Rocket Mortgage is making a big play for the legion of self-employed borrowers who have been frustrated by a lack of mortgage options and overwhelming red tape: a new jumbo mortgage product offered through its Rocket Pro TPO channel.
The new product launch comes just a few months after the Consumer Financial Protection Bureau retired the much-maligned Appendix Q patch, and amid a wave of vaccinations for the COVID-19 virus, which should boost the bottom lines of small businesses.
Effective Tuesday, Rocket Pro TPO broker partners can offer their clients a new jumbo product, called “Jumbo Smart.”
“So, the beautiful thing about this product is it mirrors DU [desktop underwriter] guidelines and requirements with just a few small overlays,” Rocket Pro TPO Vice President Austin Niemiec said in a video addressed to brokers. “So we run this through DU, giving you instant findings and approval.”
Niemiec said the new product would allow significantly more borrowers to qualify than a typical jumbo, and noted that loans go up to $2 million amounts. Borrowers can use them for primary homes, secondary homes and investment properties.
HousingWire recently sat down with Tom Hutchens, Angel Oak EVP of production, who shared how non-QM lending could be an effective way for lenders to replace lost business in the event of a refi boom slowdown.
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“You can also go all the way up to 45% DTI and 80% LTV, so the buckets are wide here,” he said in the video to brokers.
Niemiec also claimed that the loans are “easier to process and close” than your typical jumbo. The loans require just one appraisal, and there is significantly less self-employed documentation than the typical jumbo, a product that skews heavily toward self-employed clients, he said.
Rocket Mortgage claims the pricing is more competitive than the typical jumbo, which as of Feb. 28 averaged about 3.32% for a 30-year fixed-rate product.
“Take advantage of this product: we’re rolling it out right before purchase season, so you can differentiate yourself with purchase clients and agents,” Niemiec told brokers. “And also, as you know, jumbo refi clients have been sitting on the fence, not taking advantage of the low rates because of the red tape and the limited jumbo products. So go help those borrowers and win more business.”
The self-employed borrower has been in a bind since the pandemic began. Many small business owners have needed a year-to-date profit-and-loss supported by at least three months of business bank statements to obtain a mortgage. A year ago, a profit and loss from the client to the most recent quarter would have sufficed, several brokers and retail LOs told HousingWire. It’s onerous.
“It’s never been harder in my 30 years in the business to do a loan for self employed,” one LO told HousingWire in late January. “With the volume of loans I am handling, I hate doing loans for self employed right now as they take so much time, so doc heavy.” The LO told HousingWire the experience for borrowers is “worse than getting a colonoscopy.”
Rocket Mortgage is hardly alone in recognizing that self-employed borrowers represent a good business opportunity. Its rival United Wholesale Mortgage has pledged to come out with a new jumbo product this quarter, and several non-QM specialists have been very active in the space over the last few months.
Even some depository banks, which tightened lending standards during the pandemic, have indicated that they have or will soon loosen underwriting requirements to capture the rise in purchase business in the non-conforming space.