More lenders dive into non-QM as market tightens

by Ryan Smith04 Mar 2019

As non-QM lending continues to heat up – and traditional agency lending becomes increasingly challenging – more and more lenders are focusing on the non-QM space. The sudden rise of non-QM lenders may give originators more choice when it comes to their non-prime business – but it also gives them a reason to exercise caution, said Will Fisher, senior vice president and national sales and marketing director at Citadel Servicing Corp. (CSC).

“There is something like 40-plus lenders doing non-QM now,” Fisher said. “You have companies jumping in who are A-paper lenders and obviously have no expertise in the space – but they have to jump in because their QM volume is steadily decreasing. It’s going to dilute the space. When you add more competitors, you’re going to have less volume on a per-lender basis.”

Fisher said that a tightening environment in the traditional loan space has started a rush to the non-QM sector – an area of the business that, until now, hasn’t been too crowded.

“The A-paper guys are cutting where they can cut. You see all the reports coming out of companies consolidating, merging or getting out of the space altogether – and the only place to go is non-QM,” he said. “But if they don’t know what they’re doing, they’re going to have problems.”

Fisher said that success in the non-QM space requires expertise – expertise that comes from experience. He said brokers getting into the non-QM space should investigate lenders carefully to make sure they have the experience necessary to do non-QM well.

“The good news is that all these lenders getting into the space should give brokers the confidence to get into non-QM,” he said.

Fisher also said he thinks many of the lenders dipping their toes into non-QM won’t stay in the space for long. He used the analogy of ride-share services like Sidecar and See Jane Go, which proliferated in recent years, only to quickly disappear.

“Uber came out, and then Lyft, and then a hundred more – and all the others went away,” he said. “It’ll be the same thing with this.”

Want to know more about non-prime? Will Fisher will be sharing his strategies to make the most of the non-QM space at the Power Originator Summit, April 4 at the Anaheim Convention Center. Register here to reserve your spot!