New GSE guideline updates to Fannie Mae and Freddie Mac forces them to cap the amount of second home and investor properties delivered at 7%. This means a meaningful amount of supply will have to come to non-QM sector.
The FHFA’s announcement that they will be reducing mortgage purchases to 7% of a lender’s pipeline of second home and investment properties has thrown some originators’ volume into disarray. The industry should remember that this will have a more immediate impact on the borrowers themselves.
As the model by which some investor clients built their whole real estate businesses changes, brokers and correspondent partners need to stay focused on those customers by providing options and education that can help them navigate this shift and keep their businesses growing.
That’s the view taken by Keith Lind, executive chairman and president of Acra Lending. He explained that while non-QM lenders are set to benefit, more investors will be looking for products which allow investors to access non-QM programs backed by private capital. In turn, lenders and originators need to focus on what this means for the individual borrower. He explained that while this might mean slightly higher rates and higher monthly payments, the underlying strength of the market combined with the right products will still help investors thrive.
“I think if you’re acquiring a second home or an investment property, the cost for that risk has just gone up because of the cap,” Lind said. “If you’re forced to go to the private market, the mortgage rate will definitely be higher but there will be more loan options to chose from. There’s plenty of options for borrowers, brokers and our correspondent partners. If you’re looking to buy an investment property or a second home, you’re just going to use a different route.”
In this environment, Lind believes that borrowers, brokers and correspondent lenders should be working to quickly expand their knowledge of non-QM products to serve customers better. He sees this move from the FHFA as motivated somewhat by a desire to reduce the burden of risk on the government’s balance sheets. If the housing market does take a dip, he sees second homes and rental properties as likely carrying greater risk. He also expects that the already strict agency guidelines will likely tighten further, resulting in more loans going to non-QM lenders.
The benefit of learning non-QM products from a lender like Acra comes in the wide range of flexibility they offer to brokers, correspondent partners and their retail clients. With a range of products including bank statement loans based on three, 12-, or 24-months’ worth of information, full-doc loans, or even prime jumbo products, they can accommodate borrowers and originators with entirely unique needs.
Acra is also there to help educate the borrower at every stage of the process. They see the loan, Lind said, as a partnership between themselves, the mortgage professional and the borrower. Their borrowers, brokers and correspondent partners get to pull from Acra’s wealth of expertise navigating loans that fall outside agency guidelines, as well as their experience advising on difficult deals that require creativity on the part of every stakeholder.
Most importantly, Lind emphasized that Acra is there to help the borrower first. Acra can also help ensure satisfaction and continued business for their broker and correspondent partners as well.
“It starts with the education of the products we offer to our borrowers, brokers, and correspondent partners, whether through webinars or educational materials, we’re working to ensure everybody understands our suite of products and their options,” Lind said. “Not only has that helped the broker and correspondent partners understand what we’re doing, it’s helped the borrower understand what products are available to them so they can buy that second home or that investment property they know they can afford.”