B.
Collateral. Collateral will be required for all loans, AELP II
will take a security interest in the vehicle being purchased. The value of the
vehicle to be purchased will be determined using the official National
Automobile Dealers Association (NADA) used car guide. If the purchase price of
the vehicle does not meet the NADA value, then the loan will be denied. Under
the AELP LL program, borrowers must use the purchased vehicle for the purpose
of obtaining and retaining employment or employment training, subject to
Section 7 of the program
rule. Any misuse of the collateral will result in default.
E.
Credit Worthiness and Capacity to
Repay the Requested Loan. The criteria discussed below seek to produce a
reasonable expectation that the applicant will repay the loan in full. The
three most important criteria for an AELP II loan are credit history,
debt-to-income ratio, and capacity to repay.
When the applicant has a history of credit problems, the
applicant must be able to demonstrate that he or she has a workable plan to
deal with those problems. A pattern of adverse credit actions that cannot be
adequately explained and has not been adequately dealt with will result in a
decision not to approve a loan. Similarly, an applicant who does not have
adequate cash available to pay for a new loan after taking care of other
financial obligations will not be approved for a loan. If the applicant has
experienced a bankruptcy, he or she must be cleared from discharge for a
minimum of one year. The following criteria will be examined in underwriting
the loan application:
1.
Proof of Income. An applicant
will be required to provide proof of his/her current income. Acceptable
documentation includes, but is not limited to, copies of IRS income tax return,
up to 3 pay stubs, W-2 form, child support, survivor benefits, an SSDI or SSI
Award Letter.
2.
Timely Payment of Residence Expense. If the
applicant owns or rents his or her residence, he or she must demonstrate the
payments to mortgage lender or landlord have been made in a timely fashion for
the previous 12 months.
3.
Credit History. Experian credit reports, as well
as AELP and AELP II's previous lending experience with the applicant, if any,
are the primary sources for determining the applicant's repayment habits.
Provided the additional criteria below are met, AELP II will accept an Experian
Credit reporting score of 0 (No Score) or 610 and higher. If the applicant has
experienced any of the credit problems describe below within 12-month period
preceding the application, the applicant must demonstrate resolution of the
credit problem, or the loan application will be denied.
4.
Credit Problems Within the
Past Twelve Monthsa.
Delinquency with a creditor. If the applicant has been delinquent
with a creditor within the past 12 months, the applicant must adequately
explain the reason for delinquency and provide satisfactory evidence that the
delinquency has been cured. If any of the following items are on credit card
report and designated as "not paid," evidence of full payment or a payment
arrangement in place will be required: tax liens, civil judgments, levies, or
child support obligations (both payments and receipts). If any of these items
are on the credit report, but designated as paid, the applicant need not
provide additional evidence of payment. If the applicant indicates the child
support payments are being paid, and there is nothing on the credit report or
other available data to suggest otherwise, then the applicant need not provide
additional evidence.
b.
Collection Accounts. Collection Accounts that are non- medical in
nature are not permissible through the AELP II program unless the borrower can
provide evidence that the account has been successfully disputed or
cleared.
c.
Medical
Collections. Medical collections if related to the applicant's
disability are excluded from the credit evaluation, but in all events the
applicant must still demonstrate a positive discretionary income as described
above including the outstanding medical collections.
d.
Education Loans. Applicant
must provide evidence of payment arrangements or deferment, including when re-
payment will begin; education loans are generally not forgiven or discharged in
bankruptcy.
e.
Mortgages. If mortgage loans are being modified or refinanced,
evidence from the lender must be provided. Mortgage foreclosures within 7 years
of the application date are subject to review.
f.
Ability to Repay. After
careful examination of these credit issues, the AELP II program must be
satisfied that the applicant has the capacity and credit worthiness to repay
the requested loan in full. An applicant who lacks acceptable credit may
reapply for a loan later should his/her financial circumstance
change.
5.
Debt-to Income Ratio. AELP II requires documented
proof of all income and debts. Up to a year of the most recent bank statements
may be required to show all recurring debts. In the first instance, AELP II
looks for a debt-to income ratio of less than 50%. "Debt-to-income
ratio" as used here means the relationship of an applicant's fixed
monthly debt to his/her monthly income. AELP II will accept a 50% or higher
debt-to- income-ratio if, but only if, the applicant can adequately document
sufficient cash flow to make loan payments after meeting all other outstanding
obligations and expenses. That is, the applicant must document positive
discretionary income after requested loan payment. The applicant's monthly AELP
II loan payment will be included in the debt-to -income ratio
calculation
6.
Discretionary Income. "Positive Discretionary
Income" means that the applicant has documented reliable income more than the
applicant's monthly expenses, including all necessary and reasonable living
expenses, all debts and expense obligation incurred, and the monthly payment
obligations for the requested loan and/or device to be purchased. Applicants
with a debt-to-income ratio of greater than or equal to 50% must demonstrate
positive discretionary income at least 50% of the applicant's proposed loan
payment. In calculating discretionary income, the following will be included in
evaluation of income and expenses. Expenses include but are not limited to,
groceries, medical bills, utilities (heat, sewer, water, phone, etc.),
rent/mortgage, real estate taxes, auto/transportation costs, clothing,
insurance, education, credit card payments, child support or alimony, and other
miscellaneous debts or expenses. AELP II may require documentary proof for any
or all these expenses. Income includes but is not limited to, all wages,
salary, commissions, interests, pensions, and other sources of financial
support such as employment - related disability benefits, Supplemental Security
Income (SSI), Social Security Disability Income (SSDI) and Social Security
retirement benefits.
7.
Credit Reports. Credit checks will be conducted
on all applicants by using a recognized credit reporting agency.
