Mortgage rates have increased nearly half a point since January. According to the MBA weekly survey, mortgage applications have fallen in eight of the last nine weeks.
Rising rates have led to less refinancing activity. In mid-February, their share of mortgage applications dropped below 70% for the first time since October 2020.
The purchase market is positive, but the obvious question is how can lenders encourage more volume in the short-term?
Here are two good reasons to consider Non-QM products now.
1. Consumer demand is high
Prior to COVID there was a great deal of unmet demand in the market. Mortgage demand among self-employed and credit-challenged borrowers is growing, but lenders have been slow to reenter the market. Many good borrowers simply don’t fit into the GSE box. This is a tremendous opportunity for industry leaders to grow their non-agency originations and establish themselves as a trusted source for non-agency loans.
2. Luxury market and second home sales are soaring
Since the beginning of COVID and working remotely, real estate markets throughout the U.S. have undergone a noticeable shift. People have reevaluated their needs. They also are taking advantage of the flexibility to work from anywhere.
According to Redfin, sales of luxury homes surged 60.7% year-over-year during the three months ending Nov. 30, the biggest jump since at least 2013, when Redfin began recording this data. That is nearly four times the growth compared with the first two months of 2020, pre-pandemic.
And that enthusiasm is expected to continue throughout 2021, which means there is a growing need for prime jumbo loans. Recent updates to the QM rule also make jumbo and other types of non-agency lending easier which should benefit both consumers and originators.
We expect competition to heat up rapidly in the Non-QM market. Lenders who understand these reasons are taking action now. Verus non-agency loan programs enable you to lead the industry back to record volume in 2021. As refinance business and agency production fall off in a rising rate environment, Non-QM will be the fuel that propels leading mortgage lenders to higher growth.