UWM's Alex Elezaj responds to skeptics of 0% down product

June 20, 2024 5:30 AM

Some industry watchers are skeptical of United Wholesale Mortgage's new 0% down payment product.

A recent media analysis called the mortgage a "red flag" akin to the risky home loans which caused the Great Financial Crisis. The 0% down mortgage was developed under federal underwriting guidelines much stricter than two decades ago, company executives said.

"This is not like how it was done back in the 2000s," said Alex Elezaj, executive vice president and chief strategy officer at UWM. "The people who'll say they're experts and talk about that just simply don't know what they're talking about."

Borrowers qualifying for 0% down receive a 3% down payment second lien worth up to $15,000. The lien has no monthly payment requirement, and must be paid when the first lien is refinanced or amortized.

United Wholesale Mortgage UWM Alex Elezaj — United Wholesale Mortgage chief strategy officer and senior vice president Alex Elezaj. Courtesy of UWM

Borrowers must meet HomeOne or Home Possible guidelines, and loan-to-value ratios must be between 95% and 97%. Customers who haven't had an ownership interest in a home in the past three years must have a 700 FICO score. Other buyers must have an Area Median Income at or below 80%, and at least a 620 FICO score.

Those with incomes at or below 50% of their AMI will also receive a $2,500 credit. Customer interest has been "fantastic", said Elezaj. The company however is not disclosing application statistics, how interest has fared compared to its existing 1% down product, or how much money UWM has set aside to cover costs to originate the product.

National Mortgage News asked Elezaj about the product and concerns surrounding it.

The following interview has been edited for length and clarity.

Are you seeing misconceptions about the product, in the media, on social media or from consumers?

"Yeah. I've been on a lot of different interviews about it. I think a lot of media likes to focus on negativity, regardless of whatever product it is. But the fact of the matter is, this is a fantastic program. The biggest hurdle to homeownership is the down payment. We've solved that by having this product.

"These borrowers still have to qualify. We're still underwriting all the loans. This is not like how it was done back in the 2000s. The people who'll say they're experts and talk about that just simply don't know what they're talking about."

What makes this product different from some of the ultra-low or zero downpayment products that were available 20 years ago?

"First of all, after the crisis, there's a lot of regulation that's in place. We're doing all the income verification, asset verification, we're underwriting the loan. It's just a different system than it was prior to the crisis.

"There's not a lot of non-bank lenders that can do a program like this. UWM is using our cash to be able to help these consumers, so it's costing us a tremendous amount of money. We believe in it so much, we're willing to do that. We are 100% confident in the program and it's been great."

Articles also suggest the 0% down second lien means that borrowers could be instantly underwater, or owing more than the home is worth at the time they take out the loan. Could they be in that position?

"I think to me, a lot of that stuff is just silliness. There are all kinds of risks in our business, right? Property values go up and down, interest rates go up and down, people get promotions, people lose a job. There's all different types of things that go on in the business."

"We're using the lesser of the loan amount or the appraised value. So we believe that the way we do things provides protection. UWM is ultimately responsible for this. So we don't want to have products out there that we don't believe in."

What would happen if a borrower falls behind on their mortgage payments? How would the second lien factor into forbearance or loss mitigation?

"There's a lot of different ways that we can handle that. But that's where the benefit of using a broker is, they're going to be able to help coach the borrower through that.

"I'm not going to go through all the different semantics of what will happen if somebody misses a payment by 30 days, 60 days, or 90 days, and they lose their job. Those are all different things that every mortgage company deals with regularly. There's always options to help consumers and that's what we tend to deal with all the time."

With mortgage rates still hovering around 7% and home prices continuing to stay elevated, are you seeing any green shoots in the housing market today?

"First of all, we're doing great here at UWM across the board and originations. We're looking forward to the second half of 2024 and really looking forward to 2025 and 2026. So we're very optimistic. We're busy."

"We've hired over 2,000 people since the beginning of this year, because not only are we doing well right now in the purchase market, but when rates do come down, there's not gonna be another mortgage company in America that's more prepared to handle that volume when it comes in."

Are mortgage professionals still making the switch from retail, or working at banks?

"Absolutely. They're captive to what they're dealing with. If you're a loan officer working in retail, and half of your operations have been laid off in underwriting, loans aren't going to the system at the speed that you need them to go through. So you want to be able to make sure client satisfaction is there.

"When you're independent and you can use other lenders, there's much more accountability. You can really move your business around as an independent based on the criteria you need. You need speed, you need certainty, you need all these things, and that's why UWM continues to grow because that's what we're giving our clients."