prefer to manage these properties on their own. Of course, they're welcome to do so.

Speaker1: [00:25:39] Ok. Let me guess, yes, there's another one here. What's the max loan amount on the three month bank statement program?

Speaker2: [00:25:49] So on, the three month program will go up to three million. Now we'll also entertain and take a look at larger loan amounts above three million. If you have lower LTVs, so we look at those kind of on a case by case basis, but we certainly go up to three million often in this program.

Speaker1: [00:26:10] All right. Let's just scroll through this, OK, we're getting quite a few positive remarks about the webinars where it's it's proving to be successful here and popular people are asking about promotional material and getting a copy of this presentation. I understand that we do have that available. There are some handouts for it. So that answers that one, right? Yeah, I think. Oh, right. Max LTV on the bank statement program.

Speaker2: [00:26:54] So on the three month bank statement program, we're going to go up to seventy five percent is going to be the MAX on a purchase and then 70 percent is going to be the maximum refinance. Now, if you have a borrower that can qualify with twelve or twenty four months bank statements, we can go up to 90 percent LTV on a purchase on those in that program. But given that the three month banks payment program shows a lot less documentation, it is a little bit more conservative on LTV maxes. For that reason?

Speaker1: [00:27:20] Right. And on the opposite scale, do you have a minimum loan amount for the three month program?

Speaker2: [00:27:27] We do so. A minimum loan amount on the three month is one hundred and fifty thousand. And outside of that, for our other programs, it would go down to one hundred thousand.

Speaker1: [00:27:38] Okay. I think that more or less wraps it up, I think we don't have any more questions. So what can I say? Thanks everyone for joining the discussion today and thank you, Joe, for a tremendous talk. I think it's proved very popular today. We hope we've addressed a lot of your questions today, but remember, you can always check out the additional resources to find out more. So on behalf of Mortgage Professional America and micro-lending, it's goodbye from me, Richard Torne and Joe Tomasello. Take care and we'll see you next time. Have a great day, everybody.

Speaker2: [00:28:14] Thanks, everybody.