With rising interest rates and limited housing volume, brokers need to get out of their comfort zones and serve clients who don’t meet the qualified mortgage criteria – a market that could reach $20 billion during 2018.
Greenbox Loans has pushed to revolutionize non-QM services, and the effort is paying off.
“The rates were so good a few years ago that brokers could rely on a lot of refinance and purchase business to keep their pipeline full, and they likely did not have to even look at non-QM because they had enough loan volume,” said Raymond Eshaghian, Greenbox Loans president. “That is not the case in today’s market.”
Eshaghian estimated that only 30% to 35% of brokers currently handle non-QM – which means they aren’t closing all the deals they could be.
The market for these unconventional mortgages is broad, ranging from wealthy retirees seeking interest-only loans to single parents with poor credit. Buyers who lack fully documented income also fall into non-QM territory, even if they have hefty bank accounts.
More and more Wall Street investors are seeing possibilities for non-QM, though the secondary market is still fairly minimal. Non-QM deals also lack the liability protections afforded to mortgages that meet QM criteria.
Eshaghian stressed that it takes time to learn the non-QM market. If new brokers jump into it with someone inexperienced, they could struggle to get the loan done and shy away from similar deals in the future.
“You should really only work with a lender that is an expert in non-QM,” Eshaghian said. “With traditional lending becoming more difficult, new lenders are entering the non-QM space, and it is creating a clunky situation for everyone involved in the loan, from the realtor to the loan officer, borrower and lender.”
With good preparation, originators can take the plunge into non-QM and position themselves well for the future. The sector hit a record high in 2016, which was topped in 2017. This steady growth is projected to continue for years, opening up a new pipeline of clients.