The new $100K ceiling...

The new $100K ceiling...

The new $100K ceiling...

It’s now the unspoken rule of A lenders, including monolines, charge brokers: BFS clients declaring income north of $100K are quite simply persona non-grata.  

“I think it started to change about a year ago and now I venture to say that 90 per cent of brokers understand that regardless of what lenders say on paper, once the client breaks the $100,000 mark, they will be turned down for Triple-A rates ,” says Darin Bauer, an agent with Mortgage Intelligence. “That’s regardless of their down payment and credit history and whether their business is incorporated and the income makes sense.

“I wish the lenders would just come clean and put that in their guidelines rather than have us waste time.”

The palpable frustration is more and more common among brokers specializing in Alt-A deals but also the increasing number now turning to the alternative space as the stream of A deals slows.

They point to a growing gap between the declared underwriting guidelines for BFS deals and those actually in use by various lenders. The discrepancy comes at the cost of broker efficiencies but also the time loss for clients and mortgage professionals.

Bauer points to a recent example where a client with a down payment of 50 per cent and stellar credit was turned down more than once by lenders with established and much-touted BFS programs.

The scenario is more commonplace given the tighter underwriting guidelines banks are now operating under, still brokers remain concerned that their advertising is out of step with their practices.

That isn’t likely to change anytime soon, says one industry veteran  suggesting alternative lenders will ultimately benefit for the stricter unwritten policies of A players.

  • kac 2013-07-03 10:54:39 AM
    problem is the Alternate lenders in most cases don't want to go above 65% ltv and a premium on rate and fees unless there is a cookie cutter deal on a property that is in a suburban sub division.
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  • Greg K 2013-07-03 2:11:56 PM
    With the number of unwritten restrictions lenders are placing on their programs, especially specific to NIQ / Stated Income deals - clients are being forcible pushed by their own banks to Alt A lenders. It is time the consumers recognize that their banks are no longer willing to help them and educate our clients about the cost of doig business with Alt A / Private lenders. Although Alt A's are not as pricy, they do cap out at 65% where private's will go to 80%. Fee based lending is becoming the new norm and we as brokers need to embrace this to allow our clients (ex-Bank Clients) the choice as to how they wish to do business in the future.
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  • Malcolm 2013-07-03 2:36:31 PM
    Please - why is it that brokers and some consumers feel that it is appropriate to have stated income lending practices? If you really and truly earn the income that you are claiming you can prove that you earn it. No matter what your line 150 might say, there are things such as financial statements and tax returns that clearly indicate your true earnings – before all of the varied tax write offs. If those documents do not show the income, then guess what? You do NOT make that money. Period. If you don’t want to prove your income, then you can’t borrow the money. It is called reality and life.

    Stated income programs were simply a way to allow people to live the high life without having the burden of proving that they could afford it. Brokers are upset about the A lenders not doing stated income because it was an easy way for them to get a deal done and make a bag load of money doing it. Well stated income programs got a lot of lenders around the world in trouble, they are gone so deal with it.

    Brokers get all pissy with lenders because they tighten up their lending, but guess what Mr. Broker? YOU are not the one taking the risk – the lender is. There is a VERY old saying in the world of lending… the guy with the money gets to make the rules about who he lends it too. You might not like it, but that is life and it has been that way for longer than brokers have existed. It amazes me how brokers come on this site and complain about lenders and lending guidelines, all in an effort to sustain their commission. It is not up to the lenders to change their policies to suit your needs, it is up to you to change the way you do business to suit them. The sooner you realize that, the better off you will be.
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