MReport January 2021

TheMReport — News and strategies for the evolving mortgage marketplace.

Issue link:

Contents of this Issue


Page 15 of 67

14 | M R EP O RT COVER FEATURE San Rafael, California, is also witnessing a speedy revival of this market. "It is still a growing business," he said. "Every month, production grows more and more as we get reacclimated into the market. We started probably four or five months ago not doing anything, and now we're up to $25 million to $30 million. And every day, I've got more and more investors calling and wanting a piece of our business, which is a good thing." Aubrey acknowledged that while his non-QM business "is not where it was in January of 2020, it is significantly better than it was in September or October of 2020. So, things are moving up." Paul Anselmo, CEO of Evolve Mortgage Services in Frisco, Texas, saw his non-QM activities take off in a direction he wasn't expecting. What's driving this vigorous comeback for a sector that was nearly stopped cold in its tracks? For starters, the depth and scope of non-QM is rather diverse. "We actually have done a couple of securitizations," he exclaimed. "If we had that discussion in May, I would have said, 'You're crazy— how do you think we're going to do that?' Anyway, we're plugging along and have several new clients on board with big plans for the first quarter and thereafter." "The non-QM market is an enormous market," said John R. Lynch, Founder and CEO at PCMA Private Client Lending in Irvine, California. "You have multiple categories within that marketplace: you have bridge capital, you have expanded prime, near-prime, you have what some would argue is subprime. We cater exclusively to the mass affluent and high net worth, therefore we originate solely in the jumbo and super-jumbo expanded prime category." "There's a market for loan types that don't fit nicely into the QM box," said Marina Walsh, VP of Industry Analysis at the MBA. "Hopefully, after what happened in the spring, the worst is behind us." Non-QM is also well-positioned to take advantage of a forecasted spike in purchase loans. The Mortgage Bankers Association (MBA) recently projected that the share of purchase originations will balloon in 2021 by 8.5% to $1.54 trillion, a new record. "There are a lot of borrow- ers out there who have not been able to obtain traditional lending, maybe because they're self-employed or they're seasonal workers," said Janina Woods, SVP at Planet Management Group in Rochester, New York. "Maybe they had trouble making a consistent payment history because they've been affected by COVID." Ironically, what happened in the spring may have created a new field of potential non-QM customers. Woods added that a rising number of prospective bor- rowers who don't fit into the conventional loans guaranteed by government agencies or government-sponsored enter- prises has created a new pent-up demand for non-QM products. Angel Oak's Hutchens went one step further, specifically citing the agencies for helping to grow the non-QM space. "If you think about what's happened economically in 2020, I think the pool of non-QM borrowers is now larger than it was pre-COVID," he said. "A big piece of non-QM involves people who had some credit blemishes. Now, they've gotten themselves together, but the agencies don't lend to people that had credit blemishes. Now, the opportunity for non-QM lending is probably bigger in 2021 than it was coming into 2020." Lingering Impact of COVID-19 H owever, not every potentially eligible non-QM borrower is rushing into these prod- ucts. Rocke Andrews, Broker/ Owner at Tuscon-based Lending Arizona LLC and Immediate Past President of the National Association of Mortgage Brokers, stated that he was primarily receiving inquiries for conform- ing conventional loans from those who qualify and a wait-and-see response from those who could go into non-QM but declined. "Some people that are can- didates for these loans aren't doing anything right now," said Andrews. "They're waiting for their income to come back and waiting for other issues to take place for their businesses to get up and going again." While mortgage professionals in the non-QM sector are pleased with the progress made since the pandemic-induced disruption in the spring, they are also mindful that the path ahead could have a few potholes and bumps. Impac's Donatacci noted that while the speedy development of COVID vaccines due to the federal government's Operation Warp Speed raised optimism among many that the pandemic's end was in sight, that new surges in the virus could slow the cur- rent progress. And while mortgage profes- sionals in the non-QM sector are pleased with the progress being "When the pandemic was starting to take on epic proportions in March and beyond, it brought the bond market to its knees because everyone was rushing to cash," he continued. "Bondholders across the globe were liquidating their bonds immediately. And the engine that that supports non-QM production is the bond market." —Tom Hutchens, EVP of Production, Angel Oak Mortgage Solutions

Articles in this issue

Archives of this issue

view archives of TheMReport - MReport January 2021