Acra/CSC News Archives - Acra Lending

Profitable Business Verticals | Keith Lind, Acra Lending

Anthony — Tue, 14 Nov 2023 22:48:47 +0000

For this episode, Kevin Kim from Lender Lounge interviewed Keith Lind, CEO of Acra Lending. Keith talked about working at Bear Stearns and his journey to becoming Acra’s CEO. Keith also discussed his perspective on the private lending industry and how he views the housing market at large.

Source: Profitable Business Verticals | Keith Lind, Acra Lending (geracilawfirm.com)

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Coming Out Of Volatility Stronger Than Ever

Anthony — Fri, 06 Oct 2023 22:54:47 +0000

Coming Out Of Volatility Stronger Than Ever

How Acra Lending is Growing & Thriving in 2023 and Beyond

October 2, 2023, By Carole Vansickle Ellis

In February 2022, Acra Lending CEO Keith Lind observed with confidence in an interview for an industry magazine that the previous 18 months had been “lucrative for non-QM lenders” and noted proudly that “a high percentage of the time Acra can find a solution for our borrowers [because] we have the ability to look outside our guidelines and find solutions for very difficult situations.” Lind went on to predict that opportunities in his company’s lending space would expand over the course of the coming year and that the burden of the “bad credit” image non-QM loans used to bear would continue to fade. “In most cases, investors and borrowers have very good FICO scores and plenty of equity to put down to secure private financing,” Lind said. “These loans are not subprime loans. Our borrowers are putting down real equity; the weighted LTV of our loans is around 66%…. Self-employed borrowers have really become the backbone of the industry,” he concluded.

The Acra CEO had a solid basis for his predictions. Acra Lending has been in business since 2003 and weathered multiple financial and economic

cycles including the 2020 COVID-19 pandemic. “Acra has only grown stronger over the last several tumultuous years,” chimed in Kyle Gunderlock, president and chief risk officer for Acra Lending. He added, “Our competition has struggled, failing, going out of business, and, in some cases, even dishonoring [interest] locks and loan terms, but Acra has managed risk carefully and managed to come out of the last few years even stronger.” Acra is a non-qualified mortgage lender, which means the company originates mortgage loans based on alternative methods of borrower qualification, such as bank statements or assets. Real estate investors have long made use of this type of loan to avoid “traditional” mortgage loan requirements that limit the number of nonowner- occupied (NOO) properties a borrower can own and prohibit the use of popular business entities like limited liability corporations (LLCs) to close on a property. Acra prioritizes these investor borrowers, believing that supporting this population is not only good business, but also good policy. “Most non-QM loans are centered around providing investors with loans to buy investment properties, and that important market just continues to grow,” said Jeffrey Lemieux, managing director of correspondent lending for Acra. Lemieux described the need for a “housing supply surrogate” for the large volume of the U.S. population that has been priced out of purchasing a home but find the opportunity to rent renovated or rehabbed properties a viable solution. “That market will continue to grow as long as interest rates either continue to rise dramatically or remain high,” he explained. “Those folks may have been priced out of being able to afford a home with a mortgage, but they still need a home. The investment community is filling a void in the market where public homebuilders alone cannot keep up alone.”

