Strategies in a challenging market have proven strong preparation for next year, says executive
A challenging year for the overall mortgage market may be coming to a close – but resourceful lenders and mortgage professionals have still been able to carve out opportunity despite the ongoing volatility.
That’s been especially apparent in the non-QM space, where taking a strategic approach and tapping into the continuing demand for homes despite mainstream lenders’ growing conservatism has paid off, according to a leading executive.
Tom Davis (pictured), chief sales officer at Deephaven Mortgage, told Mortgage Professional America that educating clients on leveraging product types and sourcing borrowers had been key elements of a successful year for the company.
Helping originators learn how to establish relationships with realtors has also proven a crucial element for the lender in 2024, according to Davis. “The top 10% of realtors, or realtor teams in the United States, account for 90% of the listings,” he said.
“So teaching our originators to be strategic and leverage non-QM to tap into the realtors who have listings – and leveraging the products to tap into those realtors [has been important].”
In the past, those realtors might only have had one or two LOs to work with, Davis said. But the current market is seeing many borrowers frozen out of the opportunity to deal with a conventional lender despite a recent improvement, and “if those originators don’t have these [non-QM] products or aren’t versed in them, it gives the customers that we work with and trained [the ability] to go after realtors with material volume and material listing.”
Introducing new products into the marketplace to meet the increasingly complex needs of borrowers, meanwhile, has been a further strategy pursued by non-QM lenders to eke out growth this year.
Deephaven, according to Davis, has expanded its non-QM offering with new second-lien programs and options for fix-and-flip and bridge financing. That’s a response to the growing prominence of investor transactions in the mortgage space – not least because demand for housing remains sky-high even despite the affordability crisis facing many borrowers.
Demand remains strong despite overall housing market cooldown
An undersupply of housing has left the US millions of homes short of what’s required, with construction financing for builders and developers now in strong demand because of their inability to secure financing elsewhere, Davis said.
Mortgage demand fell for the sixth straight week, with applications dropping by 10.8% as volatility in Treasury yields continued to drive mortgage rates higher, according to data from the Mortgage Bankers Associationhttps://t.co/dIgW0CJkDP
— Mortgage Professional America Magazine (@MPAMagazineUS) November 6, 2024
That also means fixing up properties that aren’t currently habitable and bringing them back to the main housing market. “Being a part of the solution to the supply-demand imbalance in housing over the next 10 years will give originators a competitive advantage – having access to the full suite of non-QM that serves self-employed borrowers,” he explained.
Other trends include a growing number of homeowners who are accessing equity in their home to consolidate debt and improve their cash flow, or renovating to stay in their homes for longer.
Loan originators should be attuned to that reality, Davis said, as well as focusing on a wide variety of referral partners and not solely realtors. “There are other referral partners and other things originators could [use] today in order to be more successful and drive higher origination,” he said, “[such as] working with CPAs and accountants, who primarily work with self-employed people.”
Product expansion, non-QM growth expected in 2025
As for 2025? Further product expansion is in the cards for the year ahead, a reflection of a market that’s likely to see continued uptake of non-QM products among loan originators who don’t currently have it in their toolkit, according to Davis.
On the construction and renovation side, he said the supply-demand imbalance is keeping Deephaven in a “bullish” mood with little sign of an impending slowdown in investor appetite in those spaces.
That means that while some of the market challenges could stretch into next year, growth in the space looks a good bet moving forward – with the borrower profiles of non-QM participants especially encouraging, Davis said. “These are well-heeled borrowers with skin in the game… and they have equity, so they’re going to figure a way out to make a payment,” he said.
“I think if you look at overall mortgage credit, I haven’t seen a period in my 25 years in mortgage where the credit has been as good as it is today.”
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