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This time, we’re going to talk about two proprietary algorithms we’ve developed internally to better underwrite deals. In addition to the LTV discussed in the previous section, we also calculate two other things: a power of sale/foreclosure cushion and the homeowner’s repayment ability. It’s highly likely that nobody uses our methods to calculate these two things, but we absolutely must use our own methods and adjust our underwriting conclusions based on the results. Calculating these two factors involves gathering a lot of data discussed in the previous sections, ultimately leading to conclusions about whether to lend, how much to lend, and... Continue reading

Continuing from the last post, after all the underwriting, what truly matters in the end is LTV. If the results are favorable, even if there are additional debts on the property, various plumbing issues, low credit scores, or if the property is located in a remote area, which most people would immediately reject, it’s still possible to proceed with the application. Conversely, if the calculated results are unfavorable, even with a credit score over 800, a desirable property location, good property condition, and stable homeowner income, the application cannot be approved. Why is that? Let’s delve into what needs to... Continue reading

Continuing from the last post, we’ve roughly covered the underwriting process. However, the most crucial aspect is the final calculation. What exactly are we calculating?At the heart of it all is calculating the LTV (loan-to-value ratio) and the property’s debt ratio, which is essentially (existing debts on the property + applied loan amount) divided by the property’s market value. Let’s illustrate with an example. Suppose a property is assessed to have a market value of $1 million, with an existing bank loan of $600,000. If the homeowner applies for a second loan of $100,000, then the LTV would be calculated... Continue reading

Continuing from the last post, another key point in title check is examining the property rights. This is quite interesting. The question I’m asked most often is: What if there’s duplicate mortgages? I was puzzled at first, and the person asking seemed surprised that I didn’t know. It turns out, in some countries, this situation can occur due to their national housing system not being centralized/electronic. However, it’s almost unheard of here because of the centralized registration system. Duplicate mortgages are impossible unless there’s malicious fraud and title issues were not spotted from the beginning. Even if such a situation... Continue reading