TheMReport — News and strategies for the evolving mortgage marketplace.
Issue link: http://digital.themreport.com/i/1491913
28 | M R EP O RT FEATURE equipping a lender to play the long game more effectively. However, stability in non-QM relies on more than a strong un- derwriting skill set. Brokers should also look at how responsive lend- ers are to the market. Pricing spec- ulation is a dangerous game, and with the market moving as fast as it is going into 2023, being a price leader may not hold the strongest position as a lending partner. Competitive pricing may seeming- ly have less of an edge because it's not the cheapest, but it offers the advantage of more secured lon- gevity. The appeal in being priced out rests with the result that the lender will, in theory, be around "tomorrow," instead of getting played by the market. Fall-out nat- urally becomes less likely, which means brokers and borrowers reap the benefits of a smooth process with less breaks in the chain. And right now, especially, history and credibility matter. Operation within the niche sector dried up almost completely as market conditions placed con- straints on liquidity. For some lend- ers operating specifically within the non-QM sector, these constraints forced their hand in immediate loan suspension and sometimes left minimal margins of reconciliation for brokers and borrowers in the process. It's important for brokers to identify causation of any prior liquidity issues as a result of the market turn in recent years. Did they lose their takeout? Do they have a strong investor backing them? What, if any, did servicing assets look like? And on the other side of all this, how did these lend- ers honor their existing pipeline as a result? Considering Commitment N on-QM loans continue to bridge the gap between creditworthy homebuyers with qualifying criteria outside the QM rule box, and the ability to still obtain a mortgage. People who are self-employed, bring in nontraditional income, qualify from bank statements instead of W2s, gig economy—these kinds of earners and borrowers. As lenders began evacuating the non-QM space a few years ago, some of the pipelines containing this subset of unique borrowers were left floating in limbo. Loans went unfunded, locks were not honored, correspondent purchas- es were ignored, and unfulfilled commitments left borrowers and brokers in limbo. Integrity some- times took a backseat, and market approach was severely impacted by inherent risks that came with the turn of the market, especially if investor backing wavered. Pricing to risk and strong guidelines can help create at- tractive exceptions. Additional solutions such as offering profit and loss (P&L) loans through a third-party help tilt the scale of loan flexibility even further. Special program features, such as applying a waterfall on non-QM, to strategically sift through every loan option and exception, only further a lender's ability to remain nimble amid market adversity. Even as volatility in the housing market continues to be fueled by a culmination of limited invento- ry, interest rates and inflationary pressures, the need is still there. The value the wave of this influx offers to brokers, specifically, is that it places a spotlight on a lender's ability to follow through on a commitment. The bigger picture here is taking these things and creating a confluence to form a single channel in the form of non-QM. Going back to the importance of lending longevity, brokers should consider how lenders approach non-QM. This is where com- mitment to expertise can shine. Again, going back to the need for teams dedicated to manual under- writing as a channel separate from conventional loan origination, allowing guidelines to serve as an enhanced viewpoint of the bor- rower themselves. These things combined can serve as a com- pass for brokers serving unique borrowers whose mortgage relies on the strength of truly viable non-QM lending options. GREG AUSTIN is EVP, Mortgage Lending, for Carrington Mortgage Services (CMS). In his role, he is responsible for overseeing all aspects of Carrington's mortgage lending businesses, including Retail, Wholesale, and Correspondent. Austin has more than 30 years of experience in the mortgage banking industry—starting in the business as a loan officer. Accustomed to hard work and determination, Austin's career includes senior leadership positions in both operations oversite and sales leadership. Prior to joining Carrington in February 2018, Austin held a similar position at Impac Mortgage, as well as past sales leadership positions at Lehman Brothers and Credit Suisse. Resources: 1. https://www.freddiemac.com/pmms 2. https://themreport.com/news/data/01-04-2023/app-volume-falls-lowest-level-1996 3. https://www.attomdata.com/news/most-recent/attom-q3-2022-u-s-residential-property-mortgage-origination-report/#:~:text=The%20%24212%20billion%20dollar%20volume,the%20 third%20quarter%20of%202021. 4. https://nationalmortgageprofessional.com/news/corelogic-non-qm-share-loans-has-nearly-doubled-2022 5. ttps://usreop.com/mba-chart-of-the-week-units-matter-year-over-year-changes-in-origination-volume-oct-28-2022/ The appeal in being priced out rests with the result that the lender will, in theory, be around "tomorrow," instead of getting played by the market.