RSU Income on a $4.6M Super Jumbo: When the Underwriter Counted Shares Instead of Dollars

I’m Michael DiVita (DRE #01372066 | NMLS #241655), DiVita Home Finance (DRE #01818285 | NMLS #323700), Tiburon, CA. I’ve been in California mortgage lending since 2000 and founded DiVita Home Finance in 2007. When the bank says no, I find a way. Call (800) 239-1103.

I recently closed another super jumbo, on a $4.6 million purchase. This one wasn’t non-QM. It went through traditional jumbo underwriting, full doc. Both borrowers work in tech, and a big part of both of their incomes comes from RSUs.

On paper it was a strong file. Their RSU income for the previous two years and year-to-date was extremely consistent. But traditional underwriting means you have to fit in the box, and the bigger the loan, the more questions the underwriter asks.

On the jumbo side, it’s a different story. Jumbo underwriters worry that the investor behind the loan will find a problem later and make them buy it back. On this file, it felt like the underwriter wasn’t looking for a way to approve the loan. She was looking for ways to disqualify it.

The Other Side of RSU Underwriting

Two years of steady RSU income isn’t enough on its own. Underwriters also want to see the vesting schedule going forward, about three years out, to make sure the income keeps coming. That’s fair. Nobody wants to count income that’s about to stop.

Here’s where this underwriter went a little too deep. She counted the shares on the future vesting schedule, multiplied them by today’s stock price, and concluded the income was about to drop steeply. On her math, the borrowers didn’t qualify.

Her math was right. Her conclusion was wrong. She was counting shares. These companies pay in dollars.

How Tech Comp Plans Actually Work

I had to make the underwriter and the bank’s investor understand how these companies’ comp plans work.

• Front-loaded 4-year grants. Both companies use a front-loaded grant system. More shares vest in the first year, and fewer each year after. So any vesting schedule you pull will always look like it’s shrinking.
• Annual refreshes. At each annual performance review, the company issues new grants to keep the employee at their target compensation.
• Target comp is a dollar amount, not a number of shares. The stock price at review time decides how many shares get refreshed. If the stock is high, the company needs fewer shares to hit the same dollar target.

So fewer shares on the future vesting schedule didn’t mean less income. Both borrowers’ RSU income had stayed consistent and will stay that way going forward. The share count was irrelevant.

How I Made the Case

An argument isn’t enough in underwriting. You need paper. I found published supporting information on how these companies structure their equity grants and refreshes, and both borrowers wrote strong letters of explanation describing their own comp plans. Together that showed the underwriter and the investor that the income was stable, not falling.

They accepted it, and we closed.

What This Means If You’re Paid in RSUs

• Your vesting schedule will almost always look like it’s going down. Front-loaded grants do that by design. Expect questions.
• Your loan officer needs to understand refreshers. If they can’t explain to an underwriter that your target comp is set in dollars, your income can get cut on paper.
• Have your documents ready. Offer letters, grant agreements, your vesting schedule, and anything from your company that describes how refreshes work. A clear letter of explanation in your own words helps.
• Bigger loans get more scrutiny. On a super jumbo, expect the underwriter and the investor behind them to dig deeper.

Big banks lend from a small mold. A good file still needs someone who understands it to explain it. That’s the job.

Frequently Asked Questions

Related Resources

• RSU and Equity Compensation Mortgages in California
• Jumbo Loans in California
• Mortgage Broker vs. Bank in California

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