KBRA Releases Research – CDFIs and the Return of the ‘No-Doc’ Loan

KBRA releases a report on the return of no-documentation (no-doc) loans to private label securitization (PLS), with a focus on loans originated by Community Development Financial Institutions (CDFI) that are exempt from Ability to Repay (ATR) rules.

The report addresses several key questions regarding this type of lending, including:

• What is the performance and volume history of consumer low- or no-doc (together, non-full doc) loans?
• To what extent have CDFI loans proliferated in PLS?
• What are the consequences of the potential return of “affordability” products?
• Are no-doc loans a positive from an environmental, social, and governance (ESG) perspective?
• What may be the unintended consequences of the CDFI/ATR exemption?

KBRA concludes that given prudent guidelines and originators acting in good faith based on soundly developed underwriting, no-doc loans can strike a balance between expanding the availability of housing credit while avoiding harm to the borrowers such loans seek to help.

Click here to view the report.

Related Publications

• CDFI Loan Levels in Private-Label RMBS Expected to Rise
• RMBS Trend Watch: The Evolving RMBS Landscape in 2022

About KBRA

KBRA is a full-service credit rating agency registered in the U.S., the EU, and the UK, and is designated to provide structured finance ratings in Canada. KBRA’s ratings can be used by investors for regulatory capital purposes in multiple jurisdictions.

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