TheMReport — News and strategies for the evolving mortgage marketplace.
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16 | M R EP O RT COVER FEATURE made since the pandemic-induced disruption in the spring, they are also cognizant that the path ahead could have a few potholes and bumps. "If the COVID spikes play out in some of the more severe fore- casts, I think there's the potential for an increase in forbearance, even though we haven't seen a whole lot of that yet," Donatacci said. "Early in the pandemic, many servicers were offering forbearance even if there wasn't any hardship or real need, just out of caution. And having had a forbearance cre- ates certain challenges in pursuing new loans. I think some of those forbearances need to be reconciled and dealt with, so the borrowers can put it behind them." "Because there was an increased propensity for default in this particular product, it needed some special handling," Woods ex- plained. "We built a special team where our asset managers created a relationship early on with bor- rowers of this type of product. If they needed help, they had direct contact to an asset manager— which kind of falls outside of the standard agency-type servicing where there's not a lot of talk with the borrower until they default." Management Group's Janina Woods and her department—one- third of the assets they subservice are non-QM loans. Examining the QM Patch T here is also the question of what comes of the QM Patch, also known as the GSE Patch. It was created as part of the CFPB's 2013 Ability-to-Repay/ Qualified Mortgage rule and established a general QM standard for loans where the consumer's debt-to-income ratio is 43% or less and that meet various other requirements. In October, the Consumer Financial Protection Bureau (CFPB) issued a final rule extending the Patch's expiration from January 10, 2021. The Patch is now in effect until the manda- tory compliance date of a final rule amending the General QM loan definition in Regulation Z on July 21, 2021, or the conclusion of Fannie Mae and Freddie Mac's federal conservatorship, whichever comes first. Because there was an increased propensity for default in this particular product, it needed some special handling," Woods ex- plained. "We built a special team where our asset managers created a relationship early on with bor- rowers of this type of product. If they needed help, they had direct contact to an asset manager— which kind of falls outside of the standard agency-type servicing where there's not a lot of talk with the borrower until they default." MBA's Marina Walsh predicted that if the GSEs remain in conser- vatorship, then "there will be no final rule changing the parameters of QM." But if the Patch goes away, she added that this could reshape the non-QM market—the CFPB estimated that approximate- ly 957,000 mortgage loans would be affected by the GSE Patch's expiration. Some of these loans would either not be originated or would be more expensive for borrowers. "The challenges are around seeing the market deliver the volumes that we'd become accus- tomed to pre-pandemic," he said. "I think it's a supply challenge in the marketplace, as opposed to a demand challenge." While non-QM securitization has picked up since late spring, Donatacci wondered if lenders will be able to keep investors satisfied. "The challenges are around seeing the market deliver the volumes that we'd become ac- customed to pre-pandemic," he said. "I think it's really a supply challenge in the marketplace, as opposed to a demand challenge." "We're already seeing that hap- pening," said Hutchens. "I think more originators are getting into it every day because the refi boom of 2020 will end. And if you haven't already gotten to know non-QM and become comfort- able originating these loans, you're going to—because it will be a "The state of non-QM is strong from a liquidity perspective. I think we've identified at least 12 investors with programs looking to acquire non- QM production. Almost all the buyers from pre- pandemic are back and there are some new entrants as well." —Tom Donatacci, Chief of Staff, Impac Mortgage Holding