Skip to main content

Now Is the Time: Skyrocketing Interest Rates Fuel the Fire for Non-QM Loans

Tom Hutchens
Feb 02, 2017

The day we’ve been waiting for has finally arrived.
 
Almost immediately following the election of Donald Trump as the next President of the United States, the 10-year treasury yield shot up nearly 20 basis points and has continued to chart a steep trajectory throughout the following weeks. As expected, this movement slashed mortgage refinancing activity nearly in half.
 
Considering the swift disappearance of refinances from the market, lenders that heavily relied on refinances to create volume are now scrambling to generate new business. The recent interest rate hike announced by the Federal Reserve on Dec. 14, 2016, will only accelerate this trend. With President-Elect Trump set to take office in January, it’s no longer a question of “if” the Fed will continue to raise rates, it’s a matter of “how fast.”
 
Players that leaned on refinances in the past must now seek out other areas of the mortgage market to replace the lost volume. A natural place to look next is in non-QM products. These loans should benefit immensely considering their ability to provide lenders with product diversity and a new demographic of customers.
 
As the industry leader in the non-QM space, our advice to these players is simple: Do not delay. Begin adjusting your business models now to offer non-QM products. It will take some time to develop the relationships, new clientele and proper know-how to offer and actively market these products to your customers, so get started immediately. Acting quickly will minimize your lost business as refinances continue to disappear.
 
Also, the market for these products could further benefit from a softer regulatory tone from the Trump Administration. Regulatory relief could expand the credit box for non-QM products and increase lending opportunities to a wider range of individuals currently without access to financing.
 
But don’t fret, non-QM mortgages look nothing like they did in the pre-crisis era. Non-QM loans are made with tight ability-to-repay requirements and 10 to 20 percent downpayments. Not to mention, the average FICO score of a non-agency loan today is 680, up from 580 in 2006.
 
Now is the time. As interest rates continue to rise, partner with experts who can help you find success with non-QM products today.


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 [email protected].
This article originally appeared in the January 2017 print edition of National Mortgage Professional Magazine. 
 
Published
Feb 02, 2017
Reports: Evergrande Group Makes $83.5M Interest Payment

Faltering Chinese development firm fends off default with payment to international bondholders.

Industry News
Oct 22, 2021
FAR Establishes Borrower Engagement Division

Finance of America Reverse LLC announced its formally established Borrower Engagement Division.

Industry News
Oct 22, 2021
Automating Appraisals No Panacea For Removing Bias

With racism 'grandfathered in' to housing prices in minority neighborhoods, a solution to 'unconscious bias' is difficult to find

Industry News
Oct 21, 2021
Reports: Evergrande Group Arranges Bond Extension

Reuters, REDD say company's billionaire chairman has agreed to provide additional collateral to ensure a construction project tied to a $260M bond is completed.

Industry News
Oct 21, 2021
New American Funding Hires Regional Manager

Mark Tribuna will lead effort to expand company's partnership with affordable nonprofit builders in mid-Pacific region

Industry News
Oct 21, 2021
Rocket Pro Announces Initiatives To Boost Brokers

Company brings Rocket Tech, the Rocket Network and Rocket Marketing to mortgage brokers across the country

Industry News
Oct 19, 2021