Mortgage

Non-QM lenders hunt for LOs as consumer-direct model falters

Non-QM lenders anticipate a boom in business and are bringing more employees on board in preparation

HW+ hiring

While layoffs sweep the mortgage industry, particularly consumer-direct lenders, non-qualified mortgage (non-QM) lenders are going on a hiring spree.

Non-QM lenders Angel Oak Mortgage, Acra Lending and Newfi alone currently have at least 130 openings on jobs listings sites.

According to Evan Kidwell, chief operating officer at Griffin Funding, a consumer-direct lender that launched non-QM operations in November 2020, the company is willing to hire newbie LOs and processors and give them on-the-job training.

“If you have non-QM experience, we can throw you right in, you’re going to have a job right away,” he said. “If you’re willing to learn and you’re coachable and trainable, that works too.”

Kidwell said his company is looking for loan processors to identify fraud in non-QM loans, in addition to loan officers.

The hiring trend at non-QM lenders stands in sharp contrast to recent layoffs at some consumer-direct lenders, which specialize in conventional refinance loans. In recent months, Better.com, Intefirst Mortgage and Wyndham Capital Mortgage announced loan officer layoffs. With the three companies combined, over 1,000 employees have received pink slips.

Acra Lending, which rebranded from Citadel Servicing last year, more than doubled its headcount year-over-year from 200 employees to 420 in 2022. Keith Lind, president of Acra Lending, said that in a few months, the company will have over 500 employees.

“The area of focus for us right now is hiring LOs,” Lind said.

Riches in the niches

The Mortgage Bankers Association has forecasted that mortgage originations will grow by 9% to $1.73 trillion in 2022. Non-QM lenders are optimistic that loan originations outside the purview of the government-sponsored enterprises will propel that growth.

In a recent interview with HousingWire, HomeXpress, a non-QM lender, predicted the sector will double its market share in the coming year, from 5% in 2021 to nearly 10% in 2022.

One reason the non-QM sector is expected to take off, according to non-QM lender executives, is because self-employed borrowers and those who work in the gig economy need homes. Current GSE guidelines make it difficult to for borrowers who don’t have a traditional salary to qualify for agency-backed loans.

“I think there’s so many self-employed borrowers who have felt like they’ve kind of been pigeonholed into only being able to do one type of loan for so long and they’re just now finding out that non-QM could be an option for them,” said Kidwell. “I would say most of our clients didn’t even know non-QM was an option two years ago.”

Kidwell also said that real estate investing is another segment that is driving more business to non-QM. “I would say probably at least 30% to 40% of our clientele are real estate investors,” Kidwell said.

The Federal Housing Finance Agency recently announced new upfront fees for second-home loans which, much like the abrupt and now-suspended caps on such loans last year, are expected to give the private-label securities market a boost.

And as rising mortgage rates slow the flood of refinances, lenders are preparing for increased interest in non-QM. Alex Naumovych, an LO at Draper and Kramer Mortgage, said that his company’s upper management has urged LOs to give more thought to non-QM programs in 2022.

“In 2020 and 2021, there was so much refi volume that no one really had the time and patience to deal with these types of loans,” said Naumovych. “This year, everyone will have a little bit more time as well, they’ll be providing a little bit better service and paying more attention to those loans.”

Non-QM loans, Naumovych noted, are more time-intensive to originate, because they do not go through an automated underwriting approval process, as loans backed by the GSEs do.

Some market participants are also closely eyeing regulatory changes that could dampen the non-QM market by expanding the pool of loans able to get QM status.

The Consumer Financial Protection Bureau‘s new General QM Final Rule replaced the 43% debt-to-income ratio limit in favor of more flexible pricing guidelines, allowed jumbo loans to get QM status and provided additional ways to verify income or assets. The new rule is slated to be implemented on Oct. 1, 2022.

Redwood Trust, in a report published in April 2021, noted that if the rule is implemented, “the increased flexibility will likely result in loans that would previously be deemed as non-QM qualifying as QM going forward…a corresponding reduction in non-QM lending will follow.”

The regulatory uncertainty didn’t diminish Lind and Kidwell’s confidence in the non-QM sector, however.

“I learned a long time ago to not get too worried about those things,” said Kidwell. “The riches are in the niches.”

Comments

  1. Yes, riches are in the niches! I believe in the next 5 years there will be 2 types of lenders: Big Banks/fin-tech mortgage companies and brokers. I think the big companies will automate the mortgage process and get rid of the Loan Officer and drop their margins where the LO will not be able to compete due to his rates will be higher to make up for the LO compensation. Where the self employed, low credit score, funky scenarios will fall to the broker channel. Thoughts?

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