United Wholesale Mortgage (UWM) has been launching a new line of Non-QM products, including Prime Jumbo, Prime Jumbo Released, Prime Jumbo ARMs, Prime Jumbo Interest Only, Prime Jumbo Max and the new Prime Jumbo Max ARMs. The Prime Jumbo Max ARMS include 7- and 10-year fixed loans.
UWM is entrenching itself in the Non-QM market despite the fact some investors are shying away from Non-QM MBS packages, viewing them as too risky to buy. Recent events, such as Sprout's downfall, demonstrated investors' wariness towards these products.
In early July, Sprout Mortgage completely shut down because “Wall Street wasn’t buying up Non-QM loans,” an account executive told NMP. The company was trying to sell off $190 million in loans, but only sold $90 million. Shortly thereafter Sprout President Shea Pallante broke the news to its 300-person staff that the company would close its doors immediately, which likely stirred anxiety among other Non-QM lenders that use the same warehouse lenders, like Angel Oak.
By definition, a jumbo loan is not a qualified mortgage under the Consumer Financial Protection Bureau (CFPB) and neither are adjustable-rate mortgages (ARM). However, ARM loans and various other products that fall under the Non-QM umbrella are becoming more popular as interest rates and home prices increase.
According to First American’s Real House Price Index (RHPI), there’s been a steady incline in ARMs due to rising rates, and borrowers are being offered ARMs over three times as often as they were a year ago.
UWM would not share rates for the Prime Jumbo Max ARMs, but according to Bankrate’s latest survey of the nation’s largest lenders, the average 10/1 ARM APR is 5.290% and the average 7/1 ARM APR is 5.270%. A LendingTree study showed the average introductory APR on these types of ARMs was 89 basis points lower than the average APR offered on a conventional 30-year, fixed-rate mortgage.
“In a rising rate environment, interest in ARMs is starting to increase and UWM is relentless in continuing to provide our brokers with competitive and diverse products that will allow them to dominate their markets and further strengthen their relationships with realtors and borrowers,” a UWM representative said.
Prime Jumbo Max ARMs (7- and 10-year fixed) qualify for loan amounts up to $3M, borrowers with 700+ FICO and up to 43% DTI, and up to 80% LTV.
The loan is eligible for primary and second homes for purchases, rate/term and cash-out refinances. For primary purchase loans up to $3M, 6-18 months of reserves are required. For second home purchase loans up to $3 million, 12-18 months of reserves are required.
For primary cash-out loans up to $1.5M, 12 months of reserves are required (up to $250,000 cash back). For primary cash-out loans between $1.5M-$2M, 15 months of reserves are required (up to $500,000 cash back). For second home cash-out loans up to $1.5M, 12-18 months of reserves are required (up to $250,000 cash back). For second home cash out loans between up to $1.5M-$2M, 18 months of reserves are required (up to $500,000 cash back).
Only one appraisal is required for loans up to $1.5M and two appraisals from two different appraisers required for loans over $1.5M.
Appraisal waivers are not applicable on Prime Jumbo, Prime Jumbo Released, Prime Jumbo ARMs, Prime Jumbo Interest Only, Prime Jumbo Max and Prime Jumbo Max ARMs.
