Lew Sichelman is a seasoned writer with 50 years of covering the housing and mortgage markets under his belt. His biweekly Inman column publishes on Tuesdays.
There’s no doubt that servicemen and women transitioning back to the states after one or more stints in the Middle East sometimes have trouble returning to civilian life.
Some do just fine. In fact, the Consumer Financial Protection Bureau (CFPB) reports that veterans experience a slightly better sense of financial well-being than the average American.
But others suffer from traumatic wounds, mental as well as physical. Still others have difficulty finding jobs or what they want in the way of a career. And in the process, some let their bills slide.
Eventually, though, these veterans right their personal ships. Eventually, too, they buy houses. And that’s when their past financial difficulties can get in their way.
Joshua Potts, the owner and broker of Spartan Realty Northern Virginia, runs into this sort of thing all the time. And often, he says, his client’s rather poor credit scores “are not really indicative of who they really are.”
Most of Potts’ clients are members of or former members of the military. When you are a soldier is in a combat zone, you’re thinking about staying alive, not making sure your bills are paid, he said.
And he ought to know. As a Marine infantryman for eight years, he was deployed several times. He was part of Operation Iraqi Freedom, as well as Operation Unified Response, which helped Haiti after the 2010 earthquake.
GIs often rely on others to pay their bills when they are stationed in combat zones. Some put them on auto pay; others rely on mom or Uncle Joe or maybe a spouse to make sure creditors are paid on time. But too often, the bills are paid late, if they are paid at all.
The bills, says Potts, “are not being paid when they think they are.”
Vets have a unique profile
All the way across the country, Neil Brooks of the Brooks Residential Group in Scottsdale, Arizona, and a Navy veteran who now is a member of the Army Reserves, sees much the same thing.
“Vets have a unique profile,” Brooks reports. “For one thing, they are highly mobile. They move every few years. For another, they have fixed incomes and lower FICO scores. Many are not that good with their finances. Some never had a lot of credit, and most of those have never used it.”
Often, Brooks and Potts run into clients who apply for mortgages with big-name institutions like Bank of America and Wells Fargo. If they are seeking a no-money down loan guaranteed by the Veterans Administration (VA), USAA, or credit unions, like Navy Federal and Pentagon Federal Credit Union, are favorite choices, largely because they advertise low, low mortgage rates.
“When many of my buyers come to me,” Brooks said, “they’ve already gone online and obtained a letter from an automated underwriting system saying they are pre-qualified for a mortgage up to a certain amount. But they haven’t turned in any documentation yet, and they say lenders don’t need this stuff until there is a contract in hand to buy a house.”
That, in the parlance of soldiers and sailors, is when the proverbial s**t hits the fan. Late in the process, buyers then discover their credit scores are too low, or lenders find out that one or more credit accounts have been delinquent, and they reject the application — sometimes so close to their anticipated closing date that finding another lender quickly becomes critical.
In situations like this, both Brooks and Potts usually turn to NewDay USA to get the deal done. “To big-name lenders, you are just a number,” Potts said. “NewDay goes beyond the numbers and looks at your entire story. If NewDay can’t get the deal done, you are probably not going to get it done anywhere else.”
For his part, Brooks occasionally turns to Fairway Independent Mortgage or a local lender headed by a former GI. But “95 percent of the time,” he elects to send his military veteran clients to NewDay.
This is not meant as an advertisement for the Fulton, Maryland-based lender, which works solely with military personnel and veterans. Indeed, it has had some issues. For example, it no longer writes loans in New York, where it was banned because state regulators discovered that NewDay staff were cheating on state-required continuing education classes.
And because of a rash of early loan payoffs, Ginnie Mae, the secondary market outlet for government-backed mortgages, will only allow the company to issue its own pool of loans for securitization as opposed to joining in a pool of multi-issuer loans.
Loans that were paid off within six to 12 months were churned by mortgage brokers (to whom NewDay sold the loans to) who “earned” another round of fees for doing so. Borrowers can end up better off when they refinanced because their mortgage rate was substantially lower, NewDay CEO Rob Posner said. (But as this POLITICO story notes, veterans who decide to refinance can also be hit with substantial fees.)
NewDay goes where other lenders won’t
However, NewDay offers something of a novel approach to underwriting. Besides doing things the old-fashioned way, by hand and with a human, it uses its own proprietary version of the popular FICO score. Unlike FICO, the C-Score includes income and cash flow to insure that these two key factors will remain consistent and within a certain range, Posner said.
Whereas the credit score on loans written by larger VA lenders averages in the 740 range, NewDay’s average is in the mid-600s and sometimes goes as low as 580. And under its Operation Home program, the company will work to move its borrowers into situations where they not only can secure a nothing-down loan, but also a loan with no out-of-pocket closing costs — a true no-cost mortgage.
“I’ve done lots and lots of loans with them,” says Brooks, the Arizona broker. “NewDay takes a deep dive on the front end. To them, it’s not one-size-fits-all. You can speak with them directly whenever and with whomever you want, and they offer a variety of options. When there are challenges, NewDay is there.”
A couple of cases in point: One, a vet we’ll call “George” in his 70s with mobility issues “felt trapped” in his one bedroom apartment in Arizona. He had no cell phone, no computer and wasn’t saving much money.
“We wouldn’t have gotten to first base with any other lender,” says Brooks. “He had all kinds of challenges, so I recommended NewDay. And NewDay hung in there and got him approved. His monthly payment is the same as his rent was, but it will be the same for the rest of his life. Now he has the certainty he was looking for.”
Example two: Rose, a vet who worked at a Phoenix area VA facility had been renting for nine years when she decided to buy her first-ever home. Brooks again suggested NewDay, which held her hand all the way through the process.
“She was very guarded to the point of being paranoid,” the broker recalls. “But now her house payments are lower then her rent. She couldn’t believe it; it blew her mind.”
To which Brooks add, “What other sales job can you get where you get this kind of rewarding feeling, this kind of satisfaction?”
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Lew Sichelman is a seasoned writer with 50 years of covering the housing and mortgage markets under his belt. His biweekly Inman column publishes on Tuesdays.