Providing Accessible Quality In A Tough Industry

When many people hear the term, “Non-QM loans,” they automatically assume the note in question is unlikely to be of particularly good quality. Historically, non-QM loans were often relegated to the same category as sub-prime loans, from which they are very different and entirely distinct. Since its founding, Acra Lending has prioritized the creation and cultivation of an investment loan program that, as Lemieux describes it, “offers loans that perform well and, from where we sit, fit from a credit-quality perspective as well as a demand and opportunity perspective.” Lind recalled launching the fix-and-flip lending channel at Acra back in 2022, observing that there had been an ongoing, significant need for the product that has only grown since that time. “The average house in America is 40 years old, and a lot of them need a facelift,” he said. “This lending space is going to be around for a very long time.” To accommodate the expected growth, the Lind spearheaded a massive hiring initiative, doubling his workforce between 2020 and 2022. He credited Acra’s company culture for its streamlined, high-speed growth. “I’m a big company-culture person,” he said. Gregory Meola, head of business development and strategy at Acra, described its growth strategy as a “walk-before-we-run” approach. He explained, “Our guidelines, our lending policies, the amount of due diligence we put into every single property before making the funding commitment, is probably more thorough than others’. We are not dependent on growing [a given] division out of need to produce high volume or high profits because these are not the only things that fuel our earnings statements. We can increase our volume comfortably because we have the experience and the performance under our belt to do so, but we are not ever forced into growing faster than would otherwise be prudent.” As market demand evolves and changes, Gunderlock said he expects the demand for Acra Lending products to continue to increase because residents want modern benefits like a third bedroom, which most older apartment buildings lack. Many newer developments cannot offer this extremely attractive layout either because U.S. building codes create a demanding series of architectural maneuvers not necessarily required in other countries. For example, according to construction policy journal The Center for Building in North America, a multitude of requirements governing hall width, staircase enclosures, bedroom window requirements, and wheelchair turning radii in elevators, among many others, create a building environment in which it becomes prohibitively costly to build high volumes of three- or even four-bedroom apartments. In response, residents begin actively seeking out single-family rental (SFR) properties and the investors acquiring, rehabbing, and managing those properties need increasingly large amounts of loan capital to fund these projects. “We view this lending as a very important part of what our industry does to help our investor customers turn over older, sometimes dilapidated homes into new housing stock so more families can get into a home,” Lemieux said. “People need that third bedroom to support their growing families.”

A Culture Of Constant Learning Grit & Grind

In addition to the company’s products and services, Gunderlock credits the company’s determination and “grit and grind” for its longstanding success. “We never stop learning,” he explained, noting that he has “basically sat in every seat along the way since 2003.” He concluded, “I learned how all the pieces fit together along the way.” Gunderlock has long prioritized strategies for Acra that enable the lender to look at data points from every angle. Acra remains among the few vertically integrated companies dealing in non-QM mortgages, and that gives everyone involved in the funding process a better vantage point when it comes to analyzing portfolioperformance. “We deeply analyze our portfolio at every stage in the value chain,” he said, adding, “That means we can better understand the needs of our customers and build programs based on those needs that are not out-of-the-box programs but, instead, unique programs created specifically for our customers.” Lemieux continued, “Probably the best benefit we bring to the buyers of our loans is that our credit quality has been exceptional and the performance of the loans has been exceptional.” He credited this to Acra’s decision to continue servicing its own loans as most lenders have moved away from this practice. “We are very close to those loans’ performance because we are not just originating and selling loans,” he said, adding, “We keep the servicing and are very close in understanding how those loans perform. This information is constantly fed back into our underwriting guidelines, etc.” Lind concluded, “Thanks to that vertical integration and constant flow of information, we have a great breadth of knowledge across our industry that enables us to offer strong programs that satisfy our customers’ needs with competitive rates and fair lending while keeping our customers our focus as we build.”

How Acra Outpaced Lending Volatility In 2023

In 2021, mortgage rates fell tohistoric lows as the Federal Reserve continued its 2020 trend of lowering interest rates in response to the global COVID-19 pandemic. In January 2021, mortgage rates hit a record low of 2.65%, and the average mortgage rate in 2021 was just 2.96%. In March 2022, however, the Fed reversed course and began raising rates, with the result that by October, rates were just over 7%. Today, they hover around 8% for 30-year fixed-rate mortgages, andother loan programs may have ratessignificantly higher.

Not surprisingly, this type of volatility is hard on the lending industry because it creates uncertainty and has the potential to hurt lenders who try to “lock in” rates for borrowers and capital investors in order to create lending programs that will benefit all parties involved. When rates can skyrocket by 400 basis points in just a few short months, it makes this strategy difficult for lenders because lower locked-in rates may be unappealing to investment capital and higher locked-in rates are sometimes difficult to implement at a fast enough pace. At Acra Lending, however, the team walked this tightrope successfully in 2022 and 2023 to good results for all involved.

