Top mortgage lender NewRez has added to its line of “Smart Series” non-QM products, launching a 40-year fixed-rate interest-only mortgage loan.
With the 40-year IO mortgage, borrowers make interest-only payments for the first 10 years, which NewRez says increases their purchasing power and allows for more affordable monthly payments. (It also slows the amount of equity borrowers have in the property.)
The new product comes amid mortgage rates around 6.25% and declining home sales.
“We are continually enhancing and updating our Smart Series products to ensure we are providing competitive non-QM financing options for our clients in current market conditions,” said Jeff Gravelle, co-head of production at NewRez, in a statement. “Our Smart Series products, like the 40-year IO, are developed to meet the needs of today’s borrowers and open the door to thousands of prospective homeowners.”
The 40-year mortgage term is gaining popularity in the mortgage industry, though not necessarily in this form. The housing industry has been largely supportive of the Federal Housing Administration‘s proposed 40-year loan modification as a tool for loss mitigation. But interest-only 40-year mortgage products are relatively rare. Angel Oak is among the few offering a 40-year mortgage, and Sprout Mortgage also had one before it abruptly shut down earlier this summer.
Like many of its volume-hungry competitors, NewRez hopes to court borrowers who fall outside the traditional conforming loan credit box. The parent company of NewRez, Rithm Capital, disclosed that its originations business segment in the second quarter lost $26.4 million, down from a $26.5 million profit in the first quarter. Origination volume in the second quarter came in at $19.1 billion, down from $26.9 billion in the first quarter.