February 2017 - Making Millennials Move

TheMReport — News and strategies for the evolving mortgage marketplace.

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24 | TH E M R EP O RT FEATURE repay a mortgage, but may be recovering from a recent credit event. Caliber's suite of products has loan amounts ranging from $100,000 to $2.5 million." Inadequate Pricing Engines A significant hurdle to serving non-stan- dard borrowers has been the process lenders must undergo to find the investor programs that meet those borrowers' credit profiles. The automated pricing engines lenders use to qualify borrowers at the point of sale typically can't accomodate loan requests with missing or non-standard data. "The pricing engines available today serve the agency and jumbo prime markets the most efficiently," explains David Griege, EVP with Paramount Mortgage Company. "If a lender doesn't get a matching result for pricing or eligibility, then the options for the borrower are largely dependent on that particular lender's prior knowledge of non- agency alternatives and the related guidelines for those programs." Unfortunately, most loan originators don't have that knowledge, and confirming eligibil - ity and determining pricing for non-agency programs is a predomi- nately manual and time- consuming process. "Pricing engines don't help work through any soft criteria or customized credit guide- lines," Griege says. "Credit guidelines must be researched until a solution is found, and then pricing often manually calculated. Since op- tions for non-prime loans are often unknown without prior knowledge of these sorts of programs, lenders have historically not invested much time to research. Instead, they have typi- cally passed on those non-agency opportunities in favor of the easier agency transactions." Technology Rushes In F ortunately, technology is starting to catch up, Griege says. "We're seeing the emergence of more loan programs and technology platforms to serve out-of-the-box borrowers," he says. "Originators can lever- age their existing relationships and use these new tools and technology to efficiently serve the non-prime market." Griege points to a relatively new search engine specifically focused on non-agency programs. "Central to the engine is the ability to efficiently work through both eligibility and pricing beyond basic pricing engine credit requirements. Much of the engine util - ity focuses on soft criteria customized to the specific concerns of investors of these products, enabling lenders to much more efficiently and effectively search for solutions for a broader base of potential clients." A Win for Non-prime, Non-agency Borrowers T he private market needs liquidity to be able to support buying non-prime loans, and it needs volume to ensure liquidity. Since the crisis, the private market has struggled with both. Today, changes in the credit profile of purchase borrowers, as well as an increasing pri - vate investor appetite for higher margin mortgage assets, are changing that. The market for non-agency loans is well-posi- tioned for strong growth. Emerging technology that automates the process of making loans to outside-the-box borrowers will further the expansion of that market. The lenders that take advantage of this technology and work to serve the increas - ing number of non-prime borrowers will be the winners in the fight for purchase loan vol- ume—as will be the borrowers they serve. ELOISE SCHMITZ is a founding partner of LoanNEX, which offers a technology platform to search non-agency loan programs. The LoanNEX Marketplace provides originators with an efficient and automated means to match their borrowers to an emerging spectrum of non-agency investor programs. Schmitz has over 23 years' experience in corporate finance, including 11 years in corporate banking and 12 years as a senior executive at Charter Communications, a Fortune 500 company. She currently sits on the Advisory Board of Enterprise Bank and Trust of Creve Coeur, Missouri. "The lenders that take advantage of this technology and work to serve the increasing number of non-prime borrowers will be the winners in the fight for purchase loan volume—as will be the borrowers they serve."

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