Non-QM specialist redirects focus amid tight margins
To survive in a challenging housing market in which both mortgage rates and inflation are rising at a vertiginous rate, you need to be able to turn on a dime – and that doesn’t just apply to home buyers.
Brokers and non-QM specialists such as Angel Oak are also having to adapt quickly to a rapidly changing environment that has seen refi loan volume plummet by more than 60% in a year.
Tom Hutchens (pictured), the executive vice president of production at Angel Oak Mortgage Solutions, told Mortgage Professional America (MPA) that the company was now providing loan officers with more products “because it’s a tight margin right now”.
He said: “The refi market is gone, so we’re just trying to give originators more tools to capture more loans and prospects for borrowers.”
It would appear to make sense. Since January, the 30-year fixed rate for a mortgage loan has risen from about 3.6% to 5%, and inflation from 7% to 8.5%, with all the evidence pointing to the prospect that they will continue to rise.
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To add to the mix, Fannie Mae this week predicted that the US economy would fall into a recession in 2023, expecting property sales to drop by 7.4% this year and by 9.7% in 2023. House price growth is also expected to slow from 20% in Q1 to 3.2% by the end of next year.
Amid those sobering statistics, Hutchens said Angel Oak was now looking at three specific products to bolster a broker’s armory.
Although the non-QM market grew substantially last year, with the Atlanta-based firm originating more than $3.9 billion, delayed financing is another marketing tool within the non-QM space that could help brokers, he stressed.
The product essentially allows a borrower to make a cash offer for a property by applying for the loan after closing. “Let’s say it’s a $500,000 offer, they actually have that cash or access to it, even if they get short-term financing. They can pay the $500,000 and then apply and get that $400,000 loan from us 30 days later.”
He pointed out that although delayed financing had always been on the table “it’s never been needed like it is today”.
He added: “Delayed financing is a big opportunity right now because of the market. The bottom line is that people making an offer with a loan contingency are having a really hard time winning their offers because sellers know that if it’s contingent on the loan happening and the loan doesn’t happen, then then they’re out. That’s why sellers like cash offers.”
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With real estate brokerage Redfin this week revealing that properties sold at their fastest pace compared to any March on record – despite home sales falling by 4% last month – it would seem to make sense for a buyer who’s in a hurry to consider such a product.
Among the other Angel Oak offerings are investor products and short-term rentals, in response to what Hutchens described as a “very active” investor property market, which includes non-warrantable condos.
Investor loans account for roughly 30% of Angel Oak’s business, although Hutchens said it could grow to 40% and provide more opportunities for brokers.
“We’ve been originating investor products for many years, and we believe the demand for them will continue to make them an integral part of non-QM.”
