Some mortgage brokers must have wondered for a moment whether they were in a time warp when they received an e-mail Tuesday from their Bank of Internet USA account executive.
"No Job, No Income, No Problem!" read the first line, sounding like a subprime sales pitch from the heady days of 2005.
Of course, the product advertised is not as easily obtained as the infamous stated-income loans of yore, which dispensed with traditional documentation.
As the e-mail went on to explain, Bank of Internet was courting elderly, wealthy people who can service jumbo mortgages with income from their investments. To get a $1.5 million loan of this type, for example, one would need about $10 million in documented assets. "The older you are and more you have, the better," the e-mail said.
Still, it made its way to a popular industry blogger, who wrote that the pitch "sounds like the old days" and suggested regulators take a closer look at the $1.6 billion-asset thrift. The account executive was promptly fired.
"This is completely the opposite of who we are," Greg Garrabrants, the president and chief executive officer of Bank of Internet, said Wednesday in an interview.
The e-mail pitch to stimulate broker interest was not approved by the San Diego thrift's compliance department, he said. "We have adopted a cautious and conservative approach to lending."
The incident underscores how hard it can be for mortgage lenders to carve out niches at a time when memories of the underwriting practices (and marketing tactics) that led to the subprime meltdown remain vivid. Strategies outside conventional government-backed lending may be put through the wringer.
Joe Gladue, a senior analyst at B. Riley & Co. LLC, said Bank of Internet is willing to look at a borrower's "whole picture and not be as formulaic." "Their portfolio has very strong credit metrics in terms of FICO scores and average LTV ratios," he said, "and there is good opportunity there."
Garrabrants said the e-mail did a poor job of describing how the thrift evaluates assets of wealthy individuals who may be drawing income from their portfolio to pay monthly obligations. This type of loan makes up less than 3% of the thrift's portfolio, he said.
Bank of Internet requires significant equity: for a $1 million purchase loan, at least 30% down.
"I get beat up every day from people who have a 72% purchase and we don't do it," Garrabrants said.
Rob Chrisman, a 25-year mortgage industry veteran who wrote about the account executive's e-mail on his blog, said salespeople "always push the boundaries."
"You can't get the industry away from this 'credit creep' mentality where, if they can do a 70% loan-to-value loan, why can't they go to 75% or 80%?" Chrisman said.
The account executive did not respond to messages left this week on his cell phone and work e-mail.
Bank of Internet, chartered in 1999, employs several former regulators.
The thrift's chief credit officer, Thomas Constantine, is a former senior examiner at the Office of Thrift Supervision (Bank of Internet's regulator), and its newly hired chief risk officer, Thomas Williams, was a bank examiner for the Office of the Comptroller of the Currency and the Federal Reserve Bank of San Francisco.
A big part of Bank of Internet's current strategy is to work with institutions that need to sell jumbo assets, and the thrift has hired many sales executives from the defunct jumbo lender Thornburg Mortgage (which also offered loans to people with no regular income but ample hard assets).
Tom Millon, the CEO of the Capital Markets Cooperative, a Ponte Vedra Beach, Fla., advisory firm that helps its bank customers sell their loans and has a partnership with Bank of Internet, said there is a need for banks that have "a portfolio appetite with an eye toward securitization — if it ever comes back."
Even the blogger, Chrisman, agreed on that point: "This type of lender is needed out there, and some borrowers need financing that isn't provided by conventional sources."
More than 50% of Bank of Internet's portfolio is in multifamily loans, and it has been aggressive in hiring salespeople for that division from the former World Savings (now a part of Wells Fargo & Co.) and from the failed California institutions First Federal Bank and La Jolla Bank, Garrabrants said. (He once worked at IndyMac Bank but left long before it failed.)
Ally Financial Inc. and ING Direct are Bank of Internet's biggest competitors for online deposits, and the California thrift hopes to attract more checking account customers as larger banks migrate away from free checking, Garrabrants said.