TheMReport — News and strategies for the evolving mortgage marketplace.
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24 | M R EP O RT FEATURE turned to the mortgage credit sector to put money to work. These investors, just like brokers and lenders, have realized how non-QM loan products differ from pre-crisis, what the credit profile really looks like, and why performance is strong. Demand in the secondary market has continued to increase in 2020, which bodes well for the overall non-QM market. The Federal Reserve continues to pump liquidity into the markets, making the search for yield an elusive goal for inves- tors as well. More institutional investors are attracted to the yield offered by some non-QM securitizations that exhibit good risk-reward characteristics. As a result, securitizations collateralized by high-quality non-QM loans have been oversubscribed this year. Non-QM Exhibits Strong Fundamentals T he housing market has remained resilient despite lingering concerns over the economy. Changing needs and desires on the part of potential homebuyers has brought an influx of demand as renters look to leave their city dwellings. This mass exodus should impact the non-QM market as well—given more borrowers will be seek- ing mortgages that suit their unique needs. As many Americans are still unemployed or furloughed, an increase in self-employed individuals is expected with those enter- ing the gig workforce or starting their own businesses. Accordingly, 1099 forms and bank statement loans will become greater necessities. The market is making significant enhancements every week to ensure these loans are more accessible to borrowers with- out sacrificing quality and due diligence. As brokers see the long-term need and understand the shifting landscape that pro- motes demand for non-QM, there's signifi- cant growth opportunity. Ongoing educa- tion and the adoption of new technologies that make the process nearly seamless have allowed the non-QM market to recover in a way it never had to before. Great Financial Crisis vs. Now ... It Bears Repeating U nlike the 2008 Great Financial Crisis, this pause in lending was not due to credit issues regarding the loans specifically, nor was it caused by subprime-like loans. Non-QM has proven not to be the same as sub- prime loans from the past. It was a response to a global health crisis, created by extrinsic factors and the fallout that resulted in order to flat - ten the curve. Non-QM originators have been working within strict guidelines and lending standards, while improv - ing underwriting quality to help ensure that these loans perform well. Lenders have more skin in the game than ever before. Looking Forward N has proven to be a resilient sector of the mortgage industry. Similar to its role in the pre-pandemic environment, it will play an important role to keep your pipeline full. Be sure to tell Realtors and other financial partners how you can help their clients by utilizing non-QM and saving deals for them will protect your referral base. Circumstances have changed for borrowers and many who once qualified for Agency loans do not any longer. Someone is helping them. Are you? Your business growth in 2021 depends on it. . TOM HUTCHENS serves as EVP of Production at Angel Oak Mortgage Solutions based in Atlanta, Georgia. Hutchens has over 18 years' experience in leading sales for a wholesale and correspondent lending platform with proven success in the expansion of a lending footprint nationwide. Unlike agency loans, non-QM is not backed by the government nor do all borrowers fit inside one box. As a result, the standards needed to be addressed on a product-by- product level to account for the multitude of borrower profiles and potential issues that arise on a case-by-case basis. Anywhere. Anytime. MReport Digital theMReport.com Bringing Today's Lending Headlines into Focus, MReport Digital Puts Mortgage Banking News at Your Fingertips Experts you trust. People you know. News you want. MReport is putting essential mortgage market news at your fingertips with our new digital edition, now available online via your smartphone, tablet, or computer. Enjoy the magazine at your desk, and tap into MReport Digital's easily accessible platform anywhere, anytime. Committed to giving originators, servicers, and all lending professionals access to smarter perspectives, MReport believes it's time to think differently about the mortgage industry. Because the American Dream is evolving . . . are you? Subscribe to MReport and MReport Digital now! Call 800.856.8060 or connect with us online at themreport.com to take advantage of our special introductory offer! digital.themreport.com