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The History, Future of Non-QM Lending

Industry leaders discussed the history and future of the Non-QM sector in the latest MReport webinar series, “Non-QM Lending: Meeting the Needs of the 21st Century Homebuyer.”

“It was great to be a part of a panel of Non-QM industry experts who are passionate about this space. It is so encouraging to see these leaders create awareness around the Non-QM market,” said Tom Davis, SVP of Correspondent Lending at First Guaranty Mortgage Corporation. “Our grassroots efforts around creating awareness is contributing to adoption across the country.” 

Along with Davis, the webinar, sponsored by Altisource, featured Denis Kelly, SVP Sprout Mortgage; Robert Senko, President, ACC Mortgage; and Brian Simon, President, Lenders One. 

“The response was overwhelmingly positive from my team. ACC is proud to share our story and message to help grow the Non-QM segment of the marketplace,” Senko said. 

Kelly provided a history of QM and Non-QM, saying the sector dates back to the Dodd-Frank Wall Street Reform and Consumer Protection Act, which was enacted July 21, 2010, in response to the financial crisis of 2008.

This act also establishes the Consumer Financial Protection Bureau. 

Kelly noted that QM loans are meant to protect borrowers by prohibiting or limiting certain high-risk loan features. QM loans provide lenders legal protection from consumer lawsuits. Rules for QM were established in January 2014 and only apply to consumer-purpose loans. 

"Industry experts predict Non-QM growth ranging from 4-times to 10-times by 2021. This growth in the overall mortgage market of $1.5 trillion-plus is unprecedented,” Kelly said. “Forward-thinking and professional originators that embrace this market transition have a windfall opportunity."

Non-QM bond issuances have been on the rise, Bloomberg reports. But even amidst this positive move, some skeptics worry about non-QM's performance along the road ahead.

"Non-QM loan performance is very strong right now," Kelly said. "That's number one. Are you making responsible loans? The misconception may be that they equate it to what was happening in 2006, 2007, 2008—those were a very different type of loan."

Aaron Samples, CEO of First Guaranty Mortgage, echoed this sentiment, noting the misconceptions surrounding non-QM loans as "sub-prime."

“The biggest challenges lenders face today are around the stigma of the product being misunderstood as a sub-prime product,” Samples told MReport.

About Author: Mike Albanese

A graduate of the University of Alabama, Mike Albanese has worked for news publications since 2011 in Texas and Colorado. He has built a portfolio of more than 1,000 articles, covering city government, police and crime, business, sports, and is experienced in crafting engaging features and enterprise pieces. He spent time as the sports editor for the "Pilot Point Post-Signal," and has covered the DFW Metroplex for several years. He has also assisted with sports coverage and editing duties with the "Dallas Morning News" and "Denton Record-Chronicle" over the past several years.

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