Prolific non-qualified mortgage lender Change Lending will become a member of the Federal Home Loan Bank of San Francisco.
The firm, owned by Steven Sugarman's The Change Co., expects to buy around $7 million of capital stock in the FHLB to gain membership by the beginning of May, it said Wednesday. The application was granted based on metrics including Change's leverage and operating liquidity ratios and profitability figures.
Change Lending is a certified community development financial institution, a government designation which allows it more flexible underwriting as it meets underserved lending thresholds.
"We welcome a partnership with the FHLB-SF to enhance our strength and reach as America's CDFI," said Sugarman in a press release.
The San Francisco home loan bank declined to comment Wednesday.
Change Lending was the nation's top non-QM originator last year according to Scotsman Guide, reporting $4.1 billion in non-QM volume. It closed around $2 billion in securitizations in the past two years, including in 2022 the first AAA-rated securitization of CDFI-originated home loans.
The U.S. Treasury Department recertified Change's CDFI status in February, a few months after the sides settled a short-lived legal battle. Change sued the CDFI Fund last August after it disputed its origination numbers to underserved borrowers of which its certification relied on.
The Southern California-based Change came under scrutiny last June when Sugarman's former chief of staff Adam Levine accused the lender of mischaracterizing its data to achieve CDFI certification. Change fired Levine last March over multiple workplace misconduct accusations and is suing him for allegedly attempting to extort $10 million from the company. That lawsuit in a California court remains pending.
The FHLB Bank of San Francisco last month began accepting home loans underwritten using Vantagescore 4.0, one of two hotly debated credit scores. The depository's president and CEO said the move would allow 5.5 million more local residents to be scorable for a home loan application.
The Federal Home Loan Banks are required by law to put 10% of their earnings toward affordable housing. That amounted to $350 million of the system's $7.3 billion government subsidy last year, a Congressional Budget Office review found.
The CBO's review says it's unclear whether the FHLBank's billions of dollars in dividends to its members led to lower interest rates on mortgages. The FHLBanks' regulator, the Federal Housing Finance Agency, completed a major review of the system last year and is mulling changes to the system.
President Biden last week also proposed the banks double their 10% contribution, which could raise nearly $4 billion more for affordable housing over the next decade.
