In the years following the 2008 financial crisis, many aspiring homeowners found that lenders’ underwriting requirements had increased to such a degree that many creditworthy borrowers were finding it difficult or impossible to qualify. Just over ten years later, the underlying challenges apparently still remain. The Urban Institute recently reported that over 45 million U.S. consumers are considered “credit invisible,” meaning they either lack credit history or have credit that is considered un-scorable. But are these borrowers all bad bets to pay their mortgages? Are they creditworthy?
Let’s consider why someone might fall into this “invisible” (but potentially creditworthy) category. According to the Consumer Financial Protection Bureau (CFPB), credit invisibles include young families just starting out, borrowers in challenges or those weighed down by a recent credit event. Consider, though, that many of these borrowers are indeed successfully making regular payments on rent, cell phones, student debt, and more. As the mortgage industry and credit bureaus work towards getting a more holistic picture of an individual’s creditworthiness, these metrics will help some of the “invisibles” emerge from credit purgatory.
Clearly, consumers become credit “invisible” for a variety of reasons. The CFPB reports that many young consumers are considered credit “invisible” simply due to their lack of credit history (despite the fact they may be making regular payments that aren’t captured on a credit report). Further, it is not just the young that can be negatively impacted by a credit score’s limited view. Lenders have discovered (post-financial crisis) that major events in the recent past, like a foreclosure, are not always a perfectly reliable indicator of the individual’s current creditworthiness.
Finally, in an era of decreased affordability, even a small dent in a potential borrower’s credit score can be more than enough to keep them from homeownership. Lenders must be aggressive in finding ways to serve more creditworthy borrowers, including non-QM options. Verus Mortgage Capital offers responsible solutions for credit-impaired borrowers, including self-employed and foreign nationals, with loan amounts up to $5 million and LTVs up to 95%. Income-only options are available, as well as recent bankruptcy, foreclosure or short sale / DIL, and FICOs down to 500.
If you’re ready to help turn credit “invisibles” into customers, and need an experienced, strategic partner that offers competitive pricing, it’s time to reach out to VMC.