MReport May 2019

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TH E M R EP O RT | 11 TAKE 5 MDWELL about the certainty of selling these assets. Everyone realizes that the growth will take place. It's the uncertainty related to this growth that's keeping investors away. While there are a couple of investors who are moving into this market, they're doing so with strict guidelines and disciplined practices. There's a lot of due diligence that's performed before investors will purchase non-QM these days. Secondly, the separate process of manually underwriting non-QM loans is proving to be a difficult task for many lenders. Everybody has automated underwriting. As a result, the process of manual un- derwriting that's required for non- QM loans does not fit the current infrastructure of most lenders. It's more difficult because lenders are going back to doing things the old-fashioned way, and there's a shortage in terms of processes and resources for them. M // What are some of the best practices that underwriters must follow to ensure the quality of these loans? GERRETSEN // Manual under- writing is the best practice that lenders can adopt for these loans. In non-QM loans, because one area of the loan is significantly stronger than others, you must underwrite all the different facets of the loan. It's a skill that underwriters possess. Also, because there are limited investors, lenders want to ensure that the overlays or the product qualifica- tions that are available for investor purchase are all met so there's rigidity of the discipline in place even though a loan may be considered non-QM. M // How can lenders benefit from non-QM loans despite these challenges? GERRETSEN // Non- QM loans expand the number of potential borrowers for lenders. They open the mar- ket to an underserved demographic who, from 2014 on, after QM was initiated, were not able to purchase homes anymore because they did not meet the criteria of ability to repay or did not meet certain pieces of QM integration. M // What is your outlook for non- QM in 2019 from an investor's and a lender's perspective? GERRETSEN // As the industry starts to become more comfort- able with the fact that it's not going back to where we were a decade ago, and that non-QM loans are helping to expand responsible homeownership, this product will grow. Investors are still not jumping back in as they remain concerned about the certainty of selling these assets. Everyone realizes that the growth will take place. The Boom Towns These cities are dominating the home construction market. A recent analysis found that home construction was increasing in 10 cities across the country. The realtor. com data team identified these cities which tend to be "high-demand metropolitan areas" where jobs and amenities are on the rise and there's "ample room to grow." For this study, the team analyzed census data to figure out where builders scored the most residential construction permits for single-family homes, condos, and co-ops, apartments, townhouses, and duplexes. Two Texas cities—Dallas and Houston—received the top rankings on this list. Seven of the top 10 cities for home construction can be found on the East Coast or in the South, while only three West Coast cities featured in the rankings—Los Angeles, Phoenix, and Seattle. However, home prices in these cities continue to remain high, with the median home price in Los Angeles being the highest on this list. Top 10 Cities Dominating the Home Construction Market source:'s 2019 Top 10 Cities Building the Most New Homes Rank City Median List Price No. of Permits 1 Dallas $335,700 63,421 2 Houston $310,100 57,021 3 New York $525,100 48,384 4 Atlanta $313,300 39,132 5 Phoenix $337,500 31,343 6 Los Angeles $714,500 29,621 7 Austin, Texas $349,800 29,716 8 Orlando, Florida $299,400 28,877 9 Seattle $592,000 27,950 10 Washington, D.C. $425,000 25,429

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