With refinance volumes expected to drop by 62% this year and many originators facing layoffs, lenders seek non-QM products to broaden their offerings and obtain new business to stay profitable. So, what should lenders know before adding non-QM products to their portfolios?

  1. How are Non-QM loans different from agency loans?

Lenders must first comprehend the distinction between non-QM and agency loans. Lenders must become familiar with their capital partners, including who they cooperate with and how well-capitalized they are. Non-QM loans have distinct processes than agency loans, which lenders should be aware of. For Non-QM loans, the underwriting process is substantially more manual. Loans must also adhere to ATR, and practically all non-QM loans must be reviewed by a third party to ensure that everything was done appropriately.

  1. What are the available Non-QM products?

Lenders must be aware of the non-QM products they are offering. There are several non-QM loans on the market. Bank statement loans, investor loans, and loans to foreign nationals are three of the most common. As self-employed people grow each year, bank statement loans are becoming more common. Non-QM lenders can work with bank statements to help entrepreneurs and others in the gig economy obtain finance for a property, even if they don’t have the W2s required for an agency loan.

  1. What is the required technology?

Finally, lenders should plan to add non-QM products by determining what technology they would need. For bank statement loans, for example, underwriting is a much more laborious process, although technology can help speed the process.

To read more about Non-QM loans and what lenders should prepare for, click here.


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