One of the main factors that caused the 2008 financial crisis was the high rate of default on sub-prime mortgages. No income, no job, and no assets verified (NINJA) loans allowed households to borrow money for home purchases that they ultimately couldn’t repay. While these mortgages largely disappeared after the crisis, a similar loan is now making a comeback.
Austin, Texas-based 360 Mortgage Group, according to a report by The Real Deal, recently revealed that it is introducing a pilot program to explore the viability of a financial product that has a strong connection to the NINJA loan when it comes to borrower qualifications.
The company intends to originate up to $1 billion of the sub-prime mortgages for investor-owned residential properties through a NINA (no income, no assets) loan program, an approach that is similar to NINJA loans but aimed at real estate investors.
Landlord borrowers through 360 Mortgage Group’s Agency NINA loan program would not have to verify their income or assets.
360 Mortgage intends to offer the Agency NINA loan to borrowers with FICO credit scores as low as 620. Typically, a FICO score below 670 classifies a borrower as sub-prime.
Borrowers would be limited to loan-to-value ratios of 80 percent or below, and the loan is not available for owner-occupied properties.
While the loan has “Agency” in the name, the mortgage is not backed by a government-sponsored lender, such as Fannie Mae or Freddie Mac.
360 Mortgage NINA loans would be backed by private capital, though guidelines produced by Fannie Mae would factor in when determining whether a would-be borrower qualifies for financing.
Andrew WeissMalik, 360 Mortgage Group’s COO, said that the Agency NINA loan serves as a funding solution for residential real estate investors who “don’t fit within the highly-regulated, ultra-conservative guidelines every other lender offers.”
However, 360 Mortgage Group is not the only lender exploring the sub-prime market. Bank of America is also returning to sub-prime lending, underwriting $10 billion in mortgages last fall to borrowers who have non-traditional backgrounds. Bank of America partnered with a nonprofit brokerage to help support the sub-prime program.