Definition of "Nichification"
Proliferation in the number of loan, borrower, property, and transaction characteristics used by lenders to set mortgage prices and underwriting requirements. Nichification is unique to the U.S. and reflects the importance of secondary markets there. Any characteristic identified by investors in the secondary market as affecting risk or cost is priced in the secondary market, and then in the primary market. The following is a partial list of factors used in pricing or in setting qualification requirements. Transaction Characteristics: Loan Amount; Desired Lock Period (in days); Down Payment (as percent of property value); Term; Prepayment Penalty (if any). Borrower Characteristics: Credit Score; Ratio of Borrower Income to Monthly Housing Expense; Ratio of Borrower Income to Total Housing Expense. Property if Not Single-Family Detached: Two-Family; Three-Family; Four-Family; Co-op (building is owned by a cooperative association in which members own shares); Condominium (borrower owns unit in a project in which some facilities are owned in common); Condominium More than Four Stories High; Manufactured (house was not built on site) Attached ('Twin,' 'Triplex,' 'Row'); Planned Unit Development (house is located in a PUD with a homeowners association that charges dues) Loan Purpose if Not Purchase for Permanent Occupancy: Purchase Second Home (Vacation Home); Refinance; Cash-Out Refinance (loan is larger than old loan balance by an amount larger than the settlement costs); Investment (home is being purchased to rent out). Documentation if Not Standard: Alternative Documentation (borrower wants to provide payroll and bank statements rather
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