Did non-QM just disappear from the market?

The latest victim of the coronavirus might be non-QM lending. After seeing an increase in activity over the last two years, a number of wholesale lenders have suspended non-QM funding this week or they tightened their standards on acceptable FICO scores.

theLender is the latest company to announce that it is out of non-QM altogether, and put out this statement Friday afternoon on their website:

“With U.S. interest rates at historic lows, unprecedented Government stimulus, and the re-entry of the Fed into the agency and Government lending markets, we recognize that there is now not enough capacity in the agency markets to serve a hurting America. With our mission statement declaring that theLender is about ‘delivering customer-centric solutions to help clients realize their dreams,’ we have decided to put the full force of our platform behind the American people. To support the U.S. economy and be a beacon of hope during challenging times, theLender will be prioritizing QM loans for as long as America is in need.

“As of today, effective immediately, we are suspending all non-QM loans. That includes funding any further NonQm loans, locking or registering. We understand this is a burden for our broker clients and their customers but hope they understand this decision during this incredibly difficult time in America.”

Nations Direct Mortgage also shuttered its non-QM program. In an interview with HousingWire Friday, Martin Warren, managing director, specialty lending and servicing, at Nations Direct, described it as a “temporary exit” of the non-QM business. “We have a number of Wall Street and other large partners, so we’re going to wait it out and see what the appetite is. If our Wall Street partners want to enter again, we will.  In the meantime, we have a massive pipeline of Agency and FHA/VA business to keep us busy.”    

Orion Lending shut down its non-QM as well. Justin Simpers, a senior account executive at Orion, posted a video on the topic on Friday. “Non-QM loans are gone,” Simpers said in the video. “It is sad, but it’s just the hard truth. Liquidity — no one has it. Just like the crash in ‘07-‘08, non-QM is gone.”  

AmWest sent a statement to brokers that they have repriced their portfolio products to market-clearing rates.

Angel Oak Mortgage Solutions is one of the lenders still offering non-QM but tightening standards. The company sent out this message on Friday:

“Angel Oak is financially stable with a strong balance sheet. In order to allocate those resources most efficiently, we have made changes to our rates and guidelines moving forward. If you have active loans in the pipeline with us, please coordinate with your account executive to work through them. For all loans going forward, your account executive stands ready to assist.
“I want to stress that this is not a credit issue – these are solid loans that are performing. Unfortunately, the pandemic has caused a state of flux in financial markets that is impacting the entire real estate industry. Angel Oak was formed to provide access to capital for those shut out of the agency market. That mission will continue.”

Also on Friday, Parkside Lending communicated to brokers that they will not be approving any loans with a qualifying credit score of under 660 for all loan products. Previously, the company had been at 580 for government loans and 620 for conventional. Parkside also communicated that they narrowing their jumbo product offering and not offering non-QM.

These companies joined others who shut down non-QM earlier in the week, including Mega Capital Funding, which sent out a message to brokers that stated: “Due to retractions in the financial markets as a response to the coronavirus pandemic, and the uncertainty in the non-Qm space, MCDI will suspend funding on any and all of our non-QM and non-QM related products. This includes registering, locking or pre-locking loans. Any loan with docs signed, we will fund. Any loan without signed docs will be suspended for the foreseeable future or until market stability returns.”

HomeXPress Mortgage Corp. sent a letter that explained they would be “pausing all loan activity in order to complete a proper assessment of market conditions and allow us to create programs suitable for all constituents in the home loan process.”

Meanwhile, Citadel Servicing, which was purchased by HPS Investment Partners in February, continues its non-QM program unabated. Arc Home is also still in the non-QM business. But the evaporation of numerous non-QM funding sources means borrowers outside the traditional credit box have fewer options than ever.

This is a developing story and is being updated with information and quotes as they come in.

The post Did non-QM just disappear from the market? appeared first on HousingWire.

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