For more than two years, I have been writing this column to help Mortgage Loan Officers understand how non-QM lending can benefit you, your customers and the marketplace. Over that time, we have predicted tremendous growth for these alternative loans. Entering 2019, let’s see how accurate our robust forecasts have been.
Four years ago, when Angel Oak pioneered non-QM lending, we could only speculate about the market potential for these new mortgages featuring advanced ability-to repay requirements. Back then, all products without government-sponsored enterprise (GSE) endorsements were stigmatized as just like sub-prime and of no interest to most Originators.
Yet, we calculated that millions of creditworthy Americans had been excluded from agency loans, especially from among the 15 million self-employed workers as reported by the U.S. Bureau of Labor Statistics. Were we right to be confident that demand would grow for these new products? Here is what we forecasted and the results.
The market potential for non-QM loans is $100 billion
Non-QM lending was in its infancy in late 2015, when we first made this prediction. Recently, industry expert Tom Millon writing in HousingWire, said they “amount to $50 billion now, or about three percent of the market.” At Angel Oak, in addition to doubling our year-over-year production volume, our affiliates completed eight securitizations valued at approximately $2 billion.
Non-QM borrowers will be reliable and responsible
When Angel Oak Mortgage Solutions pioneered non-QM loans, I spent much of my time educating the market about the differences between these new loan products and high-risk sub-prime loans. In fact, non-QM loans have resulted in fewer foreclosures than agency loans. Last year, Wells Fargo Securities announced that 97 percent of non-QM borrowers with loans more than two years old have never missed a payment. Further debunking fears that only high-risk consumers would pursue these loans, studies show that 75 percent of non-QM borrowers benefitted from alternative income documentation while only 25 percent needed relief because of a credit event.
Mortgage Brokers will drive the non-QM evolution
In 2016, when industry apathy and skepticism about non-QM was dominant, we anticipated that brokers and their loan officers would drive market growth. We foresaw that the non-QM marketplace would be nuanced and diverse, therefore we built a system that would engage, educate and support those professionals most capable of aligning a growing portfolio of non-QM products with the consumer they serve. This Originator-centric infrastructure has been key to our success.
To find out how non-QM can propel your business in 2019, contact your Account Executive at (866) 837-6312 or learn more at AngelOakMS.com/MAP
Tom Hutchens is Executive Vice President, Production 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 January 2019 print edition of National Mortgage Professional Magazine.