Interfirst launches product targeting private non-owner-occupied loans

Interfirst’s new program for non-owner occupied mortgages, “One” aims for simplicity, said Chief Strategy Officer Bryan Filkey.

"That has been a philosophy of mine ever since looking at the difference between the iPhone and the Android," Filkey said. "I couldn't care less about all the different things Android can do for me. I don't have the time to dig into it," he added, pointing out that he still has a single-button iPhone.

Mortgage brokers should aim for that kind of simplicity when working with borrowers, he said.

"If their experience is complex, you're not as good at your job as you think that you are," Filkey said. "And so I took it upon myself to say, can I take this vision on simplicity to the private market, but also keep the prudent rules and risk parameters that we want to have as an organization?"

In answer to that question, the company developed One, which uses a property's debt service coverage ratio as an underwriting parameter. There is one single rate, with no pricing adjustments.

"So instead of having to go through the guides and the matrix and then figure out the rate sheet, you [as a loan officer] just know if my borrower is within these walls between this floor and the ceiling from a matrix perspective, I just have to know that this rate is going to be x, and then you can sell x all day long," Filkey said.

Interfirst will lend up to $2 million with an 80% loan-to-value ratio on purchase and rate-and-term refinancings and 75% on cash out.

One is the first in the company’s “Independence Series” of non-qualified mortgage products that will launch this year. It is a natural progression following the company’s introduction of agency-eligible andprime jumbo mortgage products last year, he said.

The limits former Federal Housing Finance Agency Director Mark Calabria put on investor loan purchases by Fannie Mae and Freddie Macback in January created opportunity in this segment of the market, Filkey said. And he’s not worried about Calabria’s interim replacement, Sandra Thompson, potentially reversing course on those changes.

Calabria’s caps added approximately $50 billion in loans to a $30-billion business line, making it a much larger, more attractive universe, Filkey said. With an estimated 24 million non-owner occupied one-to-four unit properties in the U.S, "it's a huge marketplace."

Even if those limits go away partially or altogether, the government-sponsored enterprises still have the loan level price adjustments for riskier loans in their underwriting criteria. As a result, "the entire market segment has been moving and transitioning towards private execution, even for agency eligible loans," Filkey pointed out.

Interfirst will be the securitizer of loans generated out of the One product, and it will offer One to mortgage brokers as well as through its consumer direct channel.

Interfirst is waiting to see what happens regarding changes to the qualified mortgage rule before launching the other products in the Independence Series. Right now, there is a delay in mandatory compliance with a new standard introduced by ex-Consumer Financial Protection Bureau Director Kathy Kraniger.

"So we're waiting to see how that clarifies…but we expect to have a self-employed solution, and an alternative full doc solution but probably next year unless we get significant clarity from the FHFA, the CFPB and Fannie and Freddie around the finalized rules," Filkey said.