by Calculated Risk on 12/21/2021 02:42:00 PM
CR Note: I’ve mentioned the increasing use of non-QM loans before.
Here is an interesting article on non-QM loans By Bill Conroy at Housing Wire: Move over Fannie, the non-QM loan is in the fast lane. Some brief excerpts:
The universe of non-QM single-family mortgage products is broad and difficult to define in a few words, but the definition matters because a huge slice of the borrowers in this non-QM category represent the heartbeat of the U.S. economy. Within its sweep are the self-employed as well as entrepreneurs who buy single-family investment properties — and who can’t qualify for a mortgage using traditional documentation, such as payroll income. As a result, they must rely on alternative documentation, including bank statements, assets or, in the case of rental properties, debt-service coverage ratios.
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Non-QM mortgages also go to a slice of borrowers facing credit challenges — such as a recent bankruptcy or slightly out-of-bounds credit scores. The loans may include interest-only, 40-year terms or other creative financing features often designed to lower monthly payments on the front-end of the mortgage — often with an eye toward refinancing or selling the property in the short-term future.
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Non-QM mortgages also go to a slice of borrowers facing credit challenges — such as a recent bankruptcy or slightly out-of-bounds credit scores. The loans may include interest-only, 40-year terms or other creative financing features often designed to lower monthly payments on the front-end of the mortgage — often with an eye toward refinancing or selling the property in the short-term future.
The size of the market is relatively small (about $25 billion in 2021 but growing). And the underwriting is generally solid, but this will be a segment of mortgage lending to watch.
