The Mortgage Market is currently undergoing a structural change in terms of its modus operandi, borrower profile, and the rapidly changing market norms.
In the wake of the ongoing COVID-19 pandemic, the current scenario appears remarkably different from what it was just a couple of years ago. While the industry has slowed down, opportunity does exist for those lenders who are open, in terms of a much more lucrative & growing Non-Qualified Mortgage segment.
In this article, we explore what’s changed in the mortgage market, why Non-Qualified Mortgages make a good business case for lenders in the current times & how processing support services for Non-QM Lenders can simplify the transition and help to truly seize the opportunity.
The Changing Face of the Mortgage Market in 2021
Whilst the last year’s pause in mortgage originations and securitizations caused dismay among lenders, 2021’s outlook spells optimism for the industry in terms of making up for the lost volume through the Non-Qualified Mortgages lending segment.
Radical Change in Borrower Profile
With the sharp impact of the global health crisis on salaried jobs, a large chunk of people has turned to self-employment options. The numbers suggest that the unemployment rate had reached 14.7 percent in mid-March 2021, bypassing the highest rate observed since the Great Depression. On the other hand, there was a simultaneous 24 percent increase observed in startup businesses across the United States from 2019 to 2020.
This change has automatically converted a large proportion of loan seekers as natural candidates for Non-Qualified Mortgages vis-à-vis erstwhile popular agency products servicing the salaried class.
Home prices have also experienced a rise. In this market, the rise has increased the demand for larger sized Non-Qualified Mortgages loans in the event of slowed down refinance activity for those who are looking at immediate home buying.
In the last quarter of 2020, the decline in refinance was projected to be around 50 percent, and the present times are quite moving in sync with that estimate.
Stricter Regulations by Fannie Mae & Freddie Mac
Fannie Mae and Freddie Mac have recently introduced more stringent restrictions, limiting the percentage of loans based on their perceived risk criteria. This has rendered the government box smaller, disqualifying a growing number of borrowers who do not align with the GSE.
All of this becomes quite clear with only the marginal decrease in the Non-Qualified Mortgages sector as compared to the sharp decline in the Qualified Mortgages loans. In 2020, the Non-Qualified Mortgages sector closed strong with
a sum of $ 18.9 billion. This data point is what should be now garnering significant interest among growth-oriented investors and lenders in the housing finance space.
The Value Prospect for Lenders in Non- Qualified Mortgages – A Redefined Perspective
The current market scenario does indicate a significant opportunity for lenders in the Non-Qualified Mortgages segment. Some of the pertinent aspects contributing to its growing value proposition include –
While the historical lender preference has been towards the Qualified Mortgages sector, timely entry to the Non-Qualified Mortgage segment can now be a great early mover advantage at a time when the sector is really picking up.
With the currently evolved market conditions, this sector has the potential to make up for a large chunk of the lost volumes from the agency sector, fueling continuity of business and also contributing to measurable growth moving forward.
Due to fewer competitors currently present in the Non-Qualified Mortgages segment, Non-Qualified Mortgage Providers can benefit with higher interest against the loans disbursed.
Since non-qualified seekers currently have limited options, they would be in a relatively weaker position to bargain and explore much between different lenders, rendering the position and say of the lender stronger.
Finally, as the documentation and formalities would be lesser in Non-Qualified Mortgages, the fewer formalities could expedite the entire process making the ROI per loan much higher if the right decisions are made at every step.
How Lenders Can Accelerate Growth & Maximize Benefits in This Market with Processing Support Services
As a lender, if you are considering embracing the opportunities, onboarding a processing support partner can help you make the most of this lucrative time.
Reduce the Turnaround Time with A Partner
To make the most of this opportunity, as a lender, you must seek to accelerate your process of serving a broad range of borrowers while having a robust mechanism to ensure making the right decisions at every step. Having a dependable partner for ongoing processing support could help with minimizing the turnaround time.
Scale at Unprecedented Ease
As the market is undergoing a significant change, a processing support partner could also help with handling the dynamic volume without introducing the additional fixed costs of permanent hires. Moreover, it could also ease out the multiple management complexities faced subsequently.
Seamlessly Meet the Changing Compliance Requirements
In the face of dynamically evolving regulations in the Mortgage world, it can get quite cumbersome to keep track, stay abreast and iterate the response. Non-Adherence on the other hand could pose significant damage and prove costly.
Having the right partner to support with compliance to regulations could simplify tasks, introduce efficiency and eliminate chances of making serious and costly mistakes.
If the processes are agile, costs reduced, and decision-making sharp, the combination will automatically fuel growth. A faster turnaround time would translate into improved customer experience building a better reputation.
Improved and simplified decision-making will translate to a growing bottom line.