“I had a woman who inherited property in a very trendy up and coming Washington, DC neighborhood and she needed a renovation loan. She talked to banks for two years and nobody would give her a loan. When she came to us, her property was worth about $300,000, after getting a loan and doing the renovations, it is worth more like $900,000. I introduced her to a bank which now has her loan. We help people create wealth and I am very proud of that. We helped her create an income stream.
“Nonprime lending is just common sense. Lenders try to put people in a matrix. If this is your credit score and this is your income and this is your LTV and this is how much you want to borrow, then this is your loan, this is where you fit in the grid. That leaves a lot of good people on the sideline,” he said.
“I’m not trying to reinvent the wheel. Lending used to be more subjective. Loan officers would talk to people to figure out what they needed and to assess risk, and that is what we do today.”
Operating in the subprime space and making renovation loans, he said, does not mean making riskier loans.
“There are lots of good people who make lots of money but they can’t get bank loans for one reason or another. We talk to them, we educate them.
“We just closed a deal with two doctors. They had some medical issues, they had a tax lien, they’d had a failed business, and they had a 15 year loan. We moved them into a 30 year, paid off their other debts and they are still 50% LTV. They make plenty of money, just a great customer, but no bank would touch them. They had had a loan modification that didn’t work out. We could look beyond all that to get them a good loan. So now they have a year or two to clean things up and probably get into a traditional loan.”
And that, he said, is how it goes.
“People do use them as bridge loans. We aren’t--and should not be- anyone’s long term solution. We give people the ability to improve their situation, improve their properties and refinance and position themselves for future success. People who come to us are rewarded for their hard work. It makes me happy when we get a payoff request.”
If you sense that he likes telling client success stories, you are right and he uses such stories to drive web traffic and make the phone ring. The ACC website has a column called “Recently closed loans” where they describe the client, the client’s need, and the solution. Many of the stories involve renovations of once troubled properties.
He said consumers benefit from subprime lending and added that he is especially proud that ACC has been CDFI (Community Development Financial Institution) certified for something like 20 years.
Senko said he thinks the market is strong, adding that he does not see any signs of a bubble.
“Any talk of a bubble is crazy, it is patently false. What created the bubble was people being over leveraged. All of our clients have at least 20% down. We’re a portfolio lender. People have to qualify. We always ask what is our risk tolerance? Can we work with a self-employed person, can we make that leap of faith? That is where judgement comes in.
“People can’t expect property values to go up 10% a year indefinitely. If you believe it will, you can get hurt. We will have slow growth and that is a good thing; that is how it should be. I think the market is good and is slowly improving. The economy and jobs are stable,” he said.
At ACC Mortgage, a large part of their subprime lending involves renovation loans, and owner Robert Senko is proud of how his company is able to help people create wealth by lending them the money they need for renovations when banks and traditional lenders won’t.