“We had determined we would be a ‘first mover’ in rates when we saw the market start moving, said Kyle Gunderlock, president and chief risk officer at Acra. “We prioritized this over ‘gaining market share,’ as you sometimes hear it referred to in the industry, and that meant we did not have to pray for a rebound in rates later. We were able to reduce our risk and threshold for loss while maintaining strong relationships with borrowers and investors throughout that volatile time period.”

Acra Lending has a longstanding policy of following the market when it comes to its interest rates. This, Gunderlock explained, means that the lender is always able to honor locked-in commitments without sacrificing capital investors’ interests. “When the market starts going up, we are aggressive in following that market,” he said. “That meant we did not have to reset everyone but, instead, were a good partner and moved our prices appropriately and confidently instead of trying to stay artificially low or artificially high.”

Acra’s leadership team credited the company’s CEO, Keith Lind, with successfully enacting this strategy. “It really played off his background,” said Jeffrey Lemieux, managing director of correspondent lending. “He really understood where the market was going and did not take market risk to the same extent our competitors did. That was what maintained our liquidity.”

Source: Coming Out Of Volatility Stronger Than Ever (rei-ink.com)

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Acra Lending’s 2023 Strategy: AI and Non-QM

Anthony — Thu, 07 Sep 2023 20:45:15 +0000

Acra Lending’s 2023 Strategy: AI and Non-QM

‘We’re really taking a strategic approach to be more technologically and AI-advanced’

September 7, 2023, By Candyd Mendoza

The Non-QM lending sector is not for those seeking a smooth sail. But as Gregory Meola points out, it’s all about strategic adaptation.

In a recent episode of MPA TV, Meola, managing director and head of business development and strategy at Acra Lending, shifted the spotlight on artificial intelligence. He revealed how Acra is leveraging technology to not only weather the current market challenges but also stay ahead of the curve.

“We’re really taking a strategic approach to be more technologically and AI advanced, to get ahead and do more predictive modeling, be able to be more efficient and provide a great customer’s experience through these rocky times,” Meola said. “So now that we’ve kind of settled through the rate craze wave, we’re now able to focus on some strategic initiatives that are definitely focused in that technology and AI space. And that’s really where we’re going in the future. A lot of success has come from some of these developments on our fulfillment side of the house, which will eventually translate into technological advances.”

With innovations like OpenAI’s ChatGPT and other AI-driven technologies, the market is buzzing with potential. However, the non-QM space presents unique challenges, according to Meola.

“The difference in the non-QM space is it’s a little bit more manual,” he said. “There are some things that we have to do a little bit differently. So some of the technology out there is great, and we’re utilizing a lot of that technology for decision automation, income automation pieces, and parts of the mortgage transaction that are relevant in both A-paper and non-QM lending.

“Where we’re seeing where we have to make some pivots are those areas which do not overlay within A-paper transaction. And we’re working with a couple of mortgage technology firms to develop our own technology that’s going to pick up the gaps that we’re not seeing fulfilled by off-the-shelf, A-paper lending technology, and that’s really what we’ve been working on for the most part of 2023.”

Source: Acra Lending’s 2023 Strategy: AI and Non-QM (mpamag.com)

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Acra Lending’s guide to finding a good non-QM loan partner

Anthony — Tue, 01 Aug 2023 16:06:30 +0000

What type of pipeline does Acra have in the works?

But tailwinds ahead include aging baby boomers and the ‘Great Renovation’

August 1, 2023, By Desmond Devoy

Acra Lending – safely locked and loaded with liquidity for non-QM transactions, and, importantly, well capitalized.

“A lot of our competitors have gone out of business over the last 12 months,” said Kyle Gunderlock (pictured), president and chief risk officer of Acra Lending.

Interest rates have also had a huge impact. That is why he is keen that brokers know that Acra is “incredibly well capitalized and there is still a robust need for non-QM in the consumer base. Acra is here and ready and able to do business.”

Blueprint for a good partnership

You are known by – and succeed or fail by – the company you keep, which is why Gunderlock stresses that it is important to partner with a good non-QM lender, someone who will not leave you high-and-dry at the signing table. A good non-QM lender should help expose you, as a broker, to a large swath of different programs, like the ones Acra has to offer.

