Firm helping brokers, underwriters and lenders negotiate around growing market segment
The emergence of non-QM lending amid a changing mortgage landscape marked by rising rates and a retreat from refinancing has not been smooth for some. Many mistakenly associate such loans with the subprime mortgages of the Great Recession that had more lax conditions for borrowers to secure financing.
Not so, says Redstone CEO Raviv Wolfe (pictured). During an interview with Mortgage Professional America, Wolfe described efforts to demystify the products on behalf of clients to help them better communicate the safeguards of lending.
“We think there’s ample opportunity with some groups who have damaged their reputations with their partners to provide more continuity and security in the market,” he said. “The same is true for wholesale. A lot of places have lost partners they’ve worked with diligently in the last few years.”
Despite that damaged past, Wolfe is undeterred: “Volatility brings opportunity,” he said. “It’s a good opportunity to key in on those areas. The reason why we exist in the first place is our belief that no-one is knocking it out with both technology and service in the non-QM arena. A lot of the lenders are people that were subprime lenders back in the 2000s and they’re back again with a different name and different company. And their products are phenomenal, because they’re nothing like subprime. They have high FICOs and lots of reserves.”
Yet for those who know of the Great Recession – let alone having lived through it – the lack of agency-standard documentation requirements as outlined by the Consumer Financial Protection Bureau that are innate to non-QM harkens the subprime mortgage securities of the past, Wolfe suggested.
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“I think the attention to service or lack thereof persists from those individuals because, without saying it the wrong way, there are weathered individuals that have experienced it before, and when you’ve been weathered you become a little more callous and the attitude is your customer is lucky they’re even getting a loan. So it doesn’t matter if I take an extra week, it doesn’t matter if I’m a little bit abrasive, I’m the decision maker whether or not you get a loan.”
For better or for worse, that’s the impression many have: “That’s tended to be the common theme among non-QM lenders,” Wolfe said. “From our perspective, these people have huge cash flows and are buying the best assets in the country. They should get great customer service.”
But he acknowledges that while such loans can be more cumbersome than Freddie Mac or Fannie Mae loans, “…there’s very little technology that’s actually been building to actually scale the business,” he said. “Our position is that by aggressively building technology that is helpful to make it streamlined and more automated like a conventional loan, in the long run, that and great customer service while you’re building that is really how you’re going to build long-term success. That’s what we’ve set out to do, and that’s what we’ve been doing.”
A number of launches speak to that quest. “We’ve already launched a new TPO portal that was entirely custom built,” Wolfe said. “It’s the most advanced in the non-QM space by far. We are rolling out automated fees for brokers this year so they’ll be able to make their own disclosures just like they would in a conventional loan. That puts a lot more control into the broker’s hands.”
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Also planned for launch is a “white label” tool related to automated underwriting for investment property loans, Wolfe said. “You would have heard of it as DSCR loans. We’re building an automated tool that makes the cost of underwriting tremendously cheaper and simpler for both broker and borrower to understand what their status is and what’s going on. But most importantly for our correspondent lenders, this is going to be a white label tool so it’s a tool we can roll out to them both on the correspondent side and wholesale channel where they will be able to take an application in, process it, underwrite it all within a white label tool for them so they get to look like they have great technology and make it easier for their borrowers to underwrite these loans.”
Wolfe had presciently anticipated the rise of the non-QM market even before the current shape of the mortgage market. In January 2021, Wolfe participated in the virtual Information Management Network Non-QM Forum where panelists predicted that technological innovation will be a critical driver stimulating the non-QM market in the coming years.
Others participating in that forum included Rick Soukoukis, CEO of RedyPrice; Aaron Samples, CEO of First Guaranty Mortgage; Christine Yan, director of Fitch Ratins; Mike Ousley, EVP of business development at Pro Teck and CEO of The Mortgage Acquisition Corp.; and George Lazaridis, president of Mortgage of Quontic Bank.
The rise of the non-QM market may still need to be demystified for some, especially as its presence grows. For Wolfe, the end goal is not that complicated: “This is about streamlining the whole process for creating essentially a marketplace for non-QM loans. That starts with the front-end helping brokers aggregate them, helping underwriters and lenders do that in a nice clean automated, intuitive process. By putting both of those together, you create a nice marketplace for these loans where we can help brokers and lenders move those into the secondary markets with a lot more ease.”
