Since starting this column, I have focused on two themes:
1. Today’s non-QM borrowers are as reliable and desirable as any market segment; and
2. Non-QM loans offer tremendous upside for growth-driven originators.
Recent statistics prove my positions with startling clarity. The first statement is critical because confusion about non-QM loans keeps many originators on the sidelines. These are not high-risk loans like the old sub-prime products.
In its latest U.S. RMBS Monthly Update on the non-QM sector, Fitch Ratings reported that, “Of the $4.3 billion and roughly 11,000 loans securitized since 2015 where loan-level performance data is publicly available, only eight loans have entered foreclosure.”
No typos! Of the non-QM loans followed by Fitch, one in every 1,375 (or .007 percent) have failed. While foreclosure rates across the board are down, in 2017, Consumer Affairs reporter James Limbach, citing CoreLogic data, wrote that “The national foreclosure inventory included approximately 329,000 or 0.8 percent of all homes with a mortgage.”
I emphasize that before mentioning the potential for originators to grow and profit because it shows that the clear majority of non-QM borrowers are just as able to repay as computer-qualified QM loan customers.
Regarding growth and profitability, according to Mike Fratantoni, Chief Economist of the Mortgage Bankers Association (MBA), non-QM volume will double in 2018. Even at that pace, originators who offer these products have an open playing field. Despite growing by 40 percent in 2017, non-QM loans still account for only three percent of the residential mortgage market. Millions of self-employed consumers, retirees and people who have had credit events are unable to qualify for agency loans. They often do not know that alternative mortgages are available.
This is a tremendous arena for Loan Officers who want to help deserving borrowers and enjoy great personal success. You have a head start in a market that is only now being recognized as attractive and sustainable. You can represent credible lenders whose ability to manually underwrite your work product is often superior to the automated, one-size-fits all standards of today’s agency lenders. And, because you are specializing in diverse, manually underwritten products, your commissions can easily exceed those generated by most originators.
To start, talk to your Angel Oak Mortgage Solutions Account Executive and explore the resources on our Web site (AngelOakMS.com
). We have a game plan for helping you identify and engage customers. We pioneered non-QM lending in 2013 and have been the industry leader ever since. We are at the forefront of exponential growth and encourage you to join us.
Tom Hutchens is Senior Vice President of Sales and Marketing at Angel Oak Mortgage Solutions, an Atlanta-based wholesale and correspondent lender leading the non-QM space for four years and licensed in over 35 states. 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 May 2018 print edition of National Mortgage Professional Magazine.