Non-QM Market Update - December 2022

Key Takeaways & Highlights

• Despite uncertainty about how long the Fed will continue to tighten credit, most housing experts expect mortgage rates to fall to approximately 5% to 6% in 2023.
• Compared to the 2014 level, the share of interest-only loans doubled in 2022.
• Angel Oak Mortgage (AOMR) has sold $343.4 million in mortgage loans for $284.2 million while facing near-term challenges from market instability. (Real Estate Investment Trust)
• The delinquency rates for the 2021 vintage were substantially lower and nearly zero for the 2022 vintage because loan applicants who were authorized for a mortgage loan after March 2020 had not lost their employment or company due to the pandemic or other causes.
• Texas-based Stronghill Capital announced the launch of a new residential lending division that will broaden its offerings of Non-QM and non-agency jumbo loans.
• Newrez has announced a temporary rate reduction on their Non-QM products, dubbed the “Smart Series.”
• Hildene Capital, CrossCountry Mortgage partnerfFor Non-QM investments.
• The severe volatility in the secondary markets has been the biggest obstacle for non-QM.

How the Economy is Faring & its Effects on the Real Estate sector

Rapid inflation has caused fissures to appear in the economy. Consumer spending and corporate investment, which account for more of GDP than net exports, were stagnant in the third quarter. Consumer expenditure on goods declined for the third quarter in a row. Residential investment is likely to drag on growth in the coming quarters, as high mortgage rates and prices have pushed consumers away. Home prices are falling marginally, but a shortage of inventory prevents further falls.

In the mortgage market, individuals who might ordinarily consider purchasing a home may prefer to keep their down payments in reserve, waiting to see whether interest rates and/or home prices fall in the near future. Adjustable-rate mortgages may continue to be more popular among buyers seeking reduced monthly payments in the short term for those who do purchase a property. In addition, customers seeking to access accessible home equity may continue to favor HELOCs and HELOANS over refis.

“The mortgage market in 2022 had layers like an onion, and peeling them back left our eyes stinging.”

Is there Good News for 2023?

The non-QM space has changed dramatically in the last year. There is some good news and some not-so-good news. The bad news is that secondary market volatility in the non-QM arena has been high. Because of this instability, prices and rules have changed extremely quickly and dramatically. The good news is that there is still a high demand for loans from gig workers and those becoming self-employed or working part-time on the borrower side. Despite a difficult conclusion to 2022, the non-QM forecast for 2023 is relatively positive.

How is AHL Funding moving Non-QM forward?

In such an uncertain market, you may be wondering how to recoup revenue, save costs, and increase loan volume. The new year is just around the corner; are you ready to get started? If you’re seeking new ways to increase profits and expand into new markets, Non-QM solutions supplier AHL Funding can assist.

We continue to guide our brokers through difficult seas, and as a Non-QM pioneer, our brokers may benefit from our three decades of knowledge and competence in alternative finance.

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