Lender to Ease Standards for Some Borrowers

August 4, 2014

A mortgage company with licensed lenders in 42 states has launched several mortgage products to loosen up underwriting standards in an attempt to capture the pent-up demand for higher-risk loans. 

Impac Mortgage Holdings Inc. is writing loans that fall outside certain limits set by Fannie Mae and Freddie Mac, as well as some Consumer Financial Protection Bureau rules that were created to discourage reckless lending, the Los Angeles Times reports. 

One of Impac's new programs allows borrowers to devote up to 50 percent of their income to cover housing costs and other debts, instead of the typical 43 percent. Other new lending programs from Impac are available to borrowers who are unable to get a conventional loan, such as entrepreneurs with complex and fluctuating finances, investors who own multiple homes, or foreign buyers purchasing mansions with jumbo loans up to $3 million. 

"The pent-up demand for loans like this is tremendous," William S. Ashmore, Impac's president, told the Los Angeles Times. 

The mortgages are hybrid loans, where rates are fixed for the first five, seven or 10 years before resetting and becoming variable. The interest rates are usually between 5 percent and 8 percent, depending on the perceived risk of the borrower.  Borrowers must be able to give at least a 20 percent down payment and have credit scores of 680 or higher. The bank says it will be flexible in using bank statements (instead of pay stubs and tax returns) to verify that small business owners can repay loans.

Some housing experts say they're wary of lenders such as Impac easing some of the underwriting rules. High-risk loans "fueled the mortgage and foreclosure crisis," says Kevin Stein, the associate director of the California Reinvestment Coalition, an organization that advocates for fair banking and financial services for low-income communities.

Impac says it will retain partial ownership of the loans it sells.

Source: "Impac Mortgage Rolls Out Loans with Easier Qualifying Terms," Los Angeles Times (Aug. 1, 2014)