Originators beef up non-QM production after pandemic hiatus

They’re back and have no plans of slowing down

Originators beef up non-QM production after pandemic hiatus

Non-qualified mortgage originators are charging back to the forefront as non-QM loan activities increase after a long hiatus during the pandemic.

A Fitch Ratings report showed that a combination of low mortgage rates and associated rate-term refinance production has spurred non-QM lending in the past couple of months, and more originators and aggregators are dipping their toes back in the market.

Read more: S&P Global report foresees rapid non-QM growth in 2021

“While non-QM remains a relatively small part of the overall mortgage market, some originators and aggregators have re-engaged in this sector and have beefed up production of these more difficult-to-originate loans,” the rating service agency said.

Fitch also reported seeing more origination activities in the prime and jumbo markets, as well as a notable increase in private label securitization over the past few months.

“Mortgage companies have adjusted their credit policies in response to the new and changing environment,” Fitch said. “Initially, originators implemented overlays to limit risk given the heightened uncertainty caused by the pandemic surrounding minimum FICO scores and lower maximum loan-to-value ratios, as well as increased scrutiny when verifying income and employment. In some cases, these changes were in response to requirements from warehouse providers. As the economic environment stabilized, most of the overlays were removed and have reverted back to pre-pandemic guidelines.”