Note Grades? The difference between an A note and C note.

[Jonathan D.]

Eddie Speed talks about A notes and C notes. What's make a note a C note vs an A note?

Thanks

[Michele Apt]

I was wondering the same thing also hearing the reference at Note Expo so I did some spidey searching with Google and found this for "A" notes.  

"An "A paper loan" is just as it sounds; a loan with the highest credit grade possible. It normally is going to have the best interest rate, lowest cost, and least amount of non-desirable features when compared to B (often referred to as "Alt-A") and C (or "subprime"). Banks give loans with an A paper grade all of this due to a number of factors. The primary being the low risk of an A paper borrower in defaulting on the loan.

These are not absolutes but an A Paper loan usually falls under these guidelines....

1.) The borrower has a 680 mid-FICO score or higher
2.) The borrower has verifiable income and the loan's Debt-To-Income ratio is less than 35%
3.) The loan's Loan-To-Value ratio is less than 80%
4.) An A Paper borrower normally has at least two months mortgage payments in "liquid reserves". This can be in a checking, savings, investment, or even retirement accounts at any financial institution
5.) The borrower's credit report can not have any (non-medical) outstanding collections. Even if their credit score is above 680. "