MountainView Management Co. plans to buy nonprime mortgages made to borrowers with credit scores in the mid to low-600s, maximum 80% loan-to-value ratios and balances as high as $2.5 million.
"We're emphasizing that these are going these to be high-quality, nonprime mortgages" rather than "subprime," a term associated more with loans that have credit scores below 600, said a spokesman.
"We might invest in some non-QM loans but we think 75-80% or more will be QM," the spokesman said, noting that the percentage is only an estimate. "There's no target or anything set yet," he said.
Underwriting guidelines and interest rates will vary by state. The 30-year loans could be fixed or adjustable-rate products and MountainView will buy them on a correspondent basis.
Loans made to borrowers with bankruptcy or foreclosure at least 12 months in the past will be eligible. Loans can also be made to borrowers with multiple investment properties, corporate borrowers and foreign nationals.
The Peak Program for nonprime loans is still at a preliminary stage, the spokesman said. "We are not ready to launch the program," he said. The company expects to the launch to occur late this month.
"Because we are investing for our own portfolio and not for resale to third-party investors, we are in a position to make rapid credit decisions," said James Sherrill, chief investment officer at MountainView Management Co. in a press release.
The Denver-based asset manager cited unmet demand for mortgages by customers that have demonstrated an ability to repay as the catalyst for the move. Most of the mortgages would meet qualified mortgage standards that offer some degree of protection from ability-to-repay regulation.
The Federal Housing Finance Agency's director, Mel Watt, and Julian Castro, secretary of the Department of Housing and Urban Development, have been encouraging lenders to make loans with slightly lower credit scores to reach underserved borrowers.
"During the financial crisis, many borrowers experienced life-event hardships from lost businesses, lost jobs, divorces and/or illnesses," said Art Yeend, managing director and head of sales and marketing at MountainView Capital Holdings, in a press release. "As time has passed and the economy has improved, many of the affected borrowers have now recovered financially but do not qualify for conforming or jumbo prime loans. Additionally, due to losses suffered during the crisis, credit has been restricted and many self-employed borrowers who previously relied on alternative income documentation programs face similar credit qualification challenges."
