It is possible to continue to increase your volume this year despite current challenges. We know that refinance volume is declining, Agency business will shrink and get more expensive and an increasing number of borrowers will not qualify under Agency guidelines. Non-QM is a solution for these challenges and these loans are easy to do.
Below are current market obstacles and how Angel Oak Mortgage Solutions can help through non-QM products.
Changes From The GSEs Will Drive More Borrowers And Originators To Private Capital
Fannie Mae and Freddie Mac will increase fees for second homes or high-balance loans soon this year. This means that borrowers buying a second home or a home outside of conforming limits can expect higher fees with Agency loans. This points to a shrinking GSE or Agency footprint in the market and could have a direct impact on the volume you bring in this year. If you are an originator who has exclusively done Agency loans, where are you going to look to replace Agency business you might not get this year? By the way, this is on top of refinance business we all know we won’t be getting this year.
These higher fees will, undoubtedly, push more borrowers to non-QM. Angel Oak can do these loans without imposing fee hikes because we do not sell our non-QM loans to Fannie Mae or Freddie Mac. We originate to hold. Our business model and affiliation with our asset management company here at Angel Oak is especially beneficial in avoiding mandates and fee increases that GSEs are held to. Do you have a plan to add non-QM to your loan mix this year? If not, it is time you did.
The Decline In Refinance Volume Will Have To Be Replaced Somewhere
Every source out there has been warning about refinance volume declining for many months now and it is happening right now. According to the Mortgage Bankers Association, refinance volume keeps declining each week. On average, refinances are 50% lower year over year. There are still borrowers wanting to do them – just not as many as last year. According to Black Knight Data and Analytics, homeowners have an average of $178,000 in equity to tap into. While this is the case, rising interest rates aren’t going to encourage many borrowers to refinance. FHFA also announced a potential federal funds rate hike could come in March and reaffirmed plans to end its bond purchases to tame inflation. These rate hikes will have an impact on long-term fixed mortgage rates because they are influenced by inflation and the economy. Rising rates will definitely curb opportunities to refinance. The good news is that non-QM provides other opportunities for originators to recoup that lost volume. Start by knowing who non-QM borrowers are and where to find them.
Non-QM And Angel Oak Helps An Increasing Number Of Underserved Borrowers
We have seen an increasingly larger amount of people needing non-QM to qualify for a home loan. There are various reasons for this, but one is due to more people becoming self-employed and part of the gig economy. In fact, our most utilized loan product is the Bank Statement loan for self-employed borrowers. Many self-employed borrowers are turned down because of the income documented on their tax returns – meanwhile, they actually do have the income and good to excellent credit to purchase the home they want. There are 59 million self-employed and gig economy workers in the U.S. today according to Upwork. That represents a lot of potential borrowers and many will require a Bank Statement loan to close their deal.
Another group of underserved borrowers is real estate investors. Many cannot qualify under Agency because they have exceeded the loan limit or they were turned away due to titling in an LLC. We have also had many originators come to us with Jumbo borrowers who were turned down last minute for a Prime Jumbo loan. We were able to pivot to our non-QM Platinum Jumbo product and get it closed on time. Non-QM saves deals when Agency won’t work. It is possible that Agency won’t be an option for an increasing number of borrowers in today’s market. Not sure where to find these borrowers? Angel Oak Mortgage Solutions can help originators prospect for non-QM borrowers.
The Bottom Line Regarding Non-QM In 2022
Non-QM fills the gap in lost volume from a shrinking Agency market and declining refinance business. Non-QM is the largest growing sector in the market right now with $80-$100 billion projected for 2022. A smart strategy is to utilize non-QM as soon as possible this year to get a stronghold on the year for your business. By choosing the right lender such as Angel Oak Mortgage Solutions, you can learn HOW to do non-QM at the same time you go through the process of closing a non-QM deal. Bring a scenario to us and we will walk you through the entire process. Learn as you go. You will find that non-QM is easy to do and closes quickly. Soon you will be an expert on it and adding to your volume monthly. It’s a great way to protect your relationships with Realtors and keep those referrals coming your way.
To find increase your volume with the power of Angel Oak, find out more here.