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Nonconforming Programs Hit Market

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A host of mortgage programs for borrowers who don’t qualify for agency loans has been launched by New Penn Financial LLC. The company, which originates through direct and third-party channels, hopes to reach $1 billion in annual portfolio originations next year.

Dubbed the “core product series,” the programs target borrowers with strong credit, disposable income and significant reserves but don’t qualify based on guidelines from the Federal Housing Administration, Fannie Mae or Freddie Mac.

“What we’re trying to do is develop a product that we think, quite honestly, is a real good credit risk,” New Penn Chief Executive Officer Jerry Schiano said in a phone interview.

But he explained that the company is “not trying to bring back subprime product.” Instead, he sees opportunity in “just-missed” agency loans.

Loan amounts can be as high as $2 million, and there is no minimum.

Loan to values can go as high as 85 percent without mortgage insurance — though lower LTVs are required for most of the programs. Schiano expects typical loans to be in the neighborhood of 75 percent LTV.

The lowest available credit score is 660.

The expanded criteria are designed to help borrowers who just missed qualifying for agency guidelines. This includes borrowers with credit blemishes, investor properties and owner-occupied properties that require rehabilitation. Foreign nationals are also being solicited.

LTVs on investor properties and foreign national loans are limited to 65 percent LTV.

Depending on the attributes of a specific loan, pricing could wind up around 100 to 150 basis points higher than conforming rates.

The company sees its programs accommodating borrowers who can document income through alternative methods that might not be acceptable in agency lending.

“There are a lot of people who really make money,” Schiano explained, “but you can’t qualify them the way the government programs are.”

However, the program is not for W-2 employees who actually don’t have the necessary income, he added.

Schiano cited an example of a highly compensated attorney who left a large law firm to take a political job then returned to the firm as a partner with a draw. While he now has valuable contacts and makes good income — he is not a candidate for an agency loan.

The Plymouth Meeting, Pa.-based lender was empowered with capital to fund these loans when it was acquired in June by Shellpoint Partners LLC. The senior management team of Shellpoint includes three executives who co-founded bankrupt C-BASS.

Three-year-old New Penn will originate the loans, while Shellpoint will carry the loans in a portfolio until they are sold or can be securitized, Schiano said.

New Penn says it employs as staff of 400, is licensed in 42 states and operates 24 branch offices. Business will be originated through retail, wholesale and correspondent channels — though the correspondent operation will likely not start buying loans until Sept. 1.

Schiano projects that the program will generate $1 billion in originations during 2012.

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