Non-qualified loans make up 9% of the total mortgages originated in 2016. This goes to show that there is a market, a demand for non-QM loans among today’s homebuyers. The question is: who are these potential borrowers of non-QM loans? Where can loan officers find such non-QM borrowers?
Identifying Non-QM Borrowers
Angel Oak, a wholesale lender who originates and services loans and sells them on the secondary market, is offering solutions geared toward tapping this “ massive untouched market” of potential borrowers of non-qualified mortgages.
These non-QM loan borrowers may have these characteristics:
- Don’t qualify for agency loans backed or guaranteed by GSEs, Fannie Mae and Freddie Mac or GOCs like Ginnie Mae.
- In self-employment.
- Need alternative documentation for income verification.
- Have low FICO scores.
- Have a recent derogatory record, e.g. foreclosure, bankruptcy.
Qualifying These Non-QM Borrowers
Aside from opening the credit box for non-QM borrowers, loan officers offering nonqualified loans in their portfolio can increase their competitiveness in the mortgage market.
According to Angel Oak, who recently completed its third non-QM securitization of $146.4 million, finding these potential borrowers is the first step. And they can be found through builders, accountants, realtors, and or financial advisers who closely work with these individuals.
These professionals can be considered as potential sources of referrals. Loan officers will have to educate these professionals about non-QM loans and their specifics. When the time comes that a client of such professionals will need a non-QM loan, they can recommend non-QM loan officers they know to that client.
Loan officers will also be given access to a proprietary tool that speeds up the qualification process. They can input info such as FICO scores, loan-to-value ratio, and loan amount, which can determine if a borrower is qualified for a non-QM. Loan officers can also use this tool to submit mortgage prequalification requests.
For borrowers whose profile might not take them to the traditional mortgage path, non-QM loans represent one possible route they can take. And there are many avenues to explore that option.