Brokers should maintain focus on sector as market shifts, exec argues
Tightening guidelines and a lack of activity on the agency side in recent times have opened plenty of mortgage brokers’ eyes to the non-QM space – and that’s a segment of the mortgage market that’s only poised to continue growing, according to a leading executive in the sector.
Tom Hutchens (pictured), speaking to Mortgage Professional America shortly after his announcement as incoming president at Angel Oak Mortgage Solutions, urged brokers to maintain their focus on non-QM business as the overall market begins to shift.
With a large number of originators having delved into non-QM during the past 12 to 18 months, “that’s always good because once they’ve originated one loan they’ve seen how easy it is to close a non-QM loan,” Hutchens said, “and most of them are making that part of their normal business.
“And that’s not going to change with the rates pulling back a little bit. Having learned how to successfully close a couple of non-QM loans, they’re not going to, all of a sudden, stop doing that. They’re going to continue, so I’m excited about that.”
Focusing solely on agency and government-type loans once the market reverts to a degree of normality, Hutchens said, means brokers will be prioritizing a “very limited” product set, particularly with the number of self-employed borrowers and individuals unable to avail of those options on the rise.
What falling rates mean for the mortgage market
Financial markets’ growing conviction that a Federal Reserve rate cut is on the way in September amid a darkening economic outlook has helped push mortgage rates lower in recent weeks, contributing to a positive overall atmosphere for the mortgage space heading into the final quarter of the year.
Rates hovered stubbornly around the 7% mark throughout much of the spring and early summer, but have dipped as low as 6.44% recently with a further decline anticipated in the months ahead.
US mortgage rates are falling, and Kurt Brandly of Greenside Capital sees a surge in activity! With the Fed expected to cut rates, now might be the time to act on refinancing or buying. https://t.co/Tg7lw8vzgX
— Mortgage Professional America Magazine (@MPAMagazineUS) August 26, 2024
That’s a welcome development, according to Hutchens, after the volatility that’s permeated the market since rates began to rise in 2022. “Everybody’s very optimistic on what’s happening,” he said. “We’re just seeing a lot more transactions in the market. I think there’s truly enthusiasm in the mortgage industry because it’s been a tough couple of years – everybody admits to that.
“Things just seem to be improving across the board. And the market is going to be optimistic for the mortgage space and real estate as a whole.”
Market confidence on the trajectory of interest rates translates into improved consumer sentiment, he added – and even despite ongoing inventory challenges and higher rates than those that prevailed during the pandemic, an uptick in activity on both the conventional and non-QM side could be around the corner.
That could mean the market picks up as 2024 moves into 2025. “People are still locked into all-time low interest rates and there’s still a supply-side challenge in real estate,” Hutchens said, “but as rates begin and continue to drop, I believe that the supply-side of real estate is going to normalize.
“And that’s what I’m most optimistic about. That’s not specific to non-QM, but non-QM is a subset of mortgages. So if everybody’s doing more mortgage transactions, then there’s going to be more non-QM mortgage transactions.”
Angel Oak gears up for busy months ahead
Hutchens, an Angel Oak veteran who previously served as the company’s vice president of production, will step into the role of president on September 2.
Key priorities in his new role, he told MPA, will be doubling down on what’s made the company successful to date and focusing on improving in each of those areas. “We’ll be analyzing our business on a regular basis,” he said.
“The three main pillars in the non-QM space are sales – our account executives, the people out there making people aware and educating them on the programs; credit – making those credit decisions in non-QM; and operations – [being] operationally efficient, getting loans quickly through the system from application to funding. Frankly, we’re really good at all three, but we’re just going to really focus on getting better in those.”
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