The Asset Loan—A No-Hassle Loan
What if you could walk into a bank, show them your bank statement and get immediately approved for a no-hassle mortgage?
Without having to show tax returns, explain what you do for a living, show that you are currently working or even getting paid anything, nor bring tons of paperwork or justify every single enquiry on your credit report?
Surely this exists right?
Not for the 99% of us.
Unless you have a Private Banking Relationship with the likes of JP Morgan Chase or Bank of America.
JP Morgan Chase's private banking relationship starts at $5 million. You need to move the funds to their asset management platform. That's their bare minimum, you really need about $10 million to have access to their premium services.
For most people, having the money is not enough, the bank still wants to pry deeply into your personal and business life.
What if you are in between jobs and have substantial savings? what if you are a real estate developer, movie producer, successful artist, highly paid computer programmer or game designer negotiating a contract? what if you received a big inheritance but technically don't have an income?
In other words there are people who possess substantial means but that technically "don't have a job" are not employed or are in between projects.
Even if you ARE employed, you could still find yourself being denied for a mortgage even though you have substantial means!
Couple of years ago one of my clients, a successful financial advisor, came to me with an interesting problem:
His company offered him the possibility of going 1099. Meaning he would cease to get a salary, would get a promotion, and he negotiated to be paid as a 1099 independent contractor, therefore regaining control over his income and making more money!
He had substantial savings and wanted to buy a $1M home.
He could not find a mortgage lender to approve him for a mortgage!
Picture this: he had substantial savings, a stellar credit score, he was making more money than before, had a 10+ years track record at his profession and was employed!
However he was considered "unqualified"! why? because by not having a salary, he was now "un-employed", his 1099 income was re-classified as "Self-Employment" and now he needed two years of self-employment to be "qualified".
Another case: years ago I sold a home in Pacific Pallisades, a posh area in the West Side of Los Angeles, the buyer of this home had recently sold his business for $140M, however it was difficult for him to get a loan from one of the major lenders - painful. The Seller of this home, when he bought it, was denied by the same major lender, in the end he only got the loan because he was a high net worth individual and threatened to close all his accounts with this major lender!
So if this situation can happen to very well qualified people, then what about the rest of us mortals?
One of our amazing mortgage bankers came up with a solution!
After the debacle in mortgages and recession of 2008-2011, lawmakers came up with a whole new set of more stringent mortgage regulations to ensure and try to prevent these events from happening again.
One of these new regulations is know as the "Ability to Repay" or most commonly known in our Industry as "ATR".
As the name implies, Mortgage Bankers and lenders in general, must follow a tightly regulated procedure to ensure that borrowers have the "Ability to Repay" their mortgages.
You might think this is obvious, right? but pre 2008, lenders were lax in establishing the Ability to Repay of borrowers.
After 2011, the pendulum swung sharply the other way and since then it has not been that easy to establish ATR for many borrowers - such as the examples that I gave you earlier.
Our amazing mortgage banker's lawyers reasoned that if a borrower had available to him/her:
The Loan Amount + Closing Costs + $1
He then, theoretically and practically did not need the loan since he had all the funds already in his bank account and he then has established the Ability to Repay the mortgage - which is a requirement.
The regulators did not think about this interpretation of their ATR guidelines and it took the team of lawyers some time to get this through, but they did!
We are now able to process a mortgage loan on the strength of the bank balances alone, as long as for the last 6 months you can show that your bank balance has had at the minimum:
Loan Amount + Closing Costs + $1
I'll give you a concrete example: remember our client the financial advisor? who was "unqualified"?
That's a loan we could now do! based on his bank balance!
How about the business owner with $140M in the bank but "no business" since he sold it? we could do his loan too!
You don't need $5M or have a private banking relationship with a major Bank.
What you need is a minimum credit score of 680 (and if you are not there, we'll help you), six months of a bank balance which is equal or more than:
Loan Amount + Closing Costs + $1
and assuming the property you are buying is not a dump...the loan is done!
Some people reading this might wonder, why would a person get a mortgage if he has the funds in cash to make the purchase?
The answer is, in the case of a purchase the buyer has other uses for these funds, they are already earmarked for their business or they are receiving interest income or their represent their liquid savings, so they would rather get a mortgage and keep being liquid.
In the case of a refinance the case is similar. Yes, the borrower has the funds, yes the borrower could pay off the existing mortgage at any time, but for business and strategic reasons he would rather get a mortgage and remain liquid.
Who is this useful for?
Anyone who technically does not "work" but has enough savings
A highly paid professional such as a Doctor, Analyst, Computer Engineer or Programmer, Artist, top Realtor, CEO
Someone like a movie producer who is in between projects
Someone like a real estate developer who is in between projects
A business owner with either a successful business or a complex business structure
Someone who is looking for a fast & light touch loan experience
A busy executive that cannot afford the time it takes to do a regular mortgage
A retiree who is no longer working but has savings
Someone who received an inheritance or a big windfall and wants to preserve it
Anyone with a strong bank balance but not employed, or self-employed or an entrepreneur.
A real estate investor who wants an institutional loan rather than an expensive hard money loan
I hope this article has added value to your possibilities.
This is a niche lending product and for the right person it is a powerful business tool!
Feel free to brainstorm with me. We include the brainstorming as part of our loan fee, you only pay on success and we are a relationship-based mortgage lender.
