Over the last few months, the mortgage industry has seen a real change. While volume continues to be healthy, conventional loans’ interest rates have risen and their spreads have decreased. Now, it’s a great time for lenders to consider expanding into non-agency especially considering these projections:
• The MBA forecasts a very optimistic increase of $1.73 trillion, or 9%, in purchase mortgage originations – which would be a record.
• Conversely, the MBA also forecasts refinance mortgages to plummet by 62% in 2022.
• Industry experts expect the market share of non-QM loans to increase.
Despite the healthy increase in purchase originations, the anticipated rise in interest rates combined with the slower refinance market will mean less conventional business. So, how can lenders offset this market contraction that is affecting the mortgage industry?
First, if you want to improve your profit margins, look to the non-QM market. Your investor will have an accurate pulse on what’s going on in the market and can give you the best guidance.
Second, this is a great time to begin offering non-QM loans – and some programs are extremely popular. For example, bank statement programs are highly effective for self-employed borrowers. A recent Forbes article stated that according to the U.S. Census Bureau, U.S. workers started almost 4.4 million new businesses in 2020.
For the self-employed, showing proof of income can be a real challenge. Typically, self-employed borrowers must show two consecutive years of tax returns, as well as profit-and-loss statements. In addition, for those borrowers who have been self-employed for less than two years income documentation will be ever more challenging.
At Verus, we understand the needs of self-employed and other non-traditional borrowers. Two of our non-qualified loan products allow alternative documentation such as bank statements for self-employed borrowers. These loan products will enable you to serve borrowers with credit scores down to 580 and those looking for loans up to $3.5 million.
Investor loan programs are another popular non-agency alternative that gained even more traction during the pandemic. According to the National Association of Realtors, sales of vacation homes last year were up 16.3 percent over 2019, outpacing the total existing-home sales growth of 5.6 percent in 2020.
Verus has responded to this growing need with robust second home and investment property loan programs. Lenders can choose to originate loans secured by second homes and investment properties using one of our existing non-QM programs
Lastly, if you choose to begin offering non-QM programs, you should find an investor-partner that is a leader in the space – one with the service, support, product line, and pricing you need to be successful. At Verus, our focus is exclusively on the non-QM sector. Our experts will work to your advantage as we navigate the very different dynamics ahead of us through the end of 2021 and into the following years.