Loan Officer Training 09/12/2024 - How to Structure CDFI No Income Verification Loans

Unlock the potential of alternative financing with our latest episode of Loan Officer Training! This week, we’re diving into the world of CDFI No Income Verification Loans—an essential tool for loan officers looking to serve clients with non-traditional financial situations.

In this episode, we’ll break down the ins and outs of structuring these unique loans. Learn how to navigate the application process, evaluate borrower qualifications, and tailor loan structures to meet the needs of your clients without relying on traditional income documentation. Discover the benefits and challenges of CDFI No Income Verification Loans and how they can open doors for borrowers who might otherwise struggle to secure financing.

Hear from experts who will share their experiences and offer practical advice on making the most of these loans. Whether you’re new to CDFI loans or looking to refine your approach, this episode is packed with the insights you need to excel.

Tune in and elevate your expertise in structuring CDFI No Income Verification Loans to better serve your clients and grow your lending success!

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About The Mortgage Calculator:

The Mortgage Calculator is a licensed Mortgage Lender (NMLS #2377459) that specializes in using technology to enable borrowers to access Conventional, FHA, VA, and USDA Programs, as well as over 5,000 Non-QM mortgage loan programs using alternative income documentation! 

Using The Mortgage Calculator proprietary technology, borrowers can instantly price and quote thousands of mortgage loan programs in just a few clicks. The Mortgage Calculator technology also enables borrowers to instantly complete a full loan application and upload documents to our AI powered software to get qualified in just minutes!

Our team of over 350 licensed Mortgage Loan Originators can assist our customers with Conventional, FHA, VA and USDA mortgages as well as access thousands of mortgage programs using Alternative Income Documentation such as Bank Statement Mortgages, P&L Mortgages, Asset Based Mortgage Programs, No Ratio CDFI Loan Programs, DSCR Investor Mortgages, Commercial Mortgages, Fix and Flip Mortgages and thousands more!

Our Mortgage Loan Originators are trained to be loan consultants to guide borrowers throughout the entire loan process. A licensed Loan Officer is only a phone call or zoom meeting away and always available to assist borrowers throughout the loan application process all the way to closing. To apply for a mortgage please visit our Quick Mortgage Quote Page at https://themortgagecalculator.com/Mortgage/QuickQuote

The Mortgage Calculator is a registered DBA of Mortgage Calculator Company LLC. NMLS ID #2377459. Programs and rates are subject to change without notice. Mortgage Calculator Company LLC is licensed in the following states that require specific licensing disclosures: AZ (#1040352), CA CFL (60DBO-171188), GA Georgia Residential Mortgage Licensee (#2377459), IL MB.6761755 Illinois Department of Financial and Professional Regulation, Division of Banking, 100 West Randolph, 9th Floor, Chicago, IL 60601 1-888-473-4858. Not licensed or conducting business in New York.

Catch all the episodes of the Loan Officer Training Podcast at https://themortgagecalculator.com/Page/Loan-Officer-Training-Series-Podcast

Catch all the episodes of the Loan Officer Training Podcast at https://themortgagecalculator.com/Page/Loan-Officer-Training-Series-Podcast

Loan Officers for Unlimited Free Non-QM Leads & Trainings Join The Mortgage Calculator at https://themortgagecalculator.com/join

The Mortgage Calculator is a licensed Mortgage Lender (NMLS #2377459) that specializes in using technology to enable borrowers to access Conventional, FHA, VA, and USDA Programs, as well as thousands of Non-QM mortgage loan program variations using alternative income documentation! 

Using The Mortgage Calculator proprietary technology, borrowers can instantly price and quote thousands of mortgage loan programs in just a few clicks. The Mortgage Calculator technology also enables borrowers to instantly complete a full loan application and upload documents to our AI powered software to get qualified in just minutes!

Our team of licensed Mortgage Loan Originators can assist our customers with Conventional, FHA, VA and USDA mortgages as well as acces...

