October 3, 2019
In this Forbes Real Estate Council article, Angel Oak’s EVP of Production, Tom Hutchens, explains why a robust non-QM market helps support the long-term health of the mortgage industry:
Non-qualified mortgages are one of the only areas for growth in the mortgage industry today. As the agency market remains fiercely competitive, originators have been adopting non-QM programs at a rapid pace, while direct investors and wholesalers have been quick to meet the resulting demand. I’ve had a front-row seat to the rise of non-QM over the past seven years, and to me, it seems that newcomers are popping up week after week to cash in on the sector’s growth.
At my firm, we believe that a robust non-QM market helps support the long-term health of the mortgage market. Despite the frequent comparisons to the subprime lending practices in the run-up to the housing crisis, the fact is that post-crisis regulations have made it challenging for even creditworthy borrowers to access the mortgage market. The disappearance of private capital was the catalyst to this industry shift, and the only loans available were agency loans. In present day, regulations have stopped the current market from looking like pre-crisis. Subprime lending was a greater than $1 trillion market prior to the crisis. In the years following, the subprime market effectively went to $0. Ten years later, the non-QM market has bounced back to an estimated $20 billion per year.
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