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Lending

Non-QM lending: The new normal for mortgages?

RPM latest to introduce non-QM lending solutions

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Alamo, California based RPM Mortgage is following suit with the industry and entering the newly chartered territory of non-Qualified Mortgage lending.

The demand for non-QM lending continues to motivate lenders to jump in the market, which RPM Mortgage saw.

"In the new regulatory climate, we are seeing that a certain segment of financially sound borrowers is having difficulty finding loan products that suit their needs,” RPM's founder and CEO, Rob Hirt, said.  

“To support these homeowners and borrowers in our communities, RPM has created programs that will help them secure a loan that meets their financial requirements without being penalized with an exorbitant interest rate," Hirt said.

RPM Mortgage’s new solutions are tailored specifically for residential borrowers who are looking for loans of up to $4MM but still not inside the new QM guidelines.  

The new lines provide solutions for the self-employed or the recently retired who have considerable equity, assets and credit but may be challenged by income.

These solutions also give options to borrowers with a short credit history, credit scores that are marginally outside of the guidelines or a debt to income outside of QM’s established 43% ratio.

Products include:

  • Alternative income verification for the self-employed, requiring only one year of tax returns.
  • 50% LTV for up to $4 million in borrowing for those with substantial assets, considerable equity and excellent credit.
  • 65-80% funding on loans from $250,000-$4 million for borrowers with a robust investment portfolio.

While industry experts believe non-QM opportunities make up an estimated 10% of the current originations market, Hirt projects these loans will make up roughly 20% of new originations at RPM.

There is currently $50 billion estimated in non-QM volume origination a year, which should create a significant net demand for private label mortgage-backed securities and whole loans, according to Ying Shen and Richard Mele, research analysts with Deutsche Bank (DB).  

However, they don’t expect non-QM volume to rise significantly above the $600 billion mark, and instead, given the dominance of GSE and FHA/VA and the exemption under the ATR/QM rules, the non-QM market is expected to be small.

Meanwhile, according to the Mortgage Bankers Association’s latest Mortgage Credit Availability Index, the recent increases in credit ability is being driven by a rise in the number of jumbo adjustable rate mortgage programs. 

Other lenders like Impac Mortgage (IMH) also recently broke into the non-QM market, offering 4 new products:  Alt-QM Jumbo, Alt-QM Agency, Alt-QM Income and Alt-QM Investor.

“We believe there is an underserved market for these programs where certain borrowers are finding financing for purchase or refinance is either non-existent or available with stringent and costly parameters,” Bill Ashmore, president of Impac Mortgage, said.

“We are not new to the non-agency space,” Ashmore continued. “We think this market is very similar to what we saw in 1995 when we first created Alt-A loans, and subsequently originated to $90 billion in that product from 1995-2007.”

Back in June, Caliber Home Loans rolled out four types of new non-agency mortgage products.

“We are confident that our prudent underwriting guidelines, coupled with the way we have structured each of these products, creates a winning combination for both Caliber and the customers we serve,” said Joe Anderson, CEO of Caliber Home Loans. 

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