Transcript

Restream recording Sep 12, 2024 • 04:02:16 PM 0:00

So welcome everyone. My name is Kyle Hiersche. I'm the COO of the Mortgage Calculator joined here by our President Nick Hiersche and our CSO Jose Gonzalez. We are a lender that specializes in non QM loans and what we do every Tuesday, Wednesday, and Thursday at 12 p. m. Eastern on this show is go through a new loan officer training topic and today's topic is going to be CDFI loans. So I'll go ahead and turn it over to Jose. to get right into the presentation. If you have any questions, drop them in the chat and we'll get into them afterwards. So go ahead, Jose. All right, good, uh, yes, good afternoon, or some of the, uh, those of you in the west coast. Good morning. So CDFI, uh, that was a rates topic today. Uh, how does, so how to structure the CDFI no income verification loan is our training. Now this is a program for primary and second homes only. And this is a program that actually allows the borrower to qualify for the loan without having to verify any employment, without having to provide any employment information. And without having to verify any income. So, Now that I piqued your interest, let's get right into it. How to structure CDFI, no income verification loans. Okay. So what exactly does CDFI stand for? It stands for Community Development Financial Institution. So, this is an institution that receive, receives an exemption, right, that allows a loan originated by a CDFI to be exempt from the ability to repay requirements that is set forth by the CDFI. In the Dodd Frank Act and in Regulation Z, the ATR requirements. So this is pretty cool, uh, because we all hear, uh, you got to have income verification for primary and second home loans, unless you're married. It is a CDFI originated loan. Now, please note that, uh, CDFI loans are open to everyone. However, there is a targeted CDFI eligible borrower group, uh, which receives a 0. 5 percent lower interest rates. And this targeted group are African American and Hispanic borrower. borrowers. So I, if you noted this morning, I did state that all these quotes are taken into consideration, uh, a CDFI eligible borrower. So it is a good difference in the rate. They're half a percent. However, when we state anyone can apply for the loan long as you obviously meet the credit requirements and the other guideline requirements. Income is not calculated, nor is income required to be verified. Primary and second homes only. And let's state the mission of the CDFI so that you can fully understand. It's empowering the dreams of diverse homeowners and underserved communities by providing non traditional access to prime capital. For more information, visit www. fema. gov for underbanked borrowers and communities, specifically, uh, those with a limited income history, limited credit history, or inadequate income documentation. So what, uh, type of, uh, borrowers and properties are we talking about here? Well, on the borrower side, So it's the pretty standard U. S. citizens, U. S. permanent resident aliens, and non permanent resident aliens. In this case, we're talking non permanent resident aliens that obviously are going to need U. S. credit and an acceptable visa providing them legal status. in the United States. Even though they're not working here, they have to have, you know, they don't have to, you know, show that they're working for this program, should I say? Um, they do have to be legally here in the U. S. This is not, uh, like an I 10 borrower program or anything like that. Now for eligible properties, uh, we do have a few options. Now please note, single family residences have to have a minimum square footage of 600 square feet. Condos also have to have a minimum of 600 square feet. Please note that for condos in Florida, we're talking full condo review, as opposed to what we previously covered earlier this week, the limited condo review. Townhomes are accepted. PUDs, which is just a property in a deed restricted community that has a homeowner's association. Uh, two to four units are accepted with a minimum of 400 square foot per unit. Now modular, rural, and log homes, right? That's a good one, right? Log homes are also accepted with a maximum of 10 acres. Now ineligible properties, we're looking at manufactured homes, so. They accept a lot of homes, but they don't accept manufactured homes. Uh, agricultural properties are also not, uh, acceptable. We're looking at talking about working farms, ranches, workers, investment properties, and since this is for primary and second homes only assisted living facilities are not acceptable. And very importantly, non warrantable condos. Condo tells and projects collecting less than 10 percent of the budget for reserves are also acceptable. Now, what are some of our transaction details breaking it down here? All right. We're looking, uh, if it's a purchase or rate in term, you know, they have the same, uh, LTV. So minimum credit score for the maximum LTV of 80%. is 720. Now, if you are going for the 80 percent LTV, you do need minimum of 12 months of reserves. With a 680 to a 719 credit score, you're at 75 percent LTV and only nine months reserves. And with a 660 to 679 credit score, you're looking at maximum 65 percent LTV with nine months of reserves. Now, real important to note, because there have been some changes to this program from what previous versions of it, gift funds cannot be used for reserves. So, You can have gifts for the 20% down and for the closing costs, but reserves need to be verified. Funds from the borrower. Please also note property type restrictions, right? Condos or maximum of 75% LTV and not the 80% LTV for the other property types. Uh. And, uh, that's for a, uh, 75 percent