By Jolene Johnson
More than 2 million people call Queens, N.Y., home, and almost half of them were born outside the United States. In this community—which is the most ethnically diverse in America—there are hundreds of thousands of immigrants who have the desire and the means to own their own homes but may lack the documentation typically needed to purchase one.
Enter Quontic Bank, a Community Development Financial Institution (CDFI), which wants to make the American dream of owning a home come true for these folks. “Part of our mission is to be able to foster home ownership and real estate investment in low-income communities or to low-income consumers,” says Steven Schnall, chairman and CEO of the $351 million-asset bank, which has been lending to customers in all five boroughs for eight years. “What we found in the ethnic communities, in particular, is a lot of these folks are very creditworthy borrowers with great track records of managing debt, paying their bills on time and saving,” he says. “But, oftentimes, they couldn’t demonstrate the proper documentation to be able to qualify for a mortgage under the new and very rigid Dodd-Frank requirements.”
The CDFI designation meant Quontic Bank was able to create its Lite Doc Loan Program two years ago. Schnall and his team of loan officers, many of whom are immigrants themselves, were already aware of two important things. First, their customers have a reputation for being fiscally responsible. “Whether their loans are Full Doc or Lite Doc, the loan performance has been literally impeccable,” Schnall notes. “We virtually had no late payments, no defaults, no losses.” Second, there was “a lot of pent-up demand of buyers who had the wherewithal to buy but just couldn’t, because Dodd-Frank regulated them out of the market and made it impossible for them to get financing.”
Now, Quontic Bank’s program means many immigrants who have worked in restaurants, construction and other industries for 10 to 20 years, and have been racking up their savings for the same amount of time, are able to purchase homes. Steven Ho, a senior loan officer at Quontic Bank who generates about 90 percent of its Lite Doc loans, says among his clientele are a restaurant owner who purchased a home with her son and daughter-in-law, as well as two brothers who work in construction and bought a multifamily property in Queens so they could live in one unit and rent out the other.
Both of these bank customers are from China, more specifically from the province of Fujian. “Asian buyers are driving prices in certain areas, like Flushing or Corona or Elmhurst—a lot of the areas in Queens and parts of Brooklyn,” Ho says. “They have the buying power. They’ve been here long enough to save the money, and we’re able to give them the loan that they need.”
So far, with the Lite Doc Loan Program, Quontic Bank has processed close to $75 million in home loans, with an average loan size of just under $500,000. Approximately 140 customers have qualified for the Lite Doc Loan Program. “It’s really a drop in the bucket compared to what the possibilities are,” Ho says.
In addition to New York, Quontic Bank has home mortgage offices in Miami, Virginia, Massachusetts, Georgia and Indianapolis. And, in February, Quontic Bank started offering its Lite Doc loans nationwide. “We’re expecting and projecting to triple our volume in this product in 2018,” Schnall says.
To be able to get a Lite Doc home loan, borrowers are required to provide one month’s worth of bank statements for asset verification, and Quontic Bank validates any large deposits into the borrower’s bank account. “Typically they’re gifts, and most of these loans include significant family member gifts,” Schnall says. “So, we have to trace the gifts by getting gift letters and proof of the donor’s funds moving into the borrower’s bank accounts.”
For self-employed borrowers, traditional required income documentation includes two years of tax returns and a year-to-date income and expense statement. “What we require [for a Lite Doc loan] is only a 12-month income and expense statement accompanied by a letter from the borrower’s accountant,” Schnall says. “So we avoid the need for tax returns, and that helps the process significantly.”
“Part of our mission is to be able to foster home ownership and real estate investment in low‑income communities or to low-income consumers.”
—Steven Schnall, Quontic Bank
For employees, traditional income documentation includes W-2s and pay stubs. Instead, Quontic Bank requests a written statement from the borrower’s employer that indicates how much the borrower earns. If the employee works in the restaurant industry, the employer can also account for his or her tips, thus giving a more accurate income report.
Other requirements include that a borrower can put at least 25 percent down; has six months of principal, interest, taxes and insurance (PITI) in liquid reserve post-closing; and has a minimum credit score of 680. It used to be 700, but with the community’s excellent track record, Schnall says they felt like they could relax the “extremely conservative” credit criteria to “open it up to a wider audience.”
Schnall notes that all mortgage loans come with four areas of risk: a person’s ability to repay, the amount of equity they have in the property, their credit, and the property itself. “We’re still checking all the boxes—the only box we’re relaxing is the income documentation box,” Schnall says. “The fact that these borrowers are putting down, on average, almost 50 percent and have FICO scores, on average, of nearly 740, you almost don’t need to know how much money they make, because they are never going to miss a payment because they have so much skin in the game—and a great history of paying bills on time.”
Breaking down language barriers
In Queens, N.Y., more than 100 nationalities are represented and more than 160 languages are spoken. And members of the community feel right at home at Quontic Bank, where loan officers speak a dozen languages, including Mandarin, Greek, Spanish, Arabic and Urdu.
“Being able to communicate with them in their own language and in a way that reflects their culture makes it a lot easier for them to navigate what’s a very complicated—and important—financial transaction for them,” says chairman and CEO Steven Schnall. —Jolene Johnson
Jolene Johnson is a writer in Minnesota.