The term "pro-borrower" is their preferred way of describing it
The following article is written in association with Deephaven Mortgage.
Amid economic uncertainty and a consequently slowed mortgage industry, non-QM loans have emerged as arguably one of the most feasible paths toward homeownership for many borrowers to achieve homeownership in an uncertain market.
Deephaven Mortgage is well positioned to that end, and it prefers the term “pro-borrower” than the unintended suggestion of negation implied in the term “non-QM.” As the corporate literature lays out, “Deephaven is here for the millions of Americans from all walks of life who don’t fit the narrow criteria required to get a traditional mortgage.”
Deephaven’s chief sales officer, Tom Davis (pictured), took time to chat with Mortgage Professional America about the growing need for non-QM loans. Spoiler alert: It’s the economy.
“Year over year, the market is down significantly compared to 2021 and 2022,” Davis said. “Last year was down 50%, 60% year-over-year in production. Last year, we saw the market really move as the rate went to a 15-year high. And with that, the refinancing is not as robust as it used to be two years ago.”
Those in the mortgage industry have found themselves navigating an unfamiliar landscape as a result, Davis said. “In order to fill that void and drive production, originators, lenders and brokers are having to expand their product offerings to serve the underserved market. A lot of originators are focused on repeat, refi business, but the refi business is no longer there or limited.”
The old tools of the trade are increasingly anachronistic in this climate, he suggested. “We’re in a purchase market, which means to tap into the realtor base to put more borrowers in homes, you have to have different products and tools to help borrowers that don’t fit the agency box in the Freddie, Fannie, Ginnie Mae space.”
That’s where Deephaven steps in. And the company’s not jumping on the bandwagon but launched in 2012 to provide mortgages for homeowners unable to qualify for a traditional, government-backed loan.
It’s achieved not only through the alchemy of accounting, but a decidedly human approach that the most sentient AI could never muster, including “…ingenuity and common sense, instead of a narrow set of criteria,” as the company asserts on its website.
Davis echoed the sentiment, noting that the changing face of America reflects the growing need for non-QM lending. The ideal of entrepreneurship for which America is widely known – heightened in the wake of pandemic – elevates the need even more.
“America is an entrepreneurial country,” Davis said. “A lot of people have multiple jobs – two or three jobs – in this gig economy, and that’s evolved and grown. You have to look at income loans a little bit differently than your traditional W-2s.
“There are different ways to calculate income versus the traditional agency methods,” he said. “We look at bank statements, both personal and business. In that, we take a very forensic view in understanding the cash flow, deposits, expenses and the type of business. We use assets – stand-alone or augmented. For investment loans, we can document income using a P&L or the cash flow from the property to qualify the loan.”
There are options for borrowers investing in rental properties. When referring to the use of the debt service coverage ratio in measuring cash flow to pay debt obligation, Davis said: “Borrowers have the option of documenting their income using the cash flow from the rental property. If the appraiser says the market rent is $1,500 and the proposed monthly mortgage payment is $1,400, the market rent covers it,” he added, referring to the use of the debt service coverage ratio cash flow to pay debt obligations.
“So, there are all these opportunities, all these referral sources,” Davis said with palpable enthusiasm. “Deephaven has been lending for over 10 years, and we have the expertise, knowledge, focus and experience. We have all these resources to help our clients.”
Non-QM is a business opportunity in a down market for those in the mortgage industry to be sure, but its growing reach comes at a time when the product is most needed for consumers. “Deephaven has been a pioneer in this space, and there’s a great need for non-QM in the market,” Davis said.
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