In January this year, the US Fed announced that it will be increasing interest rates not one or two but four times. The ultimate impact, needless to say, has been on consumer confidence leading to fewer refinances, given that there will be less attractive interest rates on offer.
However, one major development due to the fast-changing market conditions has been a substantial growth for non-qualified (non-QM) mortgages, bringing in cheerful news for non-QM mortgage lenders.
Studies have shown that the non-QM loans market in the US could grow to as much as $100 billion in 2022, bringing in a four-fold increase over last year. This isn’t surprising considering non-QM mortgage plays a seminal role in providing options for those borrowers whose income or other financial traits hamper them from benefiting from traditional lending programs.
Overall, there are several factors responsible for the demand for non-QM loans. While there was a blip in demand during the pandemic, the economic recovery this year has meant that liquidity has poured back into the market, prompting lenders to underwrite non-QM mortgages once again.
Another reason is the constraints in the housing supply market that have also led to opening up of opportunities for non-QM loans. With most market segments adjusting to lower production, high interest rates and less demand, rising defaults, and uncertainty, non-QM mortgages have been majorly pushed to the forefront.
It’s clear now that it is a go-to solution for lenders. In fact, non-QM loans are no longer a good-to-have, but a must have for lenders in many cases to save deals. The question now is how can lenders capitalize on this growth and maximize benefits in these market conditions?
One way they can do so is by using the right approach and partnering with the right people. Here’s how non-QM mortgage lenders can benefit by joining hands with efficient Processing Support Services:
Non-QM mortgage is a niche market and many loans may involve challenging circumstances. A Processing Support Service partner who is focused on the area and is armed with experience can offer the right support to non-QM mortgage lenders. Such loans require a partner who can quickly assess and use the right means to help close as soon as possible.
Given that time is of prime essence in a field like mortgage, experienced partners help reduce the turnaround time and ensure a smooth, easy and fast loan closure.
Mortgage is an industry that’s highly cyclical in nature and is prone to ups and downs as per market conditions. While lenders need expertise in areas like non-QM loans, hiring full time staff for this may not prove to be beneficial. Once in-house staff is hired, it can lead to high overhead costs during times when demand for the product is bound to fall.
It makes more business sense to join hands with a partner who will offer access to experienced support staff that can guide lenders. Besides, these partners can also offer other value-based services like strong helpdesk and support staff which is an investment that’s critically important, but one that not all lenders will be able to make on their own. Associating with partners thus helps scale up or scale down as per demands of the business with great ease.
Today, compliance is one of the most pressing issues facing lenders, especially when it comes to non-QM loans given their riskier nature. Research shows that nearly 40% of application failures are caused by incidences of non-compliance or other regulatory issues. With the rising cost of compliance, the major challenge is for non-QM lenders to manage costs without impacting their ability to stay compliant.
Non-QM mortgage lenders need partners who will help them cost-effectively manage the growing complexity of mortgage regulations. Partners can offer automated compliance systems that are able to more quickly and accurately check application data when compared with manual processes.
Partners like PrivoCorp can help non-QM mortgage lenders take full advantage of the sector with the help of the right approach, the right staff and right technology.
PrivoCorp provides robust support to non-QM lenders by taking care of documentation, scrutiny, and underwriting to ensure that the loan process closes successfully and quickly. Through AI and machine learning technologies, the company automates non-QM loan processing. This helps ensure accuracy, make pre-underwriting easier, and also manage vendor relationships.
PrivoCorp can be the ideal partner for non-QM mortgage lenders, as we help save loan cycle time, and reduce fixed costs.
