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Home appraisal’s ugly history and uncertain future

This is Part I of a deep dive into the home appraisal industry. Today we explore the origins of the appraisal industry and its current lack of diversity.

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Deephaven Mortgage re-enters non-QM market

Has first MBS issuance since June

Like many players in the non-Qualified Mortgage space, Deephaven Mortgage was forced to halt operations in 2020 when liquidity dried up. That was then, this is now.

Deephaven is now set to issue a $146.2 million security backed by non-QM mortgages that have seasoned for an average of nine months, a presale report from S&P Global Ratings showed. This represents the first such issuance since June for the non-QM specialist.

S&P data showed about 30% of borrowers in the pool have received some sort of forbearance, although some have since received full modification. Although this issuance is much smaller than the typical balance from Deephaven (about $400 million per MBS in 2019 and beginning of 2020), this officially marks its return to the market.

Last spring, Deephaven, one of the first lenders in the non-QM market, announced it was laying off all workers and closing all operations. Many borrowers who had their files in processing and underwriting at Deephaven were placed in limbo and couldn’t close their loans, forcing them to find another lender or start the process over again.

But this was the same fate faced by non-QM lenders across the mortgage industry. After seeing an increase in activity over the past two years, a number of wholesale lenders suddenly suspended non-QM funding in March or tightened their standards on acceptable FICO scores. In fact, overnight, non-QM disappeared from the market.

Non-QM lending is poised for growth in 2021

HousingWire recently spoke with Mike Fierman, managing partner and co-CEO of Angel Oak, about the non-QM lending outlook for 2021 and how Angel Oak’s “originate to hold” model benefits originators.

Presented by: Angel Oak

But now, investors are once again turning to the non-QM space. Mike Fierman, Angel Oak managing partner and co-CEO, recently told HousingWire he expects the non-QM market in 2021 to grow quickly as the economy recovers from the pandemic.

He noted that, in a normal year, a healthy non-QM market should report approximately $300 billion in originations per annum. In 2020, Fierman said, non-QM origination totaled around $18 billion, so there is plenty of room for growth.

The Housing Finance Policy Center’s latest credit availability index shows that mortgage credit availability was just under 5% in the third quarter of 2020, down from 5.1% in the second quarter of 2020 and the lowest it has been since the introduction of the index.

“The portfolio and private-label securities channel took on more product risk than the FVR and GSE channels during the bubble,” the Urban Institute said in its report. “After the crisis, the channel’s product and borrower risks dropped sharply. The numbers have stabilized since 2013, with product risk well below 0.5% and total risk largely in the range of 2.3% to 3%; it was 2.8% in Q3 2020. However, the PP market share has plummeted during the COVID-19 crisis, as borrowers increasingly used government or GSE channels or could not obtain a mortgage at all.”

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