LTA max for a purchase and 70 percent max LTV for a rate term and cash out refi for the condo. So they only hit you on the, uh, purchase side, 75%. Now on the cash out refi, 740 is the minimum middle score. For the maximum LTV of 70%, 700 is a middle score, minimum middle score. So you, you'd be looking at 700 to 7 39, you'd be at a 65% LTV and a six 60 to a 6 99, you'd be at a maximum 60% LTV. And here's an important note also. You know, I scoured the guidelines of Matrix to highlight certain important points. This one I found, uh, uh, of particular interest. It's a little odd. The first four months of the reserves. Need to be from the borrower's funds and cannot be cash out proceeds. In many cases, you know, we have cash out proceeds can be used for reserves. In this case, the first four months need to be for the borrower. Zero times 30 mortgage history, foreclosure season, seasoning of seven years. And very importantly, again, here assets are sourced and seasoned for 30 days. So you're going to have to provide, I guess, at least that one month bank statement to show the money already there. Any large deposits again sourced in season for 30 days. So lastly, let's talk about the solutions for this program, right? This is the program that many people don't really know exists, right? Until we have this presentation or the training or the daily rates in the morning, and then we get borrowers reaching out to us about this program because they've all been told that for primary and second homes, We need to verify income, right? The stated income loans of the past are gone, or so they say for primary and second homes, as are the no incomes, uh, and all of those, uh, really exotic programs that we had previous to 2008. Well, this is a very exotic program. primary and second homes. So what are the main solutions? Now there's many solutions. This program provides, but here I've touched on some of the main ones when you're facing these scenarios where structuring, uh, your transaction with the CDFI loan would assist first one. Here, we're looking at. When you have borrowers that are relocating, right? Borrowers moving from California to Florida, um, doesn't want to be rushed to accept the first job offer to them just because they want to be able to qualify for that home that they already found in Florida that they want to buy. So they, they found their dream home in Florida. They have the money for the down payment. Uh, they have the excellent credit. You know, to qualify for the home in Florida, they're going to have to be working already in Florida, we're going, you know, full dock, uh, and they don't work remotely and stuff like that. So, so that the borrower does not feel pressure to just accept that first job. They could, or lose the home of their dreams. Then it would be better to close on the home of their dreams before accepting that new employment. Relocate, get everything moved, and then accept the job. This is obviously assuming that you have the resources to hold off for that amount of time. Now, it makes the whole transition a little bit less stressful from the point of being forced. Practically to accept the job that may not be the one that's best for you simply simply because you don't want to lose a home. You know how tough it is to find those homes short inventory. So that's one of a very good option there for relocating a borrower, many professionals, for example. We could have borrowers working in a cash based or service industry who may not claim enough net income, like servers, bartenders, for example, or two that come to mine, get a lot of cash tips, may not necessarily be claiming all those cash tips. They got the credit, they have the money for the down payment. This is the solution so they can get the home. Then we have another solution for borrowers who are investing in assets or in industries, for example, like cryptocurrency, where it may be difficult to document the net income that you're making from the trading or the selling. Of that currency, right? You don't, uh, you don't really know, uh, a lot of them, you know, everything is sort of in a gray area. So our crypto buyers, we've structured quite a few deals for them, uh, where they have the money. Yeah, no. So the whole lot of crypto, they got all this money. Uh, it's already seasoned in their account for 30 days. They don't need to verify any income with this type of loan. So another great solution now for our private borrowers, those that really don't want to share their documents. You know, we do have those borrowers that just want to keep it private. Well, with this, with this loan, this is the solution for those borrowers wanting to keep their income documents private. They don't have to share it. This loan will qualify them. Our self employed borrowers taking too many expense write offs. Don't we know those borrowers, right? Gross income revenue, 500, 000 a year, net income 30, 000 a year. They're not going to qualify for that 800, 000 property with the tax returns, but they'll certainly qualify for it. If they have 20 percent down and a 720 plus credit score, they can qualify for it. The CDFI. Now, Another real interesting one. We've applied it this way a couple of times. Borrowers looking to buy a property before they sell their current property. This is another of those scenarios where a borrower found the property that they like. Again, the dream property. They, they, um, normally to qualify. They may have to sell their current property to get rid of the liability. Uh, they have the money for the down payment. They just don't want to feel rushed to sell their current property and maybe you have to give it away just to eliminate the liability. And so this, uh, program, as long