Top 3 reasons why you need to consider non-QM

Quick quiz: What is one of the fastest-growing sectors in the mortgage industry? Answer: The non-QM market, potentially growing by as much as 400% in 2019. Many new entrants jumped into the non-QM space this year, highlighting the opportunity to expand product offerings and hedge against changing market conditions through non-QM lending. Still skeptical?

Here are three reasons you should consider exploring non-QM:

  1. Non-QM is safe.

Let’s look at two sets of data – first, the loan characteristics: a credit agency recently noted that “in non-QM securitizations it reviewed, a weighted-average FICO score ‘rarely’ falls below 690 and the WA LTV is somewhere between 75% and 80%.” That is a far cry from some of the riskier subprime lending that plagued the market in the 2000s. Additionally, delinquency rates for our non-QM product are less than 2%. That compares favorably to current (industry-wide) conventional delinquency rates, which are around 4%, according to CoreLogic. Finally, investor appetite for non-QM is solid – experts recently estimated that non-QM RMBS issuance would double in 2019.

  1. Room to grow.

Our research shows that there is roughly $200 billion annually in unmet mortgage demand, a huge opportunity for lenders who are ready to think beyond the constraints of QM. However, we’ve found that many lenders and originators are unfamiliar with non-QM, despite the fact that roughly $10 billion was funded in 2018 and an estimated $40 billion will be funded this year.

  1. Better serve the demands of consumers

Not all of your applicants fit into the conventional box. Some may lack credit history, others may only be planning on living at a property for a short period of time, need a higher balance loan or want interest-only options. And don’t forget the self-employed. Data from the Bureau of Labor Statistics (BLS) shows that self-employed workers could soon constitute more than 20% of the U.S. labor market. There are a myriad of reasons why a borrower may want an innovative loan program. Can you afford to turn away business from these viable applicants?

If conditions change are you prepared?

Lending executives are responsible for ensuring their business thrives in any and all market conditions. What happens when the inevitable occurs, and interest/mortgage rates rise? Lenders who are too dependent on conventional origination volume will be hard-pressed to find new sources for income, and find it challenging to responsibly adopt non-agency products in a hurry. If you research non-QM today, take the time to find an experienced partner and build and train staff, not only will you have an expanded product offering to better serve your borrowers, you’ll be better positioned to weather any changes to the economy or mortgage market.

 

Verus Mortgage Capital Doubles Issuance, Increases Bond Investor Participation by 60 Percent in 2019

Leading non-QM issuer closed 14th and 15th RMBS Transactions Washington, D.C. – January 6, 2020 – Verus Mortgage Capital (VMC), a full-service correspondent investor offering residential non-QM, investor rental and fix and flip loan programs, finished 2019 strong. It recently finalized its 14th and 15th rated RMBS (residential mortgage-backed securities) transactions for $533.5 million andRead More

Verus Mortgage Capital Introduces Prime Ascent Plus

Washington, D.C. – December 4, 2019 – Verus Mortgage Capital (VMC), a full-service correspondent investor offering residential non-QM, investor rental and fix-and-flip loan programs, announced the launch of Prime Ascent Plus, a higher balance loan program for applicants with alternative income documentation. The following features are available to choose from: LTVs up to 90% FICOsRead More

Non-QM Continues to Grow: But where, exactly, does opportunity await?

The non-QM market, predicted to rise by as much as 400% this year, continues to be an important lending channel for many mortgage bankers. Particularly when 2020 is expected to see a slight decline in originations, finding new ways to replace volume is more crucial than ever. A recent survey of loan officers found aRead More

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