“[That] can certainly help brokers make more money based simply on the fact that they are able to offer more loans to more consumers and help fit the unique scenarios from those different customers into a program that we potentially have,” he said. “So, it is a win-win-win for the consumer, for the broker, and for us all to do business together.”

Gunderlock gets artistic when he starts to talk about what makes a good loan for Acra, brokers, and borrowers.

“There is an overlap akin to a Venn diagram on meeting a collective goal,” he said. “Ultimately, all parties are looking to have the transaction close, but also to do so expeditiously and with a fluid, smooth process.”

Acra has spent years developing new and stream-lined technologies while investing in a knowledgeable and customer service-oriented workforce. In any potential wholesale transaction, an Acra broker should have timely communication or service, a consistent underwrite, and competitive pricing.

The broker, in turn, can then deliver the same to the collective customer, the applicant or borrower. The customer should be able to expect, and experience, a well-articulated process, understanding any outstanding next steps, and have confidence in a timely closing.

“Consequently, and intuitively, those efficiencies have led to Acra’s ability to be at the forefront of service, product and pricing,” Gunderlock said.

Finding the best way to determine non-QM loan risk

No loan comes without some degree of risk though, even with non-QM loans. The need to guard against any adverse reactions from a loan that turns sour is front-of-mind.

“Despite well-written and thorough guidelines, unique circumstances perpetually surface. Understanding the downstream effects of those decisions is paramount to weighing our risk-based analysis,” Gunderlock said. “Ultimately, it is easier to make a loan than it is to collect. We want every borrower to be in a position to succeed.”

As such, Acra offers a “robust” series of non-QM programs, which includes a plethora of unique products. This is supported by a strong knowledge of each underwriting, the evolving second and capital markets, and regulatory directives.

For Gunderlock, it is all about “flexibility” and finding the right non-QM program that can take the unique position of a client, and make it fit, like a bank statement program versus a DSCR program.

“Having a broker with a lot of knowledge of someone’s multiple programs to help their clients fit into the appropriate LTV and at the cheapest rate… is probably the way that everybody makes the most amount of money,” he said.

Acra’s technology blueprint to be unrolled soon

While well capitalized, the company is not treading water. Over the next six to 12 months, they will be embarking on a number of initiatives that have been in the making for 18 months, like a new broker portal, transparent pipeline management for brokers, as well as easier delivery packages.

“So, I feel really confident that not only have we been at the forefront of non-QM but we are also now going to be at the forefront of technology and customer experience in the near future as well,” Gunderlock said.

Source: Acra Lending’s guide to finding a good non-QM loan partner | Mortgage Professional (mpamag.com)

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Connect with Keith Lind, CEO at Acra Lending | Episode 139

Tessa Auriemma — Wed, 05 Apr 2023 21:56:59 +0000

Source: Connect with Keith Lind, CEO of Acra Lending | Episode 139 (youtube.com/@CAMortgageBankers)

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When Non-QM lending Meets Tech

Anthony — Wed, 05 Apr 2023 20:20:22 +0000

When Non-QM Meets Tech – How To Make It Work?

The Non-QM market has been through a challenging period – and now, technology may hold the key to elevating it once more. In this interview, Gregory Meola, managing director – head of business development and strategy at Acra Lending, looks at the present non-QM landscape, how to improve the customer experience, his company’s strategic approach to technology, and what to look for from a lender partner.

Source: When Non-QM Lending Meets Tech (mpamag.com)

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Brokers, here’s how to market yourself as a non-QM broker

Tessa Auriemma — Thu, 23 Mar 2023 22:52:22 +0000

March 23, 2023, 5:06 pm By Content Solutions Team

With current market conditions having a negative impact on traditional agency loans, expanding into non-QM products can allow brokers to grow their business and reach a wider borrower pool. But what’s the best way for brokers to market themselves to reach that wider, non-QM audience?

