The head of Verus Mortgage Capital chats about the expanding non-prime space – and why lenders should take advantage of it
With conventional mortgage rates rising, more and more borrowers are turning to non-prime loans. That being the case, it’s becoming more important than ever for brokers to have non-prime programs in their toolbox. That’s where Verus Mortgage Capital comes in.
“We’re a correspondent investor,” said Dane Smith, president of Verus Mortgage Capital. “Through our network of approved originators, mortgage brokers will have access to our programs. We call it expanded non-agency. That’s anything outside of conventional, government and jumbo prime.”
As a correspondent investor, Verus offers its correspondents non-prime programs designed to fill the void in the conventional mortgage market. It offers loan products for self-employed and credit-impaired borrowers, and loan amounts of up to $5 million.
For brokers getting into non-prime for the first time, the space can be intimidating. That’s why they should look for a partner with significant non-prime experience, Smith said.
“When a broker is looking to get into the space … it absolutely makes sense to work with someone who’s done it before,” he said. “New products create new opportunities – and we’re at a pretty rapid pace of change and growth in the space, and there’s a lot to be gained with working with an experienced investor in the space.”
Verus also helps the lenders it works with understand the non-prime space, he said.
“We offer training and resources that help lenders who sell to us,” he said. “We make sure to train them so they have the skills to sell the product and underwrite it. An experienced lender knows how to make tough deals work. … At the end of the day, our success is dependent on us doing right by our origination partners – making sure they have the tools they need.”
And it’s worth getting educated in the space, Smith said; Verus estimates that the non-prime market could grow to about $200 billion a year.
“There’s the opportunity to participate in a growing segment of the market,” he said. “We’re still extremely early in the process, but there’s some research that estimates that there are about a million missing loans a year. A million loans is a lot of loans.”
And the pool of potential non-prime customers is staggering.
“There are 14 million self-employed individuals in this space,” Smith said. “That’s not even considering credit expansion for credit-worthy but underserved borrowers with credit scores below what jumbo prime lenders are typically looking for.”
Smith said that Verus is uniquely positioned to be a power player in the expanding non-prime space.
“One of the unique things we bring to bear is that we’ve been working on this exclusively for the better part of the last four years,” he said. “The result is that we’ve created one of the broadest arrays of products in the expanded non-agency space. That allows us to be a kind of one-stop shop in the non-QM space.”