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Elite-status mortgages are making a comeback
By Nancy Sarnoff - Houston Chronicle

Dwayne and Sarah Van Wieren recently closed on a loan for a four-bedroom home in
Houston's affluent West University neighborhood. Their down payment: Zero.
“We qualified for a million-dollar loan with no money down,” though that's not what they
paid, said Dwayne Van Wieren, an accountant for a big downtown Houston firm.

Even though in today's market it can be tougher for everyday borrowers to get
mortgages, no- and low-money-down loans still are available. But not everyone qualifies
for such a deal.

Van Wieren is a CPA and his wife is a tax attorney. Their jobs and incomes allowed them
to get 100 percent financing from their bank, BBVA Compass, and avoid paying
mortgage insurance through a special home-lending program for borrowers with lucrative
professions.

They also opened a deposit account, from which the bank withdraws their monthly
payments.

“We're surprised more banks don't do it,” said Jeff Manley, executive vice president in
Houston for BBVA, which has been offering what the industry calls “professional
mortgages” in the area for about a decade. The bank made Van Wieren's loan.

The program also is offered to practicing physicians, dentists, and certain high-level
executives at public companies. It's extensive in San Antonio, where it's been offered for
more than 10 years, BBVA officials say, as the bank has had a big focus on the medical
community.

Manley said some of the larger banks used to offer similar professional mortgage
programs in the past but cut back on them during the mortgage crisis.

In 2008, Bank of America stopped making loans with 100 percent financing to doctors
but just resumed the program — slightly modified — this month.

After the mortgage bubble deflated, investor demand for these high-value loans, which
sometimes were bundled and sold, dried up. Consumer demand, however, never abated.

“We received quite a bit of demand to bring it back,” said Vijay Lala, a product executive
with Bank of America.

While there's still no secondary market nationwide for this loan, the bank said it is
originating them again for sale in the future.

Bank of America's program is directed at doctors and dentists coming out of medical
school who do not have the 20 percent down payments typically required for jumbo
loans: those exceeding $417,000. When considering their credit, the bank does not take
into account the borrowers' student loan payments.

Borrowers must put at least 5 percent down, and mortgage insurance is required. They
also must have a deposit account with Bank of America and a credit score of 720. The
maximum loan amount is $850,000.

Established doctors, too, can refinance their homes through the program, which is
offered nationwide.

While it is most popular in areas with high concentrations of medical schools, the bank
may expand the program to include other professions.

Some professional mortgages require depository relationships, said David Zugheri, co-
founder of Envoy Mortgage in Houston. “If you don't have money to deposit, you're not in
that group,” he said.

Still, he notes, there have been other programs available for teachers, firefighters and
police officers.

Home loans made to high-paying professionals have performed well over time — even
without down payments, Lala and other lending experts said.

Bank of America could not provide default rates, but said they generally were very low.

Many of these specialty mortgage programs were started as a way to develop
relationships with young professionals just finishing their medical residencies or law
degrees.

By providing financing for their homes, the banks were laying the groundwork for
business down the line when their borrowers needed financing for a medical practice or
law office.

“The whole purpose is to develop a business relationship with that client so they have a
future ongoing relationship with them,” said Ken Jacobson of Hometrust Mortgage Co. in
Houston.

It makes sense for banks to make these types of loans to doctors, lawyers and CEOs
because they usually have more stable incomes and generally make better customers,
said Jim Gaines, an economist with the Texas A&M Real Estate Center.

“They're typically a lower-risk category of borrower than the average guy on the street,”
he said.

Lenders do not enter into these agreements lightly.

Jacobson said banks scrutinize their borrowers' credit histories, and the majority of the
loans perform well.

After the bust, however, some banks stopped offering these types of loans because they
were making too many of them, and it did not look good on their balance sheets,
Jacobson said.

He is not surprised to see some come back.

“Everybody's been through the mortgage crisis, and they realize those loans are still
good loans,” Jacobson said. “They still have a lot of potential to build good business.”