Sector has seen significant recent growth
Squeezed affordability and rising interest rates have seen a growing number of borrowers gravitate towards the non-QM space in recent times – and that trend shows little sign of slowing with a potentially “banner” year ahead for the sector, according to a top executive.
William Fisher (pictured), EVP for non-QM at Kind Lending, told Mortgage Professional America that the tide turned in the space last year after a difficult 2022, with the conditions firmly in place for the sector to continue growing in the months ahead.
“2022 was rough with the rise in interest rates and we saw that some bigger banks and mid-tier banks failed,” he said. “That was a rough ride for sure, through the end of 2022 and maybe even the beginning of 2023.
“But I saw a very big course correction happening and a renewed interest and desire for non-QM paper in the first quarter of 2023, and I don’t really see anything in its way at this present time.”
The sector has benefited from booming numbers of borrowers who have a need for financing but find rates prohibitively high at conventional lenders, Fisher said. Self-employed Americans and investment property borrowers who write off too much of their income to be able to use a traditional Fannie-style loan for that investment are among the chief borrower types to gravitate towards the space.
“So we see our side of the space picking up pretty well when the rates are high,” Fisher said. “I see 2024 being a continuation of 2023 for the non-QM space, just increasing in volume. Obviously, there’s a lot of outside factors that could affect that, but all things being equal it’s a fantastic place to be and my outlook is bullish.”
New York Fed president John Williams sees potential interest rate cuts later in the year if inflation continues to trend downward, emphasizing the importance of consistent signs. https://t.co/jnDku2loAa#mortgageindustry #mortgagemarket #interestrates #ratehike
— Mortgage Professional America Magazine (@MPAMagazineUS) February 27, 2024
Mortgage professionals increasingly attuned to benefits of non-QM
Liquidity – access to capital – is one of the top selling points of non-QM products, with a growing number of loan officers and mortgage brokers across the US now able to provide their clients with comprehensive details of available options and how they might prove worthwhile.
Those mortgage professionals, Fisher said, are “learning about all the different products that are out there [and] financing available for these borrowers. They’re now advertising that, and you’re seeing more borrowers in that segment receive the financing they need. It really works out pretty well.”
Fisher is a recent addition to the team at Kind Lending, having joined in January, but has put together a strong track record in the non-QM space through prominent prior roles with LoanStream Mortgage, Citadel Servicing Corporation and Arc Home, among others.
It might follow that the growing popularity of non-QM will see an influx of new entrants to the sector looking ahead. Still, for Fisher, Kind had stood out in the space for its sterling leadership and the vision of its executive team – not least Glenn Stearns, its founder and chief executive officer who previously founded and helmed the multibillion-dollar Stearns Lending.
“The leadership in this company has been to the top of the mountain,” Fisher said. “And when I say the top of the mountain, Glenn Stearns is a legend in the space. Being able to work with many of the same people that build the company and their experience sets Kind apart from everyone else.”
Company poised for significant growth on non-QM side
The quality of Kind’s tech offerings has also stood out for Fisher during his early days at the company. “The technology is quite frankly, from what I’ve seen, head and shoulders above what’s offered out there,” he said. It’s more polished. It’s just easier to use. It’s designed for the mortgage professional, and it’s designed for Kind. So that’s a huge part of it.”
Non-QM is the latest in the company’s slate of offerings, with conventional, Federal Housing Administration (FHA) and VA loans among its more established products.
Still, Fisher said he believes it’s set up to achieve strong growth in the space moving forward, with Kind’s success in other spheres setting it in good stead for non-QM.
“The relationships this company has with our end investors and with our government agencies are top tier, and so when you’re the best of breed in a certain area – conventional, government or agency lending – and they have a need and they’re serious about it, it’s just a great fit,” he said. “And I think we’re going to very soon become one of the top players of the non-QM space.”
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