as they have the 20 percent down and they meet the, you know, or whatever the down payment may be. Depending on their credit score, right? Minimum, uh, six 60 here with a 35 percent down payment, we'll get you in the door and then you can buy your current, your dream property, and then sell your current property, uh, in a more relaxed manner. So you can maximize the profit from that one. And last but not least, an additional point that I didn't make here, we've actually used this loan, uh, for borrowers, uh, that. Are U. S. Citizens, U. S. Nationals living and working abroad, right? Living and working outside of the U. S. Uh, and not claiming their foreign income on their U. S. Tax returns. So that that U. S. Based national then, uh, who wants to be full doc, but doesn't have U. S. Tax returns, doesn't have any U. S. Based income documentation that they can provide. They would not be able to qualify normally for a loan. However, they can, for example, buy that property as a second home and qualify for it with 20 percent down as long as they have at least a 720 credit score. We actually use this one for a borrower living in South America. His daughter was going to go to school in Chicago, uh, to the university. So he, rather than, you know, pay rent for four or six years, depending on how long she was going to be going to school there, he ended up buying a property so that she could live in the property. And then afterwards, uh, that property would become a rental property after, uh, the daughter moved out, or maybe they could rent out some rooms to other students. But basically he was able to, uh, close on that second home. Right. No income verification, second home in the U S while he was working in South America and living in South America, right? Because he didn't have any U S based income that he was reporting. So great solutions here provided by the CDFI loan, only 20 percent down. And do remember that CDFI eligible borrowers, and Get a half a percent lower interest rates. And those would be Hispanic borrowers and African American borrowers. So definitely look to the mortgage calculator to, um, for all your CDFI loan needs, as well as our great agency and, uh, QM products. All right. Thank you. It looks like we got a couple of questions so we can pull up. Let's pull up the first question here. What do we got? Okay, for the additional percentage off, what documentation is needed for the, I guess, to prove that they're CDFI eligible? Uh, you know, you'll provide your personal identification and information, and I guess you'll just go from there. You know, if you're African American, I think you're African American. And if you're Hispanic, you're going to be like Jose Gonzalez. Now, if, if your name now, I would say, I mean, you do have cases of like people born, uh, in foreign countries that, I mean, But with an American name, like John Smith, right? I don't know how you figure that one out. That way you'd have to go to underwriting and ask for, uh, what kind of information they're, they're going to ask for, you know, whatever, uh, documentation is used, I guess, to categorize a minority for purposes of census tract review is probably what they would use. And um, let's see here. Next question. What's the max loan amount on cash out refinance? Can we do New York? Uh, can we do? No, I mean, as New York has to do with licensing, any state that you do is going to have to do with whatever states that you're licensed in. So if you're licensed in New York, you can originate in New York. If you're not licensed, you cannot. This is a primary or a second home only. And what was the max loan amount on the cash out refinance? Do you know? Uh, max loan amount, I think max loan amount is 1. 5 million, uh, for this product. All right, looks like we got another question here. So I guess this question was actually already answered just now. What about a Canadian buying a second home? But that would, it'd have to be a citizen maybe that's living in Canada. Correct, correct. The Canadian, if he's a Canadian citizen buying a second home in the U. S. is a foreign national, foreign national buyer buying a second home in the U. S. That's all that that is. But he's still a Canadian borrower. And I mean, and unless he, unless he has dual citizenship or is also a permanent resident or a non permanent resident, cause he could be a Canadian citizen, but have some type of a visa in the U S that gives him status to live in the U S then he could buy as a non resident alien, but if they're not U S citizen, permanent resident. Of the u. s or non permanent resident alien then They would not be able to buy with this program. All right, and last question here is what are typically the required reserves? That's one of the big kind of catches right there. Yeah, those are pretty heavy. Yeah Yeah, if you uh, and I did cover that one of the slides if you're uh, 720 or above right where you qualify for 80 percent ltv it is 12 months reserves Once the ltv drops below 80 to 75 or below You Uh, the reserves, uh, drops to nine months from 12 months and do know really important. I didn't mention this, but I'll emphasize it. Gift funds cannot be used to meet the reserve required. Gift funds can be used to meet the down payment and the closing costs. But not the reserve. All right. I don't see any more questions, but thank you for the questions. Some great questions there. Great program here Uh, remember that we do this show at 12 p. m. Eastern now every Tuesday Wednesday and Thursday So, uh, we appreciate everybody tuning in and then we will see you next week on Tuesday At 12 p. m. Eastern for the next episode of the loan officer training series with the mortgage calculator. Have a great day, everybody