Who Needs Non-QM Lending?
When mortgage lenders ask, “Why should we implement a non-QM lending program,” I offer one simple response–$100 billion. That is the potential annual volume of the non-QM market. Given the current size of this market is less than $3 billion per year, it is easy to understand why so many lenders are racing to join in the growth of non-QM lending.
However, I have found that the question many lenders are actually asking is, “What kind of borrowers will I attract to my business with non-QM lending?” The answer to that question is also simple–creditworthy borrowers who do not fit the tight lending standards of today’s agency loan market. The number of borrowers who fit that profile is huge. In fact, according to the Mortgage Bankers Association (MBA), currently seven million potential homebuyers are unaware that they are able to qualify for a mortgage.
Take, for example, a borrower who has had a past foreclosure. Under agency standards, that borrower would have to wait seven years before they can obtain a mortgage. However, non-QM programs can help that borrower navigate his or her way out of the tight credit box and get a mortgage today.
Another group that is dependent on non-QM lending is the self-employed. Because these workers cannot verify their income through W-2 forms, the self-employed may be shut out of the agency market despite having good credit. With non-QM products like Angel Oak Mortgage Solutions’ Bank Statement Program, borrowers working in the “gig” economy can get approved using bank statements.