According to Hitz Mistry, chief marketing officer at Acra Lending, brokers offering non-QM products should market themselves as solution providers and choose the right lender partner to help them achieve their goals.

Why a solution provider? Because “that’s effectively what a broker becomes when entering the non-QM space,” Mistry said. “When you bring a borrower to an agency lender, the agency lender tries to fit the borrower into a box; if the borrower doesn’t fit in the box, then the borrower is denied.”

“But, with a non-QM lender, it’s more like a puzzle,” he continued. “Instead of trying to fit borrowers into a box, non-QM lenders have a unique flexibility built into their underwriting guidelines that allows them to use alternative methods to find the right solution based on individual needs.” No box required.

Choosing the right lender partner

If you’re a broker interested in expanding to non-QM and positioning yourself as a solution provider, what’s the first step?

“If you’re going to enter non-QM, you have to partner with the right lender,” Mistry said. “Most people will tell you that it’s important to understand the underwriting guidelines, and it is, but I’d say partnering with the right non-QM lender is more important.”

The right lender partner will offer its brokers valuable resources, such as dedicated support, education and training on non-QM products. The best non-QM lenders walk brokers through every step of their non-QM process and even offer marketing materials that they have created that brokers can leverage for their own white labeling purposes.

“Having a program without providing support to your brokers on how to market [it] would be like me selling you a phone without instructions on how to use it.” Mistry said.

The expertise and opportunity provided by an experienced non-QM lender partner for new brokers is extremely advantageous for brokers entering and working in the non-QM space and, in Mistry’s opinion, vital for a new broker’s success.

Marketing strategically

Beyond marketing yourself as a solution provider, the other piece of the non-QM puzzle for brokers is effective, strategic marketing.

Flexibility is key — the non-QM market is constantly changing, as are rules, regulations and loan qualifications. Brokers will need to adjust their marketing efforts and keep them fluid as changes are made to programs and services to meet the needs of investors and borrowers.

“Marketing techniques and strategies will also need to be adaptable to changing borrower habits and expectations,” Mistry noted.

“Traditional marketing techniques — though still important — need to be supplemented with new ways to reach your target audience and make information easily available,” he said.

As the use of technology increases in daily life, borrowers are also increasing their use of social media to research loan information. To make the most of this emerging opportunity, brokers need to be available and interactive online and familiar with how to use these technologies most effectively to increase brand and program awareness.

Targeted campaigns using a multi-channel approach — i.e., print, email, social media, etc., — can be extremely useful, but brokers should focus on the response to their messaging and adjust accordingly to get the most out of targeted campaigns. To do this, brokers should note (i) the messaging that was used; (ii) the targeted audience parameters that were chosen; (iii) who is reacting to the message and how; and (iv) adjust the message and/or audience parameters to increase the results to determine what types of messaging will be the most successful. Adjusting to what the data shows is key to getting the most out of targeted advertising.

Partnering with Acra Lending

For brokers interested in working with non-QM products, Acra Lending can serve as a valuable lender partner.

After signing Acra’s Broker Agreement, the first step Acra Lending takes when working with brokers is education — making sure brokers understand its program offerings and underwriting guidelines to help determine the best-fitting borrower for those loan programs.

“If we’re providing a program, we want you to understand it,” Mistry said.

Acra Lending is communicative when brokers have questions on programs or marketing and even provides white label marketing services brokers can use. Acra creates the marketing collateral based on Acra’s current non-QM program offerings and makes such collateral available to its broker partners for their marketing purposes. The collateral is easily accessible, up-to-date and can be adjusted to include broker’s branding and contact details.

“If brokers haven’t already added non-QM to their program offerings, this is the time to start,” Mistry said. To get started as a broker in the non-QM space, contact Acra Lending today.

For more information on working with Acra Lending, click here.

Source: HousingWire

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How are higher mortgage rates affecting servicing?

cscadmin — Fri, 21 Oct 2022 21:05:02 +0000

October 21, 2022, 4:00 pm By Content Solutions Team

As mortgage rates continue to rise, originations are not the only side of the industry affected. So how is the servicing sector reacting?

