TheMReport — News and strategies for the evolving mortgage marketplace.
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34 | TH E M R EP O RT FEATURE Battling Perceptions with Facts I t may be impossible to predict when the non-QM market will finally become established in the way most of us hope it will. In the meantime, those of us who look forward to a greater, responsible expansion of mortgage credit need to stay on top of the constantly increasing lineup of non-QM options and educate our organizations, part - ners and customers on when, why and for whom they work. As it stands, most lenders still think of non-QM loans as the "new subprime." They perceive it fit for credit-challenged borrowers only. In reality, non-QM loans can be an excellent choice for borrow- ers who have perfect credit but fall short on some other compo- nent of the mortgage qualification puzzle. For example, millions of self-employed Americans are currently unable to qualify for traditional mortgage owing to insufficient income documenta - tion. Many such borrowers have multiple tax write-offs that make it impossible to qualify for a stan- dard, full-doc loan. Though many lenders consider non-QM prod- ucts as inherently risky and may not give thoughtful consideration to self-employed borrowers, non- QM underwriting has become more nuanced, so borrowers with the right combination of loan- to-value (LTV), credit score and debt-to-income (DTI) are seeing lower interest rates. But regardless of where the market takes us, it is critical for lenders to be forward-thinking in determining a borrower's income and look for new ways of qualifying borrowers that make sense. As previously mentioned, one method that is beginning to take hold is using a borrower's historical deposits in their bank accounts as an alternative for income documentation. Currently, most non-QM programs allow 12 or 24 months of bank statements for self-employed borrowers, so it can be done. The fact is we are nowhere near seeing the potential of non-QM loan products. But they are coming—not as quickly as many of us have hoped, but quite possibly faster than most think. That will be great news for the millions of otherwise deserving consumers who want to live the American Dream, as well as those who thought they did not have a second shot at homeownership. Lenders who play it smart with non-QM products will uncover millions of sales opportunities on a path to a healthy, full-bodied housing market we have been anticipating. JOE LAM is the sales manager for Planet Home Lending, LLC. A 27-year industry veteran, Lam has managed over $12 billion in mortgage originations over the course of his career. He started his own non-QM journey in 2012 and has designed and implemented many of the current non-QM products that exist today. He can be reached at jlam@planethomelending.com. Anywhere. Anytime. theMReport.com Bringing Today's Lending Headlines into Focus, MReport Digital Puts Mortgage Banking News at Your Fingertips Experts you trust. People you know. News you want. MReport is putting essential mortgage market news at your fingertips with our new digital edition, now available online via your smartphone, tablet, or computer. Enjoy the magazine at your desk, and tap into MReport Digital's easily accessible platform anywhere, anytime. Committed to giving originators, servicers, and all lending professionals access to smarter perspectives, MReport believes it's time to think differently about the mortgage industry. Because the American Dream is evolving . . . are you? Subscribe to MReport and MReport Digital now! Call 800.856.8060 or connect with us online at themreport.com to take advantage of our special introductory offer! digital.themreport.com