In this decidedly tight lending environment, self-employed borrowers represent a significant opportunity for lenders looking to expand homeownership to an underserved market.
The number of self-employed workers in the U.S. continued to rise in 2017, climbing to 40.8 million people, which translates to 31% of the private work force. But while the number of self-employed workers earning $100,000 or more increased almost 5% last year, their ability to get a mortgage loan is often hampered by their nontraditional income status.
Citadel Servicing Corp., which specializes in non-prime loan products, offers these borrowers multiple options for income qualification, including a one-month bank statement program.
“This program was designed for the self-employed borrower with excellent credit who simply doesn’t have the time to gather two years’ worth of business and personal tax returns or 24 months of bank statements,” said Will Fisher, senior vice president, national sales and marketing director at CSC. “They are putting down a substantial down payment or have an exceptional equity position. Our historical data shows that this borrower can assess and manage their responsibilities.”
In 2012, CSC was the first lender to reenter the space once known as subprime. This has given the company a large swath of data from which to learn about its borrowers and perfect its products. Since CSC also services all the loans it funds, it has gained a much deeper understanding of what performs and what doesn’t.
The company’s asset programs, such as the ATR-in-Full, can qualify a borrower using their cash positions in the bank without consideration to their current income or employment. For wage earners, CSC’s Verification of Employment program allows borrower to forgo W2s, tax returns or 4506Ts, simplifying qualification and streamlining the underwriting process.
“Our products are some of the most innovative in the space,” Fisher said. “We released bank statement loans in 2013, about two years before our competitors, and we continue to innovate with our ATR-in-Full, one-month bank statement and VOE-only programs.”
The VOE-only program benefits many different types of employees in the service industries, including bartenders and waiters, who have excellent credit profiles with nearly perfect track records.
Borrowers can access up to $3 million through CSC’s non-prime loans and Fisher says the performance of these loans has been as expected — with zero defaults.
“These programs are reserved for borrowers with excellent credit, who’ve been denied receiving credit due to convenience, employment type or their ability to take full advantage of the US tax code,” Fisher said.
CSC leverages its experience and skill in underwriting non-prime loans to provide a wide range of products for borrowers with non-traditional sources of income. This flexibility recognizes and supports the growing number of Millennials who would otherwise be shut out of homeownership, stoking the company’s growth among consumers and originators.
“Because we write our own guidelines and are committed to only non-prime and non-QM loans, we’ve been able to gain efficiencies in our underwriting and funding process,” Fishers said. “I believe this gives CSC a clear advantage against our competitors who are mostly pass-through lenders that must follow guidelines pushed down on them from Wall Street or private equity firms.”