As borrower needs develop, non-QM lenders look to expand with new products
It’s full steam ahead for the non-QM train. The niche segment is holding just a fraction of the market share it had pre-pandemic, leaving many strong borrowers still in search of the right solutions.
“The non-QM market is an awakening giant,” said Katherine Gardner, chief product officer at Arc Home. “There are a lot of borrowers that have requested but unable to obtain financing over the last three months, especially in the last month, due to their income profile, job type, credit score, life events or residency status.”
In a bid to provide new solutions to the underserved borrower and help brokers realize potential new revenue for their company, Arc Home has relaunched their full proprietary non-QM product suite.
Agency Plus serves the just-miss prime borrower for loan amounts up to $3.5 million and up to 90% loan to value. The Clean Slate product set offers financing to borrowers who’ve experienced a major credit event like a foreclosure or bankruptcy in the past. No matter the income type, this product can be applied, increasing Arc’s offering to a wider swath of borrowers. Arc is also reintroducing Foreign National and ITIN products.
“Not only are the non-QM products being reintroduced, but they're also enhanced. We are doing Foreign National up to 70% loan to value and up to a $2.5 million loan amount. This product is best-suited for people looking to purchase properties in the United States as a second home or investment property but are not residents of the United States,” said Gardner.
The ITIN product is suitable for a non-resident that lives and works in the United States and is either collecting a W2 or is self-employed. Gardner says it’s a dependable space to re-enter, often with two to three incomes on these loans and a great history of performing well.
Arc is also expanding their current offerings: Alternative Income and DSCR with increased LTVs and loan amounts, as well as lowered credit score requirements. The lender also added a one-year income documentation option where a borrower can either provide 12 months' worth of tax returns or a W2 with a current paystub.
“Non-QM is expanding slowly, and we are really excited to be ahead of the curve. We expect these programs to be market-leading in a post-COVID era and we are making sure the financing options we offer are solid and borrowers have a strong ability to repay.” said Richard Bradfield, CEO at Arc Home.
In mid-July, Arc Home re-entered the non-QM space after a three-month freeze resulting from the coronavirus pandemic. Since then, Gardner says the initial rollout has been more successful than originally anticipated.
“We’ve been seeing a higher number of submissions compared to our competitors and a higher quality borrower coming through,” she said. “There are many strong borrowers that don’t qualify under agency underwriting and they are an underserved segment of the market.”