David M. DeCubellis is a vice president of Navigant Credit Union and responsible for overseeing the residential lending department and secondary market activity. He has been a mortgage-lending professional for 14 years.
He is a second vice president of the Rhode Island Mortgage Bankers Association and serves on the Housing and Opportunities Committee for the Greater Providence Board of Realtors.
DeCubellis is a coach for the Lincoln Youth Soccer Association.
PBN: Navigant Credit Union has just announced its New Beginnings Loan to help qualifying customers to buy a home, even if they’ve had a foreclosure, a short-sale or a low credit score. What was the reason Navigant decided to offer this type of loan?
DECUBELLIS: At one time, unemployment was over 11 percent in our state. Many of those people owned homes and some fell victim to an uncontrollable downward economic spiral. There were people who depleted their personal savings and retirement funds to try and do the right thing. Now that we’re seeing a slow recovery to our state’s economy, we are hearing more and more stories from these economically impacted applicants. Navigant has listened and felt as though people needed a helping hand. They needed a credit union willing to give them a second chance. The New Beginnings Loan was designed to help someone who has had a past credit event and has taken the necessary steps to reestablish their financial lives. For those who qualify, we want to offer a lower cost alternative to an FHA loan with conventional interest rates and lower monthly mortgage insurance premiums.
PBN: What are the guidelines for the New Beginnings Loan program? Isn’t this a high-risk type of loan? What’s the return on investment for the bank?
DECUBELLIS: The primary guideline for the loan is to determine that the applicant’s credit or life event that caused the foreclosure or short-sale has been rectified. In addition, the applicant must have taken the right steps toward credit recovery. Applicants who qualify can purchase a new home under the New Beginnings Loan with as little as a 3 percent down payment. On the surface the loan may appear to be of higher risk, but our initial assessments suggest that the New Beginnings Loan will perform similarly to traditional loans. Supporting the community, helping with the recovery in the real estate market and providing a second chance for individuals are the returns that Navigant Credit Union expects for offering this loan program.
PBN: The new Qualified Mortgage, or QM, rule goes into effect in 2014. What are the regulations on that? Does it impact Navigant’s New Beginnings Loan Program?
DECUBELLIS: There are many components to the new government mandated Qualified Mortgage rule. The primary regulation limits the borrower’s overall debt-to-income ratio to 43 percent.
It is Navigant’s intent to follow the government’s ability-to-repay guidelines, which are consistent with our own underwriting standards. We intend to do the same with our New Beginnings Loan program.
PBN: What’s your perspective on the real estate market in Rhode Island? Is the New Beginnings Loan program an effort to encourage home buying or a response to market demand? Are you getting mortgage applications from any particular income segment or geographic area?
DECUBELLIS: The most recent trends in real estate transactions have been positive. Economic development will play a critical role in the recovery of the real estate market. On a positive note, Navigant has seen new construction volume more than double from 2012 into 2013. New Beginnings was created after listening to our applicants who had past credit challenges. Our response was to develop a mortgage product that offered a helping hand. Our experience showed that all levels of income could be subject to past economic challenges, so it was important to us to not to limit our initiative to certain income levels.
PBN: There’s a lot of competition among banks in Rhode Island, a lot of regulations and the lingering shadow of the subprime mortgage meltdown. What do you see in the longer-term view of the mortgage market in Rhode Island?
DECUBELLIS: The persistent high level of unemployment has not helped the mortgage and housing market. As long as it continues, the market will still have challenges. Job creation is critical to the long-term recovery of the housing sector. I believe the mortgage markets will slow due to rising interest rates and the adverse impact of QM loan underwriting. With rising interest rates you’ll see a reduction in activity around reduced affordability. Additionally, we could see declining home values due to sellers having to reduce their sale prices as buyers become subject to tighter underwriting guidelines.