ACC's Senko talks non-QM outlook

Industry veteran on current market, company's focus areas

ACC's Senko talks non-QM outlook

ACC Mortgage just happened to be days away from celebrating its 25th anniversary when Mortgage Professional America spoke with its president Robert Senko (pictured) last week. But for the mortgage industry veteran, the milestone has presented an opportunity to look back with satisfaction on the company’s success to date – and ahead to the future with a sense of optimism about the market’s prospects.

It’s no secret that the mortgage space has been marked by turbulence and uncertainty over the past two years amidst rising rates and a housing market affordability crunch. Still, a decades-long career in the industry steeled Senko for such times – and they came as no surprise to his team.

“I think my leadership style has always been ‘Share the vision, don’t try to hide it. Share it, good and bad,’” he told MPA. “In 2022, my theme was ‘There’s a hurricane on the horizon, and it’s coming.’”

For Senko, it’s also important to put the current market in context, with few (if any) similarities between the present situation and the conditions that helped precipitate a global mortgage and housing market meltdown in 2007-08.

There’s little comparison, he said, between the subprime crisis of that era and the non-QM market that emerged in its aftermath.

“I hate that they call the early 2000s the subprime bubble. It’s kind of a lazy term, because the definition of subprime is any credit score below 660,” he said. “So it should be called the stated-income bomb that went off.

“Wall Street thought that they could securitize all these 100% stated-income, neg-am products, and thought for some reason that was a good idea. We know how that all played out. So I think that’s a misnomer. Non-QM is really a lot of the packaging and updating with compliance.”

A huge difference, Senko added, is that non-QM “at its core” is about equity lending – the ability and willingness to repay.

“I think those two things, when you align them, make for good loans,” he said, “unlike the runup to the 2007-08 collapse where you just had to sign your name. It was really about over-leverage, and it was the ultimate form of leverage because you really didn’t have any risk capital.”

Non-QM in its current form is well aligned, with Senko giving the example of an average loan to value (LTV) in the upper secondary with at least 20% of equity as a competently structured deal. “If you’re buying a $500,000 home, you put down $100,000 and I give you $400,000. That’s four-to-one leverage – comfortable leverage.”

Institutional players turning their attention to non-QM

Where things could get worrying for the market – when “sirens should start going off” – is if LTVs begin to inch above that type of structure, towards the 90-100% range. Senko also sees too much capacity in the mortgage space at present, and too many loan officers chasing too few deals.

With the national supply shortage showing little sign of easing, he forecast continued “shakeout” in the mortgage industry, and while the market features plenty of competent lenders, he also said mainstream financial institutions may not find the non-QM space as straightforward as might be assumed.

“They see non-QM as their last-gasp hope of trying to do something and that’s where they start getting hurt: they start having EPDs and unsellable loans,” he said. “That’s where you know that non-QM will get a bad name by lenders who don’t understand it and who haven’t been doing it.

“There’s plenty of companies, ACC’s competitors, that are good companies and know what they’re doing. The new people coming in are going to get hurt because they’re going into an area that they don’t understand.”

Efficiency, streamlining key priorities in current climate

Top of mind for Senko looking ahead? In a word, it’s about efficiency, especially with little indication that the current landscape is likely to shift anytime soon.

Cutting costs and operational friction are paramount, he said, “and just [making] us leaner and meaner, because I think we’re in for a continued year and a half [in this market],” he said. “I was never sold that 2024 was going to be this big breakout year.

“So we didn’t overexpand or do anything that we’d have to align. But I continue to look for operational efficiencies to survive and be more profitable and retain more money. I’m talking to vendors: Where can we cut costs? So I’m doing that everywhere and anywhere that I can.”

The company’s focus on brokers, meanwhile, is continuing – including a streamlining that Senko said will make the non-QM offering “more efficient” for those mortgage professionals.

“That’s what I expect over the coming weeks, and launching in June – a really concise offering,” he said. “I see my competitors have got a lot of programs that get confusing so to be efficient in the mind of the broker and to offer a more simplistic execution for them, that’s going to be my goal.”

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