MReport September 2018

TheMReport — News and strategies for the evolving mortgage marketplace.

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56 | TH E M R EP O RT O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T THE LATEST ORIGINATION 162 people in St. Louis, where it has ranked No. 2 in mortgage volume in the previous three years, according to media surveys. It racked up a loan volume of $1 billion in 2017 and has been the fastest-growing mortgage banker in Missouri for six straight years. Is the Time Right for NonQM Lending? ALTERNATIVE MORTGAGE PRODUCTS ESCALATE GROWTH FOR MORTGAGE BANKERS. By Tom Hutchens GEORGIA // The awarding of nonQMs (nonqualified mortgages) is rapidly increasing as mortgage bankers recognize the benefits of correspondent lending for growth. With refinance volumes drying up, originators are searching for alternative mortgage solutions to achieve their goals. By working with a correspondent investor of - fering nonQMs and jumbos, your lending options will expand and the result will be higher margins and additional volume that will help provide a competitive edge in a challenging market. Increasing Demand Demand has increased hand- in-hand with the mainstream's embracing of nonagency mortgage lending via correspondent lending and those who are not working with an industry-leading investor are rushing to become aligned. Anyone still considering the idea should recognize that their com - petitors likely have correspondent- lending options and are reaping the rewards of higher volumes, engaged production teams, and wider margins that come along with them. Benefits include ever-evolving, quality products such as jumbo loans, self-employed programs, and other alternative options. One of the best practices followed by many lenders is to have delegated and nondelegated underwriting options available through a part - ner that has years of experience in the nonagency space. Building Partnerships When considering a correspon- dent partner, ferret out one that makes loan-level exceptions, has a distinct corporate structure, possesses years of solid experi- ence working with nonagency products, and is backed by a world-class operational platform that will help guide a positive customer experience. Today, nonQM originations total roughly $20 billion per year, but we believe the nonQM market will grow to over $100 billion in the coming years. The market is seeing more and more innovative products backed by high-quality underwriting and re - sponsible decision making. Now, national and regional lenders are both getting involved as they become aware of the value these products bring to the table. A Popular Trend As forecasted in Q 4 of 2017 dur- ing an annual MBA conference for lenders, the trend will continue. A top takeaway from that confer- ence was that nonQM activity would double in 2018. Beyond the demand to stimu- late strong business growth, the market is accepting nonQMs since stricter guidelines mandate borrowers prove their ability to repay their loans. Subprime loans extended precrisis did not require a down payment or proof of means to pay off debt. Nonagency is performing well today because buyers have skin in the game with sizeable down payments. Fitch Ratings reports that "Of the $4.3 billion and roughly 11,000 loans securitized since 2015 where loan-level perfor - mance data is publicly available, only eight loans have entered fore- closure." This is a game changer in today's market because these are solid-performing loans. Borrower Benefits Correspondent-lending divisions are expanding due to the significant number of people with past credit events who have improved their situations and are ready to fulfill their dream of homeownership. Self- employed borrowers who typically seek jumbo loan amounts are prime candidates to keep the pipelines full as well. The inclusion of jumbo of - ferings has helped the performance of correspondent lending. Most correspondent lenders have been clamoring for a jumbo product that will enable them to compete with national banks. Fortunately, the largest operators of nonagency products have well-executed prime products that are competitively priced so borrowers are no longer lost to large banks. The best-case scenario is a lender with a jumbo product that has consistently strong pricing, great service, and offers nonagency products. Correspondent lending is a fast-growing trend not likely to slow down. At this point— mid- year, if you are still considering how to meet your business goals, nonagency correspondent lending is the answer. It is a fast-moving train you will want to catch, so do not find yourself stranded at the station in 2018. Tom Hutchens is the SVP of Sales and Marketing at Angel Oak Mortgage Solutions, an Atlanta-based wholesale and correspondent lender leading the nonQM space for four years and licensed in more than 35 states. Tom has been in the real estate lending business for nearly 20 years. ORIGINATION LOCAL EDITION LOCAL EDITION

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