One hundred billion dollars–this is the total loan volume the non-agency mortgage market could reach in the near future, according to many experts in the space. When this will happen is still unclear, but tailwinds driving supply and demand for these products continue to encourage non-agency loan growth.
Non-agency loans today are a far cry from the relics that led to the 2008 financial crisis. Today, the average FICO score of a non-agency loan is 680, up from 580 in 2006. Non-agency loans also require a 10 to 20 percent downpayment in 2016, as opposed to the loans provided without any required downpayment a decade ago. For more info on this, check out our recently published White Paper, “A Closer Look at the New World of Non-Prime” at http://SignUp.NMPMag.com/NonPrime
As you can see in the chart below, rising mortgage rates will cause purchases to grow as a portion of total originations. With refinances disappearing, lenders will turn to non-agency loans to replace that volume.
The potential for continued non-agency market expansion is sky high. While the $100 billion figure may not be reached next year, we expect 2017 to see significant growth in the non-agency arena as demand for and awareness of these products grows.
Tom Hutchens is senior vice president of sales and marketing at Angel Oak Mortgage Solutions, an Atlanta-based wholesale/correspondent lender licensed in more than 35 states and operating in the non-QM space for over three years. Tom has been in the real estate lending business for nearly 20 years. He may be reached by phone at (855) 539-4910 or e-mail Info@AngelOakMS.com.
This article originally appeared in the December 2016 print edition of National Mortgage Professional Magazine.