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Outlook for Non–QM Mortgage in 2023

Outlook for Non–QM Mortgage in 2023
In: Blog

The volatile economy and rising interest rates have led to lenders experiencing thinner margins. Most are faced with the task of revamping their existing cost structures while exploring alternate revenue streams.

This is the time when the non-QM mortgage market is emerging as a lucrative and practical solution for many. While the pandemic slowed down the boom of non-QM mortgage due to liquidity limitations, it reclaimed its market share in 2021 and 2022. In fact, studies have shown that the non-QM mortgage market has grown as much as $100 billion in 2022, bringing in a four-fold increase over the previous year. This is hardly surprising considering non-QM mortgage plays a significant role in providing options for those borrowers whose income or other financial traits hamper them from leveraging traditional lending programs.

Reasons for rise in demand for non-QM mortgage

Overall, there are several factors responsible for the demand for non-QM mortgage.

One of them is the changing nature of borrower profile especially after the pandemic. In the last two years, there has been a seminal shift in employment profiles across the country. Research has shown that the start-up businesses has grown by 24% from 2019 to 2020. As several individuals lost their jobs during the crisis, many turned towards entrepreneurship, starting their own business and being self-employed.

This has opened up the non-QM mortgage market to a large number of people who become natural candidates.

Another reason for the growth of non-QM mortgage is the spiralling prices of homes. Home prices have seen a massive rise in the recent past. The loan market is moving away from refinances, which made up over half of the market in the last 12 months, to a purchase driven market. The demand for large-sized loans, in the form of non-QM mortgage, has increased as the GSE guidelines have been disqualifying most candidates for agency loans.

Outlook for non-QM mortgage in 2023

As we reach the end of this year, experts believe that the non-QM mortgage will have a promising outlook in 2023. The demand from borrowers is growing every single day. The market continues to have a large number of self-employed borrowers, real estate investors and credit-worthy borrowers who have recovered from credit issues. The non-QM mortgage space will grow in order to fulfil the need of serving this underserved category of borrowers. Just as these loans performed through COVID, they are likely to continue performing even in the coming year. However, for a proper growth trajectory, it is necessary that the market sees some amount of stability. Once the interest rates settle, the product and pricing of non-QM mortgage will stabilize, bringing in more certainty.

Why lenders need to watch the non-QM mortgage space

It is clear now that non-QM mortgage has become a go-to solution for lenders in the recent past. In fact, it is no more a good-to-have, but a must have in many cases to save deals. Lenders need to keep a watchful eye on the non-QM mortgage space for several reasons.

Firstly, in today’s smaller marketplace, it is imperative for mortgage lenders to be ready with a range of diverse product offerings. When they have a qualified borrower in their officehe, they need to be in a position to offer a solution to that borrower’s specific financial situation. If they don’t, they will lose that borrower to a competitor.

Also, non-QM mortgage is likely to stay for long as it is important for a significant population of borrowers. Mortgage lenders need to ensure they do not turn away potential borrowers that do not fit traditional loan options.

Furthermore, with Agency refinances almost non-existent, non-QM mortgage can help protect volume and referrals. By having a diverse product set, there’s a high chance that lenders will be able to save a greater number of deals.

But as the demand will rise, non-QM mortgage lenders will need partners who will help them cost-effectively manage the growing complexity of mortgage regulations. Partners can offer automated systems that are able to more quickly and accurately check application data when compared with manual processes.

How PrivoCorp can help with non-QM mortgage

Partners like PrivoCorp can help non-QM mortgage lenders take full advantage of the sector with the help of the right approach, 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. With AI and machine learning technologies, the company automates non-QM loan processing. This ensures accuracy, eases pre-underwriting, and manages vendor relationships.

PrivoCorp can be the ideal partner for non-QM mortgage lenders, as we help save loan cycle time, and reduce fixed costs.

Get in touch with us today.

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