Misperceptions unrelated to quality management hamper the volume potential of originators and the health of the mortgage industry
We have seen over the past 18 months that the demand for non-QM will remain high as there are always borrowers who cannot qualify for a mortgage without it.
Self-employed people who can’t use tax returns to qualify or Jumbo borrowers who don’t meet Prime guidelines can’t buy a home without a non-QM. Our clients who get it increase their volume using our bank statement, non-QM Platinum Jumbo, no cash flow income for investors and other non-QM solutions we offer.
Unfortunately, some originators who do not use non-QM loans tell us this is because they think non-QM loans are the same as subprime loans that were issued before the financial crisis.
The point is, non-QM loans are responsible, performing loans that help the mortgage industry thrive. Our goal is to educate them on the facts and help them grow their business.
Below are the most common non-quality management myths and the facts that dispel them:
Myth – Non-QM loans are difficult to close and a waste of time
Do – Non-QM loans can be as easy to close as agency loans. It all depends on the lender. We have been doing this for over 8 years now and that is why we are so successful in this space. Our loan application process is straightforward and we can issue CTCs within two weeks depending on the circumstances.
We have a very large base of approved principals who do non-QM transactions with us every month – because we make it as simple as possible. More referrals are coming in and they can achieve easily earned commissions.
The industry produced $ 25 billion in non-QM origination in 2019 with significant potential for increased business volume and growth. In fact, the industry is expected to grow to over $ 200 billion annually over the next several years. This type of volume and earning potential is time well spent for any initiator.
Myth – Non-QM does not require repayment capacity (ATR) and has little to no regulatory oversight
Do – All borrowers, including non-QM borrowers, must have a documented ability to repay their mortgage. We are required to assess and verify the ATR as outlined in the Dodd-Frank Act for each borrower during the qualification process.
The regulations and underlying credit conditions are subject to a high level of scrutiny, regardless of the type of loan. We comply with all regulations provided by law. Many subprime loans that were issued in the past would not pass underwriting guidelines today.
Myth – Today’s non-QM borrower looks like the pre-housing crisis subprime borrower.
Do – The average FICO for our non-QM borrowers is 742 compared to a score in the 500s before 2008. With an average down payment of over 20%, borrowers are now “in the game”. Frankly, the profile of a non-QM borrower is very similar to that of an agency borrower. They buy more expensive homes and just need a non-QM loan to close the deal.
The non-QM makes a difference in the growth of the company and the results for so many initiators with whom we work. We would like this to happen for all initiators. That’s why we strive to continue our mission of educating creators about the power of non-QM by working with Angel Oak.