Fast-rising interest rates are fuelling today’s mortgage market catastrophe. The rate hikes began in January and are still going on. The mortgage business is dealing with rapidly growing inflation, exacerbated by congested supply chains, the escalating war in Ukraine, and the linked, expanding sanctions, which are causing the global economy to whipsaw. Moreover, interest rates have risen by more than 1.5 percentage points since the beginning of the year, owing to a hawkish Federal Reserve policy and free-market factors. For Non-QM lenders, the volatile rates have become highly challenging, with purchase loans needing more intensive underwriting than agency loans. In addition, non-QM Mortgage loans do not command a government stamp through Freddie Mac or Fannie Mae.
Because borrowers cannot rely on traditional payroll records or otherwise fall outside agency credit rules, lenders in the non-QM area use alternative-income documentation. Real estate investors, property flippers, foreign nationals, business owners, gig workers, and the self-employed are among the non-QM borrowers, as are a smaller percentage of homeowners with credit issues such as previous bankruptcies.
For non-QM lenders, the rate crisis means that loans made at a lower coupon rate at the beginning of the year were worthless in the whole-loan or private-label securitization market than loans funded a month or even a week later at a higher coupon rate. Keith Lind, CEO of Acra Lending, said, “We haven’t seen rates jump like this in 40 years.” According to her, the current market problem is so many troubled loan portfolios out there. As a lender, if you are stuck with a bad loan, you are left with no choice but to sell. To read more on this, click the link below
https://www.housingwire.com/articles/non-qm-lenders-struggle-to-navigate-volatile-waters/
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