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Opinion: Harnessing Non-QM Loans As Refinancing Volume Dwindles

The mortgage industry continues to be battered by negative headlines amid the slow in demand, the challenges of housing supply, and rising interest rates. It’s no secret that refinance (refi) volumes dropped off a cliff, and the number of homebuyers in the market has shrunk since 2022. That leaves you with a small pool of prospects in a sea that used to be teeming with more volume than you could handle. The change of pace is probably off-putting in more ways than one, but a slowdown in refi and loan volume can mean a chance to build a new pipeline of revenue through the non-qualified mortgage (non-QM) market.

As a purchase product, non-QM can be a great addition to your options when it comes to serving homebuyers. Not only does it allow you to expand your pool of prospects, but it also gives you an opportunity to replace lost volume and potentially stave off that revenue compression we are seeing across the industry.

Evolving with non-QM expertise

The first step to taking advantage of this sector is continuing education on non-QM loans and their unique features. As more borrowers fall outside the conventional lending parameters, the demand for non-QM loans increases. It’s crucial to start educating yourself, your team, and your clients about non-QM loans. 

In the non-QM market, there’s a myriad of product offerings tailored to serve various borrower demographics. For instance, self-employed individuals have long been underserved by traditional lenders due to income documentation requirements. We often hear stories of self-employed borrowers who get rejected by their bank because the bank doesn’t understand how to qualify their situation. Non-QM bank statement products, which verify income based on bank statements rather than tax returns, can serve this population effectively.  

Education is not to be confused with complexity. These loans are not as complicated or as time-consuming as you may think. The reality is that when you work with non-QM professionals, you will find that these loans can be done as seamlessly as Agency loans. Experience will only make the process faster. 

Selecting the right non-QM partners

The non-QM world is different from the conventional mortgage space, so it’s essential to have reliable partners by your side. Plugging numbers into a black box and getting a yes or no answer is not how non-QM works. As I mentioned, though, choosing a trusted and experienced lender who specializes in non-QM loans can make the difference between a deal that closes and one that doesn’t. These professionals have navigated the non-QM landscape many times over and can guide you through it, identifying and answering pertinent questions that can impact your borrower’s chances of loan approval and providing support when needed.

Non-QM as the solution to the refi vacuum

With the refi market having dried up, it’s clear that the future for originators lies in diversifying their portfolio of loan products. Non-QM loans are not just a stopgap but a long-term strategy that can redefine your business model. These loans cater to an untapped audience and can sustainably replace the volume lost to refinancing.

The shift to non-QM may seem daunting, but by marketing yourself as a non-QM expert, partnering with trustworthy lenders, and leveraging a variety of non-QM products, you can not only survive in this new landscape but also thrive. The market always moves, and the most successful originators move with it. 

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