While most loan volumes are expected the shrink in 2022, the non-QM sector is expected to double its market share. Non-QM loan growth is expected to increase by a whopping 40%.
In our recent webinar, “Automating Non-QM”, Indecomm asked its participants the following: Are you already originating non-QM loans? If so, do you plan to do more?
Participants overwhelmingly stated that they plan to do more, and several noted that they intend to enter the non-QM space this year.
Indeed, the opportunity for non-QM volume growth is significant. However, anytime there are large volume increases or an expansion into a new product strategy, lenders should expect added risks. Moreover, non-QM is a unique asset type with unique risks. For lenders looking to dive into this product category, the key questions to ask include:
- What risk management measures do we need to take to capitalize on this opportunity without incurring loss?
- What do we need to do to revamp our product strategy to embrace non-QM?
- How can we efficiently manage loan volumes without increasing our cost-per-loan?
Indecomm specializes in the automation of audit and risk management processes for lenders. Non-QM has recently become a hot topic. In a recent webinar, host presenter, Rachael Harris, opined that since these mortgages don’t meet the exact lending rules laid out by the CFPB, , lenders don’t have a playbook to follow. . As a result, some lenders that entered the non-QM space quickly changed course when the cost of originating these loans exceeded expectations.
Fortunately, today, the innovations available to Indecomm clients may help offset some of those negatives. Additionally, there is significant demand for non-QM when other loans are experiencing volume drop-offs. Addressing some of the complexities efficiently will help lenders keep competitive and originating loans.
For those of you unfamiliar, the unique non-QM features that cause hesitancy include:
- Non-QM loans often have less traditional borrower, income, and credit data
- Borrowers may have a non-traditional credit profile with various types of income, and other types of credit files.
- Non-QM typically comes with a substantial amount of documentation
- Borrowers don’t fall into typical categories and many are self-employed (even more so in the pandemic era)
- The time it takes to sort, compare, and analyze documents can be excessive
As stated during our recent webinar, Indecomm designed several products that address non-QM lending challenges.
- IncomeGenius solution was designed to calculate income for the self-employed borrower, which is often far more complex.
- DecisionGenius decision management software additionally can help underwrite unique and doc-heavy non-QM loan files, cutting back on hours and hours of underwriting time.
- Indecomm automation solutions offer a truly contiguous and streamlined view of documents and data that you can’t find anywhere else.
- Automation solutions serve as a second set of eyes, helping you capture risk before loans are sold during secondary transactions.
What it comes down to:
In the last year alone, the US had the largest increase in self-employed, unincorporated individuals in a 13-year timeframe. Historically, these borrowers have been left out of a lot of standard mortgage options but they could be great candidates for non-QM so long as lenders are ready to offer that option.