Lender phases out agency offerings, citing rising complexity and the need for specialization
Carrington Mortgage Services (CMS) has announced it is shifting its correspondent lending channel to focus exclusively on non-qualified mortgage (non-QM) loans.
The shift reflects the nonbank’s intent to double down on what it sees as a rapidly expanding and underserved segment of the market.
"By streamlining our product offerings to non-QM in the correspondent channel, we can leverage our expertise in reducing risk for our sellers," explained Andrew Taffet, CEO of The Carrington Companies.
"Being able to manage complex loans has long been one of our core strengths. With margins tightening in the current market, one that is highly commoditized, it makes sense for us to best serve our correspondent partners by focusing our energies on building our non-QM business."
Carrington’s correspondent channel will now underwrite and purchase only non-QM loans, a product category that has gained momentum as traditional borrowers become harder to qualify and agency loan volume slows.
"In recent years, one of the most successful loan products offered by CMS has been the non-QM, or non-agency, loan," Samuel Bjelac, senior vice president of third party originations for CMS, said in a Press release. "As the non-QM market continues to grow, we have been positioning ourselves, with expanded guidelines and competitive pricing, to capture more market share and add liquidity to the secondary marketplace."
Read next: Carrington Mortgage Services launches second-lien program
Non-QM loans are often associated with borrowers who fall outside the traditional credit box - self-employed clients, gig economy workers, or those with more complex financial profiles. While these loans don’t meet government or GSE guidelines, they must still comply with Ability-to-Repay (ATR) rules put in place in 2014, and Carrington says it applies prudent underwriting standards across the board.
The company believes that its internal underwriting expertise gives it a leg up in helping sellers navigate the risk that comes with more complex loan files, something that could prove valuable as volume shifts away from cookie-cutter agency deals.
CMS will continue to operate under a non-delegated delivery model, but it plans to introduce a delegated option for approved sellers in the near future, “as market conditions permit.”
Stay updated with the freshest mortgage news. Get exclusive interviews, breaking news, and industry events in your inbox, and always be the first to know by subscribing to our FREE daily newsletter.
