Alternative lending, aka the buzz word “Alt-A” lending, in the mortgage world refers to mortgage financing that is not in the box or considered conforming to the standard underwriting guidelines. After Dodd-Frank was passed, a whole bunch of compliance and regulatory guidelines came out that pretty much did away with the no-documentation-and-stated-income loans because they wanted to eliminate any potential for fraud, embellishing, and lying to get a mortgage. To be clear, stated income, no-documentation loans and subprime loans existed for many, many years and helped many, many borrowers. The problem was that because Wall Street was able to pass the buck and securitize these loans, the underwriting guidelines of old, which had some common sense to them, ran away to the senseless lending arena. At one point you could borrow 100 percent of the property and not show any proof of income or assets, and … it didn’t matter because the loans were being sold. Well, you know what eventually happened: our then-executive powers that be in Washington decided to pass the Dodd-Frank legislation, eliminating all the risky products. Lenders pretty much stuck to the basic black-and-white full-documentation product since the passing legislation of Dodd-Frank. The market has changed and old wounds are beginning to heal, and with that healing come forth new mortgage-financing products and opportunities for those borrowers who are recovering and who have recovered from the real estate market downturn.

Some of the new products are bank-statement-only programs, low credit scores, shorter waiting periods between financing and housing events (deed in lieu, foreclosure, bankruptcy), and higher debt ratio calculations (total debt figure and divide it by your income). There are even stated income products for those who want to buy or refinance investment properties. To give you an idea of what is available for those “out of the box,” borrowers see below:

Wholesale lender 1

• • Program 1—Innovative credit solutions for qualified borrowers looking for loan amounts up to $3,000,000. Competitive guidelines options include loan-to-value (LTV) ratios up to 90 percent with no mortgage insurance (MI) requirement; debt-to-income (DTI) ratios to 50 percent; and an interest-only option for lower initial payments for qualified borrowers. Eligible income documentation may include restricted stock units and asset depletion.
• • Program 2—Designed to help qualified borrowers achieve or re-establish homeownership. Guidelines include DTI ratios up to 50 percent and ? 24 months seasoning for Chapter 7 and 11 bankruptcies, foreclosures and deed-in-lieu.
• • Program 3—Fresh Start Tailored for qualified borrowers who have been prevented from achieving mortgage financing due to a recent short sale, bankruptcy, foreclosure, or deed in lieu. Gift funds may be used for 100 percent of the down payment and closing costs.

Wholesale lender 2

Dodd-Frank is still here, but I have a sneaking suspicion it may disappear into the sunset. As time goes by, and Wall Street continues to embrace the many alternative lending products available for borrowers—who may be like you—who knows, the oldie but goodie products may still make a comeback, but with much smarter safety features. In the meantime there is plenty to choose from as it stands right now in the mortgage financing world, so don’t let anything stop you from buying or refinancing your property—only, of course, if the financial ends make sense.

By Carl E. Guzman, CPA

Carl Guzman, NMLS# 65291, CPA, is the founder and president of Greenback Capital Mortgage Corp. He is a residential financing expert and a deal maker with over 28 years’ experience. He currently has 168 five-star reviews on Zillow. Carl and his team will help you get the best mortgage financing for your situation and his advice will save you thousands! www.greenbackcapital.com [email protected].