Mortgage RatesOrigination

In volatile market, Angel Oak sets 30-day rate lock period

Company said it has been forced to make rapid adjustments to ensure liquidity in a highly volatile market

HW+ mortgage rates desk

Atlanta-based non-QM wholesale lender Angel Oak Mortgage Solutions has updated its rate lock policy to a 30-day lock period due to the fast-rising interest rates landscape.

“Angel Oak, along with the rest of the non-QM industry, has been forced to make rapid adjustments to ensure liquidity during this highly volatile market,” a company spokesperson told HousingWire. 

Lenders offer borrowers to lock the mortgage rates for a period between the offer and the closing date, which vary according to their policies.

However, during periods of instability, locking the rate for a long period puts downward pressure on lenders’ margins, hurting earnings. That’s been playing out over the last few months due to massive rate increases. And more are expected to follow – the Federal Reserve signaled six additional rate hikes this year, with at least three more in 2023.

The latest weekly Freddie Mac PMMS survey, released Thursday, showed that the average purchase mortgage rate touched 4.67% early last week, up 25 basis points from the week prior and the highest reading since December 2018. Black Knight‘s Optimal Blue OBMMI pricing engine, which considers refis and data from the Mortgage Bankers Association (MBA), reported that rates on Monday averaged 4.86%, up around 80 basis points in one month. 

“The sharp rise of the 2-year swap rate along with the rapid increase in credit spreads of the securitization market have led to an unusually fast increase in non-QM rates that the industry has not seen before,” Angel Oak’s spokesperson said. 

Angel Oak Mortgage Solutions announced the change in its lock policy on March 31, which caused “confusion and stress” among brokers and borrowers, according to a company’s post on its LinkedIn page

The company retracted the changes the following day, saying it was in the “process of making the appropriate system updates to reflect the original information of borrower’s loans.”  After that, the spokesperson for the company told HousingWire on Tuesday that it will honor all current locks, with the new policy valid only for loans moving forward. 

With mortgage rates now hovering around 5%, compared with 3% or lower for much of last year, lenders are investing more in non-QM products. UWM recently rolled out bank statement loans targeting the self-employed as well as investor loans. Likewise, Homepoint is unveiling bank-statement loans as well as non-QM cash-flow loans for real estate investors. (Several other big nonbanks have investor loan products as well.)

Investors’ appetite for non-QM loans also increases in a higher interest rate landscape, as they are seeking for more return on their investments. So far, this year, the non-QM volume numbers are impressive: year to date as of March 25, a total of 29 non-QM securitizations were completed or underway valued at $12 billion, compared to 17 deals valued at $4.8 billion over the first full three months of 2021, the most recent Kroll Bond Rating Agency’s data show.

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