It is possible to continue to increase your volume this year despite the current challenges. We know that refinancing volume is declining, that Agency operations will shrink and become more expensive, and that a growing number of borrowers will not qualify for Agency guidelines. Non-QM is a solution to these challenges and these loans are easy to make.
Below are the current market hurdles and how Angel Oak Mortgage Solutions can help through non-QM products.
GSE Changes Will Incentivize More Borrowers and Originators to Invest in Private Capital
Fannie Mae and Freddie Mac will raise fees for second homes or high balance loans soon this year. This means that borrowers buying a second home or home outside of the compliant limits can expect higher fees with Agency loans. This indicates a reduced GSE or Agency footprint in the market and could have a direct impact on the volume you bring in this year. If you are an originator who has exclusively made agency loans, where do you go to replace agency business that you may not get this year? By the way, this is on top of the refinancing activity that we all know we won’t get this year.
These higher fees will undoubtedly push more borrowers into non-QMs. Angel Oak can make these loans without imposing fee increases because we do not sell our non-QM loans to Fannie Mae or Freddie Mac. We are native to hold. Our business model and affiliation with our asset management firm here at Angel Oak is particularly advantageous in avoiding the mandates and fee increases that GSEs are required to. Do you plan to add non-QM loans to your loan portfolio this year? If not, it’s time you did.
Lower rollover volume will need to be replaced somewhere
All sources have been warning about declining refinance volume for many months now and it is happening right now. According to the Mortgage Bankers Association, refinance volume continues to drop every week. On average, refinances are 50% lower year over year. There are still borrowers who want to do them – but not as many as last year. According to Black Knight Data and Analytics, owners have an average of $178,000 of equity to operate. Although this is the case, rising interest rates will not encourage many borrowers to refinance. The FHFA also announced that a potential hike in the federal funds rate could take place in March and reaffirmed its intention to end its bond purchases to control inflation. These rate increases will have an impact on long-term fixed mortgage rates, as they are influenced by inflation and the economy. Rising rates will certainly limit refinancing opportunities. The good news is that non-QM provides other opportunities for initiators to recover that lost volume. Start by knowing who non-QM borrowers are and where to find them.
Non-QM and Angel Oak help growing number of underserved borrowers
We have seen a growing number of people needing non-QMs to qualify for a home loan. There are several reasons for this, but one is due to more people becoming self-employed and part of the gig economy. In fact, our most used loan product is the Bank statement loan for independent borrowers. Many self-employed borrowers are turned down because of the income shown on their tax returns – in the meantime, they actually have the income and good to excellent credit to buy the home they want. According to Upwork, there are 59 million freelancers and gig economy workers in the United States today. That’s a lot of potential borrowers and many will need a bank statement loan to complete their transaction.
Real estate investors are another group of underserved borrowers. Many may not qualify for the agency because they have exceeded the loan limit or been denied due to title in an LLC. Many originators have also come to us with Jumbo borrowers who have been turned down at the last minute for a Prime Jumbo loan. We were able to switch to our non-QM Platinum Jumbo product and shut it down in time. Non-QM registers offers when the agency is not operating. Agency may not be an option for a growing number of borrowers in today’s market. Not sure where to find these borrowers? Angel Oak Mortgage Solutions can help originators prospect non-QM borrowers.
The essentials concerning non-QMs in 2022
Non-QM fills the volume gap lost due to the agency market contraction and lower refinancing activity. Non-QM is the fastest growing sector in the market right now with $80-100 billion predicted for 2022. A smart strategy is to use non-QM as soon as possible this year to get a stronghold on the year For Your Business. By choosing the right lender such as Angel Oak Mortgage Solutions, you can learn HOW to do non-QM at the same time as you go through the process of closing a non-QM deal. Bring us a script and we’ll walk you through the process. Learn as you go. You will find that non-QM is easy to do and closes quickly. Soon you’ll be an expert at it and you’ll be increasing your volume monthly. It’s a great way to protect your relationships with real estate agents and keep those referrals available to you.
To find boost your volume with the power of Angel Oak, learn more here.