Bank launches new ‘Lite Doc’ mortgage program

Loophole allows it to avoid Dodd-Frank regulation

A new version of the stated-income mortgage may be on the rise, however there are a few key differences, according to an article by Diana Olick for CNBC.

Quontic Bank, and FDIC-insured community lender in New York City, announced its new program called Lite Doc, which requires verification of employment and only two months’ work of bank statements instead of the normal two years of employment W2s and at least four pay stubs in addition to bank statements and credit checks, according to the article.

Unlike lite-doc mortgages from the subprime-era, the new loan contains much stricter covenants.

From the article:

The Quontic loan does not have to comply with strict new "ability-to-repay," or ATR, rules established in the wake of the financial crisis under Dodd-Frank legislation, due to a little loophole: Quontic is designated as a community development financial institution, or CDFI, under a small U.S. Treasury program which funds economic revitalization in low-income communities.

The "Lite Doc" loan is not the "low-doc" loan of the past. It is only for owner-occupied properties, so no investors, and it requires a 40% down payment on the property, far higher than most conventional or government loan products. There is a minimum FICO credit score of 700, and the borrower must show he or she has a minimum of 12-months’ worth of principal, interest, taxes and insurance in the bank at closing.

To read more about the program, click here.

Other banks, such as Bank of America, Wells Fargo and JPMorgan Chase, also try to reach a new dynamic of homebuyers with their new 3% down programs

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