B2R/Blackstone - Loan based soley on rental income of property

[Marsha C.]

Any thoughts on if this is a "too good to be true" lending option, or if it's even a good deal?  

In particular, "The interest rate on the loan, which is 30-year fixed, will be between 6 and 8 percent, about twice the rate on a traditional mortgage for an owner-occupant, but far lower than the current cost of investor loans." and, "We're not verifying any income [of the borrower]."

Below is a link to the article, along with a portion of the text that I pasted from the article. The full article has more details and information.

http://nbr.com/2016/06/30/this-private-equity-gian...

This private equity giant wants to give landlords millions — here's how.  

June 30, 2016 | Diana Olick, NBR, CNBC.com

B2R, a mortgage company owned by private equity giant Blackstone Group, just began offering a mortgage product for investors that requires absolutely nothing of the borrower, save a 20 percent down payment on the home. The loan is based entirely on the rental income of the property. Russo intends to use it to pull millions of dollars worth of cash out of the homes he already owns.

B2R's requirements are pretty simple: The investor must hold a minimum 20 percent equity in the property for a purchase, 25 percent for a refinance. The rental income of the property must exceed the owner's costs, including principal, interest, taxes and insurance (PITI), by 33 percent. In other words, if it were a regular, owner-occupant mortgage, it would be like a 67 percent debt-to-income ratio, but in this case, the income is all based on the property, not the borrower. The borrower needs to have a minimum 680 FICO credit score.

"We're not verifying any income [of the borrower]," said Matthew Weaver, a vice president at Finance of America Mortgage, another Blackstone company working with B2R.

The interest rate on the loan, which is 30-year fixed, will be between 6 and 8 percent, about twice the rate on a traditional mortgage for an owner-occupant, but far lower than the current cost of investor loans. Fannie Mae and Freddie Mac have limits on how many properties an investor can own. B2R will lend up to $750,000 per property, and there is no limit on how many properties an investor can own.

.... see article for more....

[Jay Hinrichs]

@Marsha C.  B2r along with Colony capital have made huge in roads to this model.. its far from gone nowhere... but as stated its not simple asset based loan its full blown underwriting.. and their valuations.. and that's were many have issues.. their valuations require the 20% down to all of sudden need to be 50%  and given C class or B class rentals I for one don't blame them.