TheMReport

36 | 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 Enhancing the Homebuying Experience How is the lending landscape likely to change with Zillow introducing home loans to its portfolio? Z illow Group has launched Zillow Home Loans to deliver an easier and more streamlined mortgage ex - perience to consumers. Home shop- pers who visit Zillow to shop for a mortgage can now get financing directly from Zillow Home Loans. Financing is the biggest hurdle to buying a home, and most buy - ers say they worry about qualify- ing for a mortgage, according to the 2018 Zillow Group Report on Consumer Housing Trends. With Zillow Home Loans, consumers using Zillow Offers— whether they are selling to or buying from Zillow—can experi - ence a simpler and shortened real estate transaction. "Getting a mortgage is often the hardest, most complicated part of buying a home," said Erin Lantz, VP and General Manager of Mortgages at Zillow Group. "Since our inception, Zillow has been em - powering people with information and resources to make smarter real estate decisions, including helping borrowers shop for the best lender and loan for their new home. With Zillow Home Loans, we are tak - ing an incredible step forward to deliver an integrated payments plat- form to complete the financing for Zillow Offers that delivers a more seamless, on-demand real estate ex- perience today's consumers expect. We continue to offer consumers the power of choice to shop for loans directly through Zillow Home Loans or through our popular mortgage marketplace." Homeowners using Zillow Offers to sell their home can secure financ - ing through Zillow Home Loans, allowing them to sell their existing home and shop for a new home simultaneously. Home shoppers who want to purchase a Zillow-owned home may use Zillow Home Loans to finance their home purchase. The use of Zillow Home Loans is not restricted to Zillow Offers' home sales just as borrowers may still use Zillow's mortgage marketplace to shop for a lender and loan for any home purchase or refinanced loan. Zillow Offers is now available in nine markets. Potential home sellers in markets where Zillow Offers is available can request a free, no- obligation cash offer from Zillow to purchase their home. If the seller accepts the offer, they choose their closing date, and then Zillow will conduct a free home evaluation to finalize the offer. Home shoppers purchasing a Zillow-owned home are getting a move-in ready home they can purchase when it's conve - nient for them. The launch of Zillow Home Loans occurred in conjunction with the rollout of a new look and feel on Zillow's mobile apps and website. Non-QM: Then and Now An economist reviews the growing market for this mortgage product. F ive years have passed since the Consumer Financial Protection Bureau (CFPB) issued regulations to provide safer and more sustainable home loans for consumers, known as Qualified Mortgages (QMs)," said Archana Pradhan, Senior Professional, Economist, Office of the Chief Economist at CoreLogic. In her blog entitled, "Characteristics of Today's Non-Qualified Mort - gages," Pradhan looked into how much has changed in the non-QM sector. According to Pradhan, today's non-QMs are of high quality and are vastly different and safer than their pre-crisis counterparts. CoreLogic data revealed that in 2018, the average credit score of homebuyers with non-QMs was 760, compared to a score of 754 for homebuyers with QMs. "The average first-lien LTV for borrowers with non-QMs was 79% compared to 81% for borrow - ers with QMs. However, aver- age DTI for homebuyers with non-QMs was higher compared with the DTI for borrowers with QMs," the blog reads. "Although the non-QM market is just a small piece of today's mortgage market, it plays a key role in meeting the credit needs for homebuyers who are not able to obtain financing through a GSE or government channels," Pradhan said. "Creditworthy borrowers not applying for GSE or government-insured loans may benefit from non-QM options. These may include self-employed borrowers, first-time homebuy - ers, borrowers with substantial assets but limited income, jumbo loan borrowers, and investors," Pradhan added. Shedding light on the ability-to- repay (ATR) rule, she pointed out that it came into being after the Dodd-Frank Wall Street Reform and Consumer Protection Act imposed an obligation on lenders to make a good-faith effort to determine that applicants have the ability to repay their mortgage. Pradhan noted that the act "man - dates that QM loans cannot have risky loan features like negative amortization, interest-only, balloon payments, terms beyond 30, years or excessive points and fees." "Any home loan that doesn't comply with the QM rules is called non-QM. A non-QM loan is not necessarily a high-risk loan, it's merely a loan that doesn't meet the QM standards. Examples of a non-QM loan include interest-only or limited/alternative documenta - tion loans. A non-QM loan still needs to satisfy the ATR require- ments," Pradhan added. Listing the criteria to be quali- fied for QM loans, Pradhan noted that it must satisfy at least one of the following three criteria: First, borrower's debt-to-income (DTI) ratio is 43% or less. Second, the loan is eligible for purchase, guarantee or insurance through the Federal Housing Administration, Veterans Affairs, United States Department of Agriculture or a GSE, regard - less of the DTI ratio; or third, the loan was originated by insured depositories with total assets less than $10 billion and must be held in portfolio for at least three years. The non-QM market expanded by 1 percentage point from 2017 to 2018, and represented about 4% of 2018 originations, according to Pradhan. She added that despite having DTI ratios that are higher than conventional QM loans today, non-QMs are performing very well. "Getting a mortgage is often the hardest, most complicated part of buying a home." —Erin Lantz, VP and General Manager of Mortgages, Zillow Group

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