As lenders look to pivot strategies amid refi-volume all but drying up, non-QM product options have risen in popularity. In light of that, HW Media CEO Clayton Collins recently sat down with Tom Hutchens, EVP of Production at Angel Oak Mortgage Solutions, to talk all things non-QM lending. 

“Everybody in the industry knows how fast rates have gone up this year,” Hutchens said. “And because of that, there were predictions of refinances going down, but they went down so quickly. So anytime that happens – and we’ve actually seen that in the past, over the past few years – that’s when originators look for new products.”

However, this strategy is not without its challenges for lenders. While there are logistical learning curves, the main thing Hutchens highlights as a challenge is preconceived – and misinformed – ideas of what non-QM lending is.

“We’ve been educating originators since 2013. I do think a primary issue that has come up over these years is that non-QM borrowers and non-QM loans, they’re not the subprime of the pre-financial crisis,” he said. “That’s what most people who haven’t originated non-QM loans might have a preconceived notion about, but really the non-QM borrower is highly qualified.”

Hutchens said at Angel Oak, they’ve seen many lenders get in and out of the non-QM space, often exiting when refinance volume returns. With quick pivots in product strategy, it’s important to have a reliable non-QM partner who knows all of the ins and outs, Hutchens said. 

“And then, maybe even more importantly, work with someone who has experienced and well-trained account executives,” he said. “Because the difference between non-QM lending and agency is that non-QM is driven by the quality of the account executive. This is because they’re the ones that are going to be doing the pre-qualifications for you. They’re the ones that are going to help you with the process. So if you work with a qualified and experienced lender and an expert account executive, you’re going to find originating non-QM loans is a lot easier than you might think.”

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