Non-bank wholesale and correspondent Non-QM lender Angel Oak Mortgage Solutions LLC has announced an enhancement to its debt service coverage ratio (DSCR) loan program — the launch of a rental automated valuation model (AVM). This new enhancement incorporates Clear Capital’s Rental AVM, marking an instantly estimating data-backed rental income for rental property calculations held through closing, delivering certainty, and speed to brokers and borrowers alike.
For years, the industry has been faced with a tedious, manual appraisal process that has challenged DSCR loans. Angel Oak’s addition of Clear Capital’s AVM eliminates issues by using the same MLS data and comparable analysis that appraisers use. The algorithm-based analysis enables the firm to reliably estimate rental figures within seconds.
Once a pre-qualification is submitted and meets credit requirements, Angel Oak’s system generates a rental AVM figure for the property. That number is then locked in for the loan term, barring significant changes, giving brokers and borrowers confidence that the loan will close under the agreed parameters. While other lenders have to wait for a physical appraisal to determine the actual DSCR, Angel Oak’s rental AVM determines that upfront, ultimately helping borrowers reach closing faster.
“This is a game-changer for rental owners and borrowers and our vertically integrated platform with our affiliated asset management business, Angel Oak Capital Advisors, strengthens our ability to bring innovative solutions to the market,” said Tom Hutchens, president of Angel Oak Mortgage Solutions. “For the first time, borrowers and investors can have a higher surety of execution from day one with Angel Oak, which means faster timelines, fewer surprises, and happier borrowers. No other lender in the industry offers this kind of certainty and speed for DSCR loans. This enhancement gives originators a competitive edge and provides investors with the confidence to act quickly in today’s dynamic rental market.”
NMP sat down to chat with Hutchens regarding the state of the DSCR market, and how Angel Oak’s new offering will help facilitate a smoother borrower experience.
“The hardest part about doing DSCR loans, which has always been the case for 10 years now, is that number that we use at prequal 一 or that an originator uses at any point 一 means nothing until the appraisal is completed by a human being,” said Hutchens. “It’s 100% guesswork … and what happens is we, and every other Non-QM lender, get the appraisal and then the entire loan parameters change five days before closing. The rent came in low, so we’ve got to lower the LTV, raise the rate, and the borrower needs to come up with another 10% down — that’s the reality of today.”
Avoiding key hurdles is paramount to any closing, and Hutchens notes Angel Oak’s new offering successfully achieves that goal by expeditiously moving the app through the approval process.
“We need an application and a credit report … it’s not like they can just start running these rental AVMs on random properties,” said Hutchens. “We do it at prequal — credit report and application — that’s what we do prequals based on. Minutes … it’s fully automated into our process. It will be available in minutes, and the AE does have to review the whole deal to give them the prequal back that says, ‘yes, we’ll do this deal.’ It’s all calculated within minutes.”
Angel Oak, which currently operates in 46 states and the District of Columbia, offers a breadth of Non-QM products that expand the pool of borrowers, giving partners more opportunities to grow their businesses and better serve their customers.
