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MAXEX seeks to capitalize on expanding non-QM market

The fintech loan-exchange platform is bulking up trading programs to expand liquidity in the nonprime space

MAXEX, a major mortgage trading and aggregating platform, has unveiled a series of new programs designed to serve originators and loan buyers in the growing non-QM lending market.

The increasing demand for non-QM loans (more broadly defined as nonprime) has run up against market volatility, as mortgage rates have doubled since late last year. That has left “originators scrambling for liquidity in this growing market segment,” MAXEX’s announcement of the new non-QM initiative states.

MAXEX is an Atlanta-based fintech company that is backed by leading private-equity and capital-markets investors, including J.P. Morgan Chase. To address the non-QM challenges, MAXEX says it will work to expand liquidity in the sector as follows:

• Improving daily-flow trading by establishing guidelines and daily pricing for individual whole loans.

• Facilitating forward-trading agreements, which allow platform users to sell loan pools at a future date with pre-negotiated terms and pricing.’

• Enabling bulk trading, which allows platform users to sell closed loan pools to one or more buyers in a single transaction.

How to reach more and new borrowers with non-QM

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In May, MAXEX expanded its reach into one part of the nonprime market by launching a flexible DSCR [debt-service coverage ratio] loan-purchasing program designed to serve real estate investors, such as rental-property owners. 

“These new programs will expand our reach with bank-statement and other alternative-documentation loans, interest-only, etc., and are in addition to our DSCR program we launched in May of this year,” said MAXEX’s head of marketing, Andy Payment. “MAXEX’s goal is to continue to increase standardization and efficiency across the non-agency market, which includes jumbo, non-QM and more, thereby increasing liquidity and helping to meet the needs of creditworthy but underserved borrowers.”

Non-QM/nonprime mortgages include loans that cannot command a government, or “agency,” stamp through Fannie Mae or Freddie Mac. The pool of borrowers in this space includes real estate investors, property flippers, foreign nationals, business owners, gig workers and the self-employed, as well as a smaller group of homebuyers facing credit challenges, such as past bankruptcies.  

“Access to reliable liquidity is critical to the growth of non-QM lending, which serves the growing number of gig economy workers, business owners and other underserved creditworthy borrowers with nontraditional income documentation,” said Brennan Walters, chief revenue officer at MAXEX. “The growth of this fragmented market requires standardization to meet the long term needs of the consumer and the industry, [and] MAXEX is committed to providing that, just as we have for jumbo loans.”

The lenders originating in the non-QM space — technically a more narrowly defined category within the nonprime sector — make use of alternative-income or nontraditional income documentation, such as bank statements or assets, because borrowers cannot rely on conventional payroll records or otherwise fall outside agency credit guidelines. Mortgages originated to purchase investment properties for business purposes, which involve loans that typically make use of DSCRs as income documentation, are exempt from qualified-mortgage rules — although they are generally considered part of the larger nonprime universe if they are not agency-eligible. 

“The gig economy of the pandemic era invited more self-employed borrowers requiring alternative documentation into the fold — creditworthy but not fitting into the box of a conventional loan,” explains a recent MAXEX market report. “Investment property purchases have also been on the rise as those needing a business-purpose DSCR loan are typically less rate sensitive. 

“… MAXEX is poised to put its sellers in a position to take advantage of this market with new non-QM programs, which will contribute more data to this report in the coming months to better track the trajectory of the market.” 

MAXEX officials declined to offer an estimate of the expected loan volume the new non-QM loan-trading services will generate monthly or annually for the platform 

“However, we currently have more than 320 originators approved to sell to MAXEX, and our goal is to improve liquidity for as many of them as possible — both through the non-QM programs we are offering now, and others we will add over the coming months,” Payment said.

As a sign of the popularity of non-QM/nonprime loans, through August of this year, according to the MAXEX market report, expanded-credit (nonprime) issuance in the residential mortgage-backed securities (RMBS) market was “greatly outperforming prime RMBS” based on deals tracked by the exchange. 

“Year-to-date, 83 expanded-credit securitizations have priced versus just 29 prime jumbo issuances,” the MAXEX market report states. “The expanded-credit pools have a total volume of $32 billion while the prime deals have totaled just $18 billion. 

“The higher coupons of the expanded-credit deals make them more attractive to investors versus the limited supply of higher-coupon prime pools. … The expanded-credit issuances also show the continued appetite for non-QM by both loan buyers and bond investors.”

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