Neither a bubble nor a crash seen in the future, as new regulations and smarter underwriting keep the market on a smart course
Ten years ago the nonprime lending system was set up for failure, and it failed.
Today, Angel Oak Senior Vice President for Sales and Marketing Tom Hutchens said the system is set up for success, and that it is succeeding at putting qualified buyers into houses they can afford to pay for even if they don’t qualify for conventional loans.
“Back then we also got the appraisal from the originator. The originator provided the appraisal to us. It could have been their fifth appraisal, no one knew. Appraiser independence regulations really give us confidence that when we do an 80% loan, we are doing an 80% loan because that appraisal process no longer involves the 100% commissioned loan officer. Appraisers have independence they didn’t have in the past and that is a big thing. When we were doing nothing-down loans in the past were we doing 100% loans or were we doing 125% loans because the value wasn’t there and we didn’t even know it?” he asked.
Today, not only do appraisers have independence from originators to ensure their jobs are being performed fairly and accurately, but Hutchens said Angel Oak also has other tools it can use to confirm value and call up transaction histories on properties, tools that lenders didn’t have access to 10 years ago.
“The further away we get from the QM and non-QM designation that happened in 2014 the more comfortable people get that these loans can be done responsibly,” Hutchens said. “In 2014, people said here we go again, it’s the same old same old, but it isn’t. This is the new nonprime and it is a new normal.”
Hutchens said there is no way that a new bubble is coming or that another nonprime crash is on the way. “I can’t predict real estate or mortgage markets but I can say these won’t be the loans that cause the problem because the loans are being done responsibly.”
Today, Angel Oak Senior Vice President for Sales and Marketing Tom Hutchens said the system is set up for success, and that it is succeeding at putting qualified buyers into houses they can afford to pay for even if they don’t qualify for conventional loans.
“Back then we also got the appraisal from the originator. The originator provided the appraisal to us. It could have been their fifth appraisal, no one knew. Appraiser independence regulations really give us confidence that when we do an 80% loan, we are doing an 80% loan because that appraisal process no longer involves the 100% commissioned loan officer. Appraisers have independence they didn’t have in the past and that is a big thing. When we were doing nothing-down loans in the past were we doing 100% loans or were we doing 125% loans because the value wasn’t there and we didn’t even know it?” he asked.
Today, not only do appraisers have independence from originators to ensure their jobs are being performed fairly and accurately, but Hutchens said Angel Oak also has other tools it can use to confirm value and call up transaction histories on properties, tools that lenders didn’t have access to 10 years ago.
“The further away we get from the QM and non-QM designation that happened in 2014 the more comfortable people get that these loans can be done responsibly,” Hutchens said. “In 2014, people said here we go again, it’s the same old same old, but it isn’t. This is the new nonprime and it is a new normal.”
Hutchens said there is no way that a new bubble is coming or that another nonprime crash is on the way. “I can’t predict real estate or mortgage markets but I can say these won’t be the loans that cause the problem because the loans are being done responsibly.”
