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Non-QM Mortgages: Essential Tools for Loan Originators Amid Declining Volume

Jul 28, 2023
bank statement
News Director

Industry experts discuss rise of accidental landlords, opportunities in self-employed market, and increasing importance of non-standard loans.

It’s an evolving landscape, but Thursday's webinar hosted by National Mortgage Professional’s Head of Engagement and Outreach Andrew Berman delved into how Non-QM mortgages are an increasingly important part of the toolkit for any loan originator, particularly when loan origination volume is dropping

John Wise, executive vice president of sales for NewFi Wholesale, said the conversation around Non-QM mortgages has gone from “why” to “how.” 

He noted that large corporations are increasingly purchasing U.S. real estate, and 14 million Americans owning multiple investment properties, accounting for 72% of U.S. rental properties. Wise predicted these figures would continue to rise as those with 3% mortgages hold onto their properties and convert them into rentals.

He suggested this was becoming the norm and not the exception and many of those borrowers if they can prove they will have positive cash flow will benefit. 

Tom Davis, chief sales officer for Deephaven, also highlighted the potential in the self-employed market, with 24 million private businesses in the U.S. He suggested loan originators connect with local CPAs and chambers of commerce to tap into this market of borrowers who don't fit the conventional agency box.

In addition, he pointed to the trend of more homeowners becoming accidental landlords by holding onto their primary home as a rental and buying a new one. 

“Don’t know where to start? Start with the Realtor. Many Realtors are investors,” Davis said. 

He said many Realtors don’t know they can buy a property just based on its cash flow. Davis explained that the Debt Service Coverage Ratio (DSCR) loans for these properties could be determined by dividing the rent by the mortgage payment and investors don’t necessarily need income or bank statements. 

“Those Realtors, guess what? They know other self-employed people,” Davis said. 

Wise pointed out the dramatic rise in new business formation since the onset of COVID-19. With 450,000 new business applications every month, he argued that these are ideal candidates for bank statement loans and urged good relationships with organizations like DeepHaven, ACC, and Newfi, that focus on this segment.

Robert Senko, president of ACC Mortgage, also highlighted the opportunities in serving the 14% of the U.S. population not born in the country. Senko noted that these borrowers were putting down between 20 to 30% and emphasized the importance of having "skin in the game."

Missed yesterday’s Non-QM Townhall? We are hosting another at 2 p.m., Aug. 24. Register here.

About the author
Christine Stuart is the news director at NMP.
Published
Jul 28, 2023
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