“The most basic thing that we’re seeing right now is mortgage rates increase and payoffs decrease because of fewer opportunities to refinance a loan,” said Eric Friedman, managing director of Servicing at Acra Lending. “At the same time, a decrease in new loan originations doesn’t help our portfolio grow, because you’re not really adding loans at the same pace you may have been adding in a lower-rate market.”

Friedman said that as volume slows down, they also see more calls from borrowers wanting to understand what their options are in terms of refinancing a loan at a lower mortgage rate or looking at loan modification.

“With fewer opportunities to refinance, we are seeing a direct correlation to an increase in mortgage rates and a decrease in payoffs from the number of calls that come into us including options to retain the property due to increases in property taxes and ARM adjustments,” he said.

Additionally, the tighter profit margins for lenders mean that companies like Acra Lending must take a closer look at operating costs.

“As consolidation takes place, we have to be more thoughtful around where our money’s being spent,” Friedman said. “It really forces us to look at technology, workflow, integration and doing things in a manner that is not necessarily people-dependent.”

Acra looked at opportunities to work with third parties that have the infrastructure to take on parts of the servicing process, he said. The company needed to identify a way to make sure its investors’ loans are being serviced appropriately while still meeting the needs of its borrowers.

“We could have thrown bodies at this to handle all the phone calls, but that would have been a fixed cost that just increased,” he said. “Instead, our subservicer was able to provide us scalability at a reduced cost.”

Friedman said the servicing business right now is a “delicate balance between complying with regulations and servicing a loan for investors.”

“The big focus right now for us is fair servicing and ensuring that we’re treating all borrowers in a fair, consistent and uniform manner,” he said. “And at the same time, operating within the contracts that we have with each of our private investors.”

Communication is key

According to Friedman, the most important thing brokers need to understand about servicing is that the information they collect with the borrower is critical for servicers to establish contact once that borrower is being serviced by them. Often servicers run into problems with contact information, such as telephone numbers that are no longer in service or a cell phone that won’t allow them to leave a voicemail.

“The quality of the information collected at the loan origination is critical for us to establish contact and get ahold of the borrower and really set the tone for how the loan is going to be serviced,” he said.

Communication really is key. Borrowers need to understand that their servicer is there to help them, answer any questions and make their mortgage experience positive.

“Many of our borrowers have multiple loans with us, so it’s critical for us to create a positive customer experience for them,” he said. “It all starts really with the initial contact.”

Acra reaches out to borrowers at the beginning of the loan, sending welcome packages and emails and making phone calls to establish contact and let them know about their loan – the terms of the mortgage, when their first payment is due and what Acra’s role is.

“But if we can’t get the borrower to read our letters or our billing statements, or answer our phone calls, it’s really difficult to establish that relationship and talk to them about what the experience is going to look like,” Friedman said.

Many of Acra’s borrowers are located outside of the United States, so the company offers online access to allow those borrowers to self-serve, making online payments, looking at billing statements and asking questions when the company’s hours might not align with the borrower’s time zone.

“We’re really here to help,” Friedman said. “We want to make this an easy experience, a painless experience, but we really need them to engage in communication to allow us to help them.”

Acra Lending’s servicing business

What sets Acra Lending’s servicing business apart, Friedman said, is that it retains servicing on every loan it originates.

“We’re highly invested in the experience, from cradle to grave,” he said. “We want to make sure that the borrowers are offered realistic opportunities to perform on the loan and at the same time ensure that we are meeting the expectations of our investors, so they continue to buy our loans. Fortunately, our portfolio performs extremely well. Our delinquencies are back to pre-Covid numbers, which even then was below other non-QM servicers.”

The company has built its servicing platform to maintain tight guardrails, looking at exceptions and requiring physical touch around things that don’t look normal.

“We don’t let things just sit,” Friedman said. “We’ve built a deep set of exception reports and are very aggressive in getting a hold of the borrower and trying to understand their intentions and fix things as quickly as we can.”

