As banks restrict non-QM loans, other lenders step in

by Ryan Smith25 Apr 2017
Non-QM loans fell in 2016, according to data from the American Bankers Association.

About 9% of total originations in 2016 were non-QM loans, MortgageOrb reported. That’s down from 14% in 2015. The drop may be due to bank restrictions; more than 30% of banks are restricting lending to qualified mortgages only, according to the ADA.

Meanwhile, 45% are making non-QM loans only to specific target markets or within tight restrictions.

“Non-qualified mortgage loans have been subject to heightened regulatory requirements and risk, reducing the willingness of banks to extend these loans to even the most creditworthy borrowers,” Robert Davis, executive vice president of the ABA, said in a statement. “Despite ongoing regulatory hurdles, community banks remain resilient in their ability to manage risk levels, increase productivity and introduce more first-time homebuyers into the market.”

But it’s not all bad news on the non-QM front. Non-prime lenders like Citadel Servicing Corporation are bringing non-QM back as a viable option for borrowers who have a tough time meeting QM requirements.  

And while total originations dropped last year, dollar volume doubled from 2015. According to Fitch Ratings, it’s likely to double again this year, with some projecting total non-prime volume to hit $6 billion by the end of 2017.

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