Tom Hutchens said he does not think of Angel Oak as a nonprime lender. “We think of ourselves as non-agency lenders. If agency loans are not meeting the needs of a market, we ask ‘what can we put together to meet those needs, whatever they are?’”
Angel Oak today is in 25 states and seeing its biggest growth in the Southeast, especially Florida, and in the West, especially in California and Arizona. “There is a need in every market. There is not a market that didn’t experience financial challenges around real estate, and where people haven’t struggled to get back on their feet,” Hutchens said.
“For so long people have known or thought that if their credit was not pristine, they had no opportunity to buy a house, and the way real estate works, Realtors filter people out. They have learned to ask lots of questions since the crash, to ask ‘have you had a foreclosure or a bankruptcy?’ and if they say yes the Realtor says ‘talk to a mortgage lender and call me back in a couple of years when you can qualify,’ but now Realtors and lenders are learning there are some options out there for these people,” Hutchens said.
He said that a few years ago, real estate agents might have just stayed away from clients who didn’t qualify for conventional loans, but that today more and more Realtors understand that people with less than great credit might qualify for a “band aid loan and then work on refinancing later.”
With interest rates on most of its loans ranging from the 5s to the 9s, he said most borrowers intend to refinance as soon as they can. In addition to nonprime loans for people with less than perfect credit, he said Angel Oak also underwrites interest only loans for people with better credit.
“For the right borrower, interest-only loans can be a great tool, but in the 2000s interest-only loans were abused and going to people who should not have gotten them,” said Hutchens.
“Interest only is a good tool for the right person, someone who has better things to do with their money. If you look at an amortization table, the first 10 years are interest only anyway--really. Interest-only loans give a more sophisticated borrower the ability to make decisions on how they invest their money,” he said.
“When interest-only loans became starter home loans
for first time buyers so they could afford a home, that is not what interest-only was meant for or who they were meant for,” Hutchens said with a tone of incredulity.
Even though Angel Oak Mortgage Solutions is the largest nonprime originator in the US, Senior Vice President of Sales and