Source: HousingWire

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Non-QM Power Panel – Thriving amid the turmoil

cscadmin — Thu, 20 Oct 2022 15:29:45 +0000

In the latest Non-QM Power Panel, Will Fisher, EVP of non-conforming at LoanStream Mortgage, Nick Harvey, senior VP, regional sales manager at Acra Lending, and Tom Davis, chief sales officer at Deephaven Mortgage, join MPA TV to discuss the state of the sector after a series of market withdrawals. They explain what’s been happening in the market, what the longevity of non-prime looks like, how brokers can feel confident in their lender partners and where they can find new opportunities.

Source: MPA Magazine

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How will non-QM perform for the rest of 2022?

cscadmin — Thu, 01 Sep 2022 23:46:38 +0000

With rising rates and inflation, non-QM lending has spent the last few months in choppy waters, with some lenders closing their doors.

However, the outlook for non-QM for the rest of 2022 is relatively optimistic, according to Acra Lending CEO Keith Lind.

“We are fairly bullish,” Lind said. “You had this backlog of lower-coupon loans that were originated in the first two quarters, where people got caught offsides, and we had a sort of ‘get the pig through the python’ concept. And I think that is coming to fruition.”

Lind said that the market is starting to see less supply of deals in the securitization market and that securitization spreads are tighter.

Lind called inflation the “elephant in the room,” and noted concerns about whether the front end of the rate curve could increase, but said that in his opinion, the biggest risks from a rates perspective are behind us.

Currently, he said, there are concerns about home prices, especially in areas of the country where they may have doubled or tripled.

“We’re keeping our eye on that, but we’re fairly bullish heading into year-end,” Lind said.

Challenges facing non-QM lenders

Still, there is that elephant in the room to address. How could inflation affect lenders who have non-QM loans on their books?

“It depends on what the coupon of those loans is, and how many loans they have,” Lind said. “I always make the comment, ‘We’re in the moving business, not the storage business,’ and we sell loans every two weeks and we have been since the beginning of the year. So, we’ve been able to avoid that problem of getting stuck with loans – not bad loans, just bad prices.”

But he noted that for lenders “stuck” with lower-coupon loans, that could be troublesome.

As for rising rates, Lind said that some lenders may have struggled with rate moves, which could leave them with lower-coupon loans.

“Throughout the first seven months of the year, we had 18 rate moves – 14 up and four down. Our first rate hike was January 3,” he said. “I can’t say that all lenders were as rapid as Acra in taking rates up, but we were following rates. Other people thought they would get more business, possibly, by keeping rates lower, but I think rates went up so fast that if you did do that, then you probably had more lower-coupon loans on your balance sheet and maybe trouble selling them at a profit.”

Lind said liquidity and expenses are two other challenges facing non-QM lenders right now.

“We are hearing some issues about liquidity from some of our competitors, and maybe the people that were buying their loans two or three months ago aren’t showing up today to purchase those loans,” he said.

Acra’s production is down about 25%, according to Lind. The company adjusted accordingly earlier in the year.

Concerns about working with non-QM

Given the challenges facing the non-QM landscape, some lenders and LOs may hesitate to work with non-QM products. Lind said Acra is open to the tough questions about its business from potential partners.

“If there are concerns out there, people should be asking the hard questions that we’re comfortable answering. ‘Are you profitable? What strategic moves is Acra making?’” he said. “I think those are the questions that, if you’re an LO or you have a brokerage shop, and you’re looking to partner with someone, that’s the first question you should be asking.”

Acra advantages

While others may have cut programs or shut down entirely, Acra has continued to lend, turning a profit in the first two quarters of 2022 and the first eight months of the year, according to Lind.

“It’s unfortunate that some of our competitors had to shut their doors,” Lind said. “On the positive side, we recently hired the Sprout [Mortgage] West Coast team. We are continuing to strengthen in key areas and are always looking for talented professionals. We want to increase both our loan fundings and workforce across the nation.”

“We’ve added more capital partners to purchase our loans, so we have a bigger subset of people that want to buy Acra loans than we did six months ago. And I think we’re going to continue to add new investors that want to purchase our loans,” he continued. “At the end of the day, that’s going to help our liquidity and improve our pricing.”

Source: HousingWire

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