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Here’s what brokers should know about non-QM heading into 2022

The non-QM sector is expected to double its market share

Recently, the Mortgage Bankers Association increased its 2021 forecast in total mortgage origination volume from $3.74 trillion (in September) to $3.85 trillion. This closely mirrors last year’s record $3.83 trillion.

Despite the expected flattening of volume year-over-year, the non-QM sector is expected to double its market share in 2022, from about 5% in 2021 to nearly 10%, according to HomeXpress.

Non-QM volume is projected to increase because there is a need that traditional products are unable to fulfill. Non-QM product knowledge has continuously grown nationwide with not only those in the lending community but with borrowers alike.

As non-QM lending increases in popularity, it’s a great opportunity for brokers to jump in and grow their business by offering a wider selection of loan products. So, what do brokers need to know about non-QM heading into 2022?

Looking back

Last year, the non-QM sector experienced a pause in the secondary market. This stemmed from the COVID-19 pandemic and the notion that the economy would go through turbulence.

The feeling of some investors was that the housing market, in particular, would take the brunt of the impact and because non-QM loans have not been tested through trying times, it was unknown how it would fare.

Government intervention did arrive to strengthen the economy and it certainly helped in avoiding another financial crisis. However, investors also realized that non-QM loans were made with sound underwriting practices and that their purpose served a void that is much needed in the housing market. By June of 2020, confidence returned in the non-QM space, and it continues to thrive today.

The secondary market currently has a huge appetite for these loans, and borrowers who may not have been able to purchase or refinance a home in the past due to strict agency guidelines are now participating in the housing market in thanks to non-QM lending.

Know your products

The biggest challenge for brokers is not knowing exactly what types of loans fit into the non-QM world. Agency loans have very specific guidelines, and in many cases, borrowers with unique situations who are a “near miss,” fall short of qualifying with traditional loans. Many self-employed borrowers are also affected by the inflexibility of agency loans.

However, with non-QM loan products, “outside the box” and “makes sense” underwriting practices have proven to be a welcomed alternative.

Many brokers are finding that these non-traditional products are not only supplementing their current business but are also broadening the customer base they are able to serve within their communities.

As the economy continues to recover, it’s important that brokers fully understand what non-QM products are available and how to best utilize them for their borrowers. Such knowledge may prevent potential loans from being declined and would add more new customers than ever before.

Partner with a non-QM specialist

To ensure brokers are well-educated on the non-traditional products available in the marketplace, they should partner with a knowledgeable and specialized non-QM lender.

“Speed, ease and convenience is the holy grail that all lenders strive for, but at HomeXpress Mortgage, it’s engrained in every employee’s DNA and this common goal has propelled us to become one of the top non-QM lenders in the nation,” said Rey Maninang, HomeXpress’ Head of Strategic Initiatives.

HomeXpress specializes in non-QM loans, partnering with brokers in 47 states. To learn more about working with HomeXpress, visit homexmortgage.com.

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