![]() Pricing engines: The newest technology automatically determines borrowers’ non-QM loan options and runs pricing scenarios for the lending team.These more efficient technologies include: In the past, loan professionals had to manually process and underwrite applications, thus slowing down the process and increasing the chance for errors. Newer technology in the loan origination industry is beginning to catch up with the non-QM boom. Agency mortgages follow standards and processes that don’t always fit non-agency loans, and the differences can reduce efficiency. No lender wants to take the borrower through the origination process only to encounter unexpected obstacles unique to non-QM. Your business will face this initial challenge to overcome this negative perception if you plan to expand into non-QM lending, but other challenges also exist.Īs Ben Wu, executive director of technology at Calyx, explains, the scrutiny and documentation behind a non-QM loan can be burdensome, as can underwriting. Unfortunately, non-QM loans are often equated with subprime products, which scares off lenders and even borrowers who think anything outside of a traditional mortgage is dangerous. ![]() Mike Brenning, chief production officer at Deephaven Mortgage, estimates that half of American consumers are well-positioned for a non-QM loan-cementing that this strategy isn’t just for a small, risky segment of the population, but rather, a demographic that is underserved and untapped. Aging baby boomers, possibly retired or not fully employed, looking to downsize but still own.Prospering millennial and Generation Z borrowers exploring options in the residential market.More renters potentially ready for their own homes.Increased year-over-year earnings for American workers that can be applied to a non-QM loan application.Less risk for loans that differ from non-traditional products.Higher interest rates that price some consumers out of traditional FHA loans.A tighter mortgage market that makes lenders more willing to offer less traditional products.More successful self-employed workers in the economy.Non-QM loans aren’t necessarily new, so why are they bursting in popularity now? Many reasons jump out for this surge, including: Interest rates may be higher or for longer terms, and the origination process is geared toward these borrowers differently, but a non-QM is anything but subprime, ATR-noncompliant, or predatory. The problem with the CFPB’s QM rules is that they sideline many qualified borrowers who fall just outside of the guidelines-for example, self-employed consumers, foreign nationals, real estate investors, and borrowers with significant assets but not necessarily a job.Ī non-QM loan does not conflict with the CFPB’s directive and approaches the mortgage in a unique way. Borrowers avoid mortgages they might struggle to repay, and lenders avoid handing out loans that might default. QM rules prevent borrowers from taking out mortgages they can’t afford, restrict riskier terms, and limit fees and points. In 2014, the Consumer Financial Protection Bureau (CFPB) instituted its qualified mortgage guidelines, aimed at protecting the industry from the housing crash of the previous decade. However, these products represent opportunity backed by due diligence and smart strategy. Lenders may feel some apprehension about non-QM loans, fearing increased risk after the mortgage market finally settles down. This news aligns with other predictions that the non-QM market will explode in the immediate future. According to Inside Conforming Markets, “$11.38 billion of expanding-credit MBS, including non-QM loans, was issued in 2018.” The same report said that analysts are expecting a 60 percent increase in these products in 2019. The forecasts of the booming non-QM market are finally coming to fruition. Non-QM loans are no longer the future of mortgage products-they’re the present. Zip Live Orientation Thursdays: 1:00 pm-2:30 pm (CST).Zenly Live Orientation Tuesdays: 1:00 pm-2:30 pm (CST). ![]() ![]()
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