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24 | M R EP O RT COVER STORY Home Mortgage, had to suspend our non-QM programs. In late 2020, when it became clear that non-QM loans were continuing to perform, liquidity began to gradually return. The first lenders to reopen their programs were specialty non-QM shops. Plaza Home Mortgage is a full-service, third-party originator, and in the second half of 2020, and throughout all of 2021, our conventional and government loan businesses were hitting on all cyl- inders. So, we had the benefit of enhancing our non-QM program before reopening it. What has your com- pany done in terms of reintroducing non-QM offerings in a post-pandemic world? Tom Davis: We have been very intentional about making it easier for our customers to expand their share of the non-QM market. Many of them have never sold or manufactured non-QM products before and see them as an impor- tant pathway to new purchase originations. Deephaven helped pioneer non-QM lending when we opened our doors in 2012. Our executive leadership has a history of being in the space, and that expertise is making our partners feel more empowered. Building on that history, we're working to create a best-in-class experience for mortgage brokers and mortgage lenders alike, so that they can provide that same experience for their borrowers. The pillars for our non-QM are training, technology, support, and flexibility. We've formed new technology partnerships and refined our processes and tools to simplify every non-QM transac- tion. For example, we've enhanced our scenario desk and income qualification tools, and expanded our support team. Deephaven does its underwriting in-house, and that has allowed us to be very flexible with borrowers' indi- vidual situations. That's particular- ly important to our brokers who want to improve borrower loyalty through responsive, personalized service. Of course, we're also ensuring that our product offerings meet borrowers' changing needs. For instance, DSCR loans have been estimated to comprise 25-30% of the non-QM market. That is re- flected in demand from property investors for our DSCR prod- ucts—including products with cash-out options. Jeff Leinan: We relaunched our Solutions Non-QM Program in our Wholesale Channel last September. Our initial offerings were 12- or 24-month bank state- ment loans with limits up to $3.5 million. The program features LTVs to 90%, DTIs up to 55%, and FICO scores down to 660, as well as options for P&L and 1099 and condotels. When we reopened the pro- gram, we made two significant operational enhancements. First, we added a scenario desk, so that our broker clients could get a quick indication of whether their deals would work before they got too far along in the process. Secondly, we put in place a dedi- cated non-QM underwriting team to accelerate the underwriting process and help brokers. The response to both of these enhancements has been very positive. We recently added a busi- ness purpose loan program for investors, Plaza's DSCR Investor Solutions, that qualifies deals based on property cash flows. This program offers financing up to $3.5 million and compliments our non-QM program. What does the future hold for non-QM offerings amidst a high-rate environment with skyrocketing hous- ing prices? Jeff Gravelle: Our non-QM products can provide non- traditional borrowers with the opportunity to buy a home in any market environment. In fact, one of the most meaningful advantag- es of offering non-QM options is the ability to serve a market that has historically had less access. We can expect non-QM market share to remain steady. Loan Officers and Mortgage Brokers are facing a pivotal time where ad- aptation is necessary for success, but lenders must also provide the right amount of education and resources to mortgage profession- als in order to keep customers in- formed and in the right products. Michael Isaacs: Interestingly, as agency rates have increased, the difference between a prime rate and a rate for a non-QM loan has narrowed, making non-QM options more palatable for rate-conscious borrowers. Non-QM loans are also filling gaps for second homes and investment properties, since Fannie Mae and Freddie Mac made it clear they would prefer to lend on primary residences. This is the perfect time for non-QM loans, and it appears the market will continue to grow and gain additional steam amidst the new high-rate environ- ment. We're continuing to add new non-QM investors to our product offerings and training our loan officers on all non-QM products because we expect this type of loan to add significant volume over the next few years. Neil Merritt: There's no question that 2022 has seen serious changes to the housing market. With rate increases that may continue to rise, low housing inventory and a very competitive housing market, non-QM products can provide nontraditional borrowers with the opportunity to buy a home. With the current housing market, we can expect the influx of non-QM busi- ness to remain steady. As a result, loan officers and brokers must embrace non-QM for success, and lenders must also rely on non-QM resources for mortgage professionals to keep customer satisfaction strong and mitigate risk. ERIC C. PECK is Five Star's Managing Digital Editor. He has 20-plus years' experience covering the mortgage industry; he most recently served as Editor-in-Chief for The Mortgage Press and National Mortgage Professional Magazine. Peck graduated from the New York Institute of Technology where he received his B.A. in communication arts/media. After graduating, he began his professional career with Videography Magazine before landing in the mortgage space. Peck has edited three published books and has served as Copy Editor for Entrepreneur.com. "… one of the most meaningful advantages of offering non-QM options is the ability to serve a market that has historically had less access." —Jeff Gravelle, Co-Head of Production, Newrez