A&D Buys A Building, Bucks A Broader Trend
The non-QM lender is positioning for a big 2025, expanding warehouse lines and access to investor capital
While many traditional mortgage lenders have struggled — to say the least — to weather the low-production, high-cost origination environment of the past two years, non-QM lender A&D Mortgage has bucked that general trend.
After all, who is buying more office space these days, especially as loan origination rapidly moves online?
“It’s a very rare situation on the office market right now,” laughs Andrey Gunin, who joined the company in May as chief financial officer (CFO). “We’ve outgrown our current office.”
The nine-story building that the wholesale non-QM lender bought from Citrix, a multinational cloud computing company, is modern, spacious, and situated in a “very good location in Fort Lauderdale,” Gunin says. “We think that a much better quality office and a good location is going to help us to attract top quality people.”
Beyond the blue skies and palm trees mirrored in the building’s glass facades, A&D’s purchase reflects the company’s internal optimism and orientation towards growth in 2025. Ten-year Treasury yields and mortgage rates have risen in recent weeks as market volatility has investors guessing over future Federal Reserve rate cuts.
Lenders across the industry are eyeing 2025 with apprehension as mortgage rate relief remains elusive for longer than desired or expected. In the second quarter of 2024, the majority of independent mortgage banks (IMBs) finally achieved profitability after eight consecutive quarters of losses, according to the Mortgage Bankers Association (MBA).
At a CFO conference Gunin recently attended, he said the ambient mood was relief, that those in attendance had survived the market contraction thus far. Not every lender has experienced 2023 and 2024 the same, though.
“We’ve been profitable all this time,” Gunin says, projecting A&D’s volume to grow by 25-30% in 2025. “We actually have weekly meetings with the management team internally and every single meeting goes back to the same question in the last few months: Are we ready for the huge growth that we are expecting? That’s what we're discussing internally.”
After falling to less than 3% of the market in 2020, growth in the non-QM share of originations has continued steadily since 2022, comprising 5% of the total mortgage market in 2024, according to a recent study published by CoreLogic. Today’s non-QM originations are characterized by limited documentation and high debt-to-income ratios (DTI), but also high credit scores and low loan-to-value (LTV) ratios, the report noted.
Controlling A&D’s growth only begins with buying a new building, though. The company’s business model allows the company to maintain stability in volatile markets. Gunin says being an originator, servicer, and securitizer enables profitability across the lifetime of every loan. A&D has originated more than $10 billion since 2020 and services a loan portfolio exceeding $8 billion.
In September, A&D recently announced a joint venture with New York- and London-based investment firm Atlas Merchant Capital to support expansion of A&D’s securitization platform. The company has also made investments in technology, including a new portal for brokers.
Beyond expanding access to investor capital through Atlas, A&D has been increasing its warehouse capacity with existing lender-partners over the past three-four months. “We brought two more large international banks who opened new lines for us,” Gunin says. “We are right now in discussions with two more banks who are considering setting up credit limits for us.”
In the current market, Gunin acknowledges, little can be done to fabricate new revenue if borrowers stay on the sidelines and mortgage rates stay elevated. But, the investments A&D is making promise to position the company for success long after 2025. Given its new building, new portal, newly expanded warehouse lines, and new investors, A&D is saddling up for an important growth phase.
As the mortgage market limps toward another tough winter, Gunin says modernization ought to be the entire industry’s main priority. Failure to modernize undermines the industry’s ability to provide relevant products and services for customers, he believes, which is directly reflected in the well-documented, upward trend in the cost to produce a mortgage.
“People should start focusing on that because we are focusing on this every single day. I don't understand how the industry is showing numbers like what we've seen,” Gunin says, regarding production costs and A&D’s internal focus on automation and training.
He continues, “I see that some people are doing phenomenal things. I think these people will survive and these people will become bigger and more noticeable and everybody will know about them. The inefficient people will just disappear.”
What doesn’t disappear is the need for talented, hard-working people to optimize the efficiencies that A&D is implementing. He calls 2023 “a very good lesson for most of the players, not to be too optimistic and be very, very careful.” He did not witness an outpouring of optimism among his CFO peers at the recent conference.
“Market size is kind of constant in the short-term perspective,” Gunin continues. “We don't know how fast or how much they’re going to decrease the interest rates. Anything can happen. The geopolitical instability, the huge debt that we have in this country, the elections…,” he trails off. “We’re looking for talented, hard-working people because that’s who we’re always looking for.”