Nonprime mortgage set for a comeback

by Ryan Smith23 Mar 2016
Mortgage lenders who participated in the National Association of Realtors’ mortgage originator survey reported that non-QM mortgages were making a modest comeback in the fourth quarter, according to a report by Global Capital.

According to NAR’s survey, nonprime loans are more likely to be originated by larger lenders and banks, while nonbanks and smaller lenders are more likely to stick with qualified mortgages that hew to the government’s Ability to Repay rule.

Subprime loans’ reputation took a beating during the financial crisis, but lenders like Angel Oak Mortgage Solutions, which focuses exclusively on non-agency loans, are changing that. Nonprime loans today require a higher credit score and a documented ability to repay.

And according to Global Capital, nonprime lenders are looking to securitize the offerings. While investor demand for non-QM loans slumped slightly in December, it’s expected to increase over the next six months, Global Capital reported. And the NAR survey found that mortgage originators expect credit access and investor demand for most RMBS categories to rise in the near future.


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