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NSF Counter: Counting NSFs and Overdrafts on Bank-Statement Loans

Oct 16, 2026 · Varaxon Technologies LLC d/b/a StatementReady

The examples below are quoted from specific lender documents as published when checked. They aren't universal rules. Always use the current guidelines for your program.

On a bank-statement loan, the statements are the income documentation, so underwriters also read them for signs of cash-flow stress. NSF (non-sufficient funds) and overdraft activity is one of those signs. Most non-QM programs set a tolerance, but the counting rules differ from lender to lender. Here's how three published programs define and count them.

What counts as an NSF?

One published non-QM program snapshot defines an NSF as any of the following [1]:

  • the bank designates the transaction as an NSF
  • the transaction is declined
  • the transaction results in a negative balance
  • the transaction includes overdraft protection fees that are not tied to a prearranged link to a savings account or line of credit

Same-day occurrences count once

Two programs say that multiple NSFs on the same day count as one occurrence. [1][2] Check your lender before assuming this.

Overdraft protection can be excluded, with conditions

Occurrences covered by a prearranged overdraft link may not count.

  • The Plaza snapshot: you can exclude occurrences covered by a linked depository account if statements for the linked account show all of the following [1]:

- it had enough balance at the time of the transfer

- it never reported zero or a negative balance during that statement period

- it didn't itself receive overdraft protection during that period

There are separate conditions for a linked line of credit. [1]

  • Another program: overdraft-protected occurrences don't count toward its 3-occurrence limit "as long as the account does not reflect a negative balance." A satisfactory LOE is still required for NSFs and overdrafts. [3]

Published tolerances

Program documentLook-backTolerance
Plaza Home Mortgage, Solutions Non-QM 1 Product Snapshot [1]Most recent 12 months1+ occurrences in the most recent 3 months → up to 3 in 12 months allowed. 0 in the most recent 3 months → up to 5 in 12 months.
Newfi Correspondent, Delegated Plus NQM matrix (effective Jan 13, 2025) [2]Most recent 12 months"1 / 3 / 3" and "0 / 3 / 5" tests (same structure as above)
Bank Statement product sheet (© 2025 Silver Hill Capital) [3]Last 12 monthsNo more than 3 NSFs

Arch Mortgage Funding's bank-statement worksheet includes a "# of NSF Items" column for each month. It notes that "certain tolerances on NSF items apply" and points to its Non-QM Program Manual for the details. [4]

Exceptions are often possible. The Plaza snapshot, for example, describes exception requests that need a borrower LOE explaining the cause and how it was fixed, plus compensating factors. [1]

How to count NSFs by hand

  1. For each account and month, list every NSF fee, returned item, declined transaction and negative-balance day.
  2. Merge multiple occurrences on the same date into one, if your program allows it.
  3. Remove overdrafts covered by a qualifying linked account or line of credit. Keep the linked-account statements as evidence.
  4. Count the occurrences in the most recent 3 months and in the most recent 12.
  5. Compare the counts with your program's tolerance. If you're over, prepare the LOE and compensating factors before submitting.

Sources (checked 2026-10-15)

  1. Plaza Home Mortgage, Solutions Non-QM 1 Product Snapshot (PDF): https://www.plazahomemortgage.com/DownloadFile.aspx?FileName=Solutions+Non-QM+1+Product+Snapshot.pdf&FilePath=%5CDocuments%5CPlazaPrograms%5CSolutions+Non-QM+1+Product+Snapshot.pdf
  2. Newfi Correspondent, Delegated Plus NQM Product Matrix, effective January 13, 2025 (PDF): https://newficorrespondent.com/wp-content/uploads/2025/01/Correspondent-Delgated-Plus-NQM-Product-Matrix.pdf
  3. Bank Statement product sheet (© 2025 Silver Hill Capital), hosted at https://www.lakeviewcorrespondent.com/wp-content/uploads/2025/07/Bank-Statement-.pdf
  4. Arch Mortgage Funding, Bank Statement Income Calculator (XLSX), linked from https://mortgage.archgroup.com/arch-mortgage-funding/calculators/

Lender rules as published on the date checked; check the current guide before relying on them. Sources 1–3 are correspondent or lender program documents. Wholesale (broker) guidelines from the same companies may differ.

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