#nonqm mortgage lender Archives - Acra Lending

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

The post How are higher mortgage rates affecting servicing? appeared first on Acra Lending.

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

The post Non-QM Power Panel – Thriving amid the turmoil appeared first on Acra Lending.

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

The post How will non-QM perform for the rest of 2022? appeared first on Acra Lending.

DealDesk Focus on Acra Lending Rehab Loans

cscadmin — Thu, 02 Jun 2022 16:53:46 +0000

Bring your deals, scenarios, and questions as National Mortgage Professional Magazine presents a DealDesk featuring Acra Lending Rehab Loans. Acra BPL (Business Purpose Loan) division does bridge loans 1-29 units and the Non-QM long-term take-outs for those products. Their Bridge products are 12-24-month terms, Interest only with no prepayment penalty. Acra Lending will reward high FICO’s with additional leverage and pricing. They hold some of our paper, securitize the rest and have our own servicing department. On this DealDesk, Acra will discuss their zero-point options and how they allow for points to be charged on the exit to accommodate our partners. Acra Lending will allow outside appraisals if they are ordered through an AMC, this is huge in the rehab loan space.

Join Robert Jennings, Managing Director, Fix and Flip of Acra Lending as he helps you understand:
* Acra 12 -24-month term Bridge products (Interest only with no PPP)
* How we reward high FICO’s with additional leverage and pricing
* Our zero-point options and allowing for points to be charged on the exit to accommodate our partners.

Present your deals to Acra Lending, and let us help you close more Rehab loans today!

Source: NMP (nationalmortgageprofessional.com)

The post DealDesk Focus on Acra Lending Rehab Loans appeared first on Acra Lending.

What issues do brokers face in the commercial market?

cscadmin — Mon, 23 May 2022 18:50:11 +0000

In this Commercial Mortgages Power Panel, Jeffrey Tesch, CEO at RCN Capital, and Keith Lind, CEO at Acra Lending, take a closer look at the current landscape, including the picture on multifamily lending, the opportunities brokers should look to capitalise on, and the issues they may face in the market.

Source: MPA

The post What issues do brokers face in the commercial market? appeared first on Acra Lending.

Non-QM lenders struggle to navigate volatile waters

cscadmin — Tue, 26 Apr 2022 16:50:42 +0000

Top executives share their views on where the market is headed as it copes with spiraling interest rates

April 22, 2022, 3:02 pm By Bill Conroy

The mortgage market is facing a crisis today, and it’s being fueled by fast-rising interest rates.

The rate escalation started at the beginning of this year and is continuing to play out. It’s a crisis that one industry executive describes as “a situation where we have to get the pig through the belly of the python.”

The mortgage industry, really the entire economy, is coping with fast-rising inflation further aggravated by jammed-up supply chains, the escalating war in Ukraine, and the related, expanding sanctions that are whipsawing the global economy. That economic environment has led to spiking interest rates driven by a hawkish Federal Reserve policy and free-market forces — with rates up more than 1.5 percentage points since the beginning of the year and still rising.

For the sector of the mortgage market engaged in non-QM lending, the volatile rate environment is a particular challenge. Non-QM lenders are dealing primarily with purchase loans that require far more intensive underwriting than agency loans and, once funded, must be moved off the balance sheet quickly in most cases to maintain liquidity. That is typically accomplished through whole loan sales or private label securitizations along with hedging — such as the use of third-party forward contracts that allow for bulk loan sales at a future date at a predetermined rate.

Non-QM mortgages include loans that cannot command a government, or “agency,” stamp through Fannie Mae or Freddie Mac. The lenders originating in the non-QM space make use of alternative-income documentation because borrowers cannot rely on conventional payroll records or otherwise fall outside agency credit guidelines. The pool of non-QM borrowers includes real estate investors, property flippers, foreign nationals, business owners, gig workers and the self-employed, as well as a smaller group of homebuyers facing credit challenges, such as past bankruptcies.

Some non-QM lenders have parent companies in the private equity space or have affiliates organized as real estate investment trust, and some even have affiliated real estate mortgage investment conduits (REMICs). Those entities can help to buy or warehouse loans for their non-QM lending affiliates for a time to deal with a liquidity challenge. But regardless, they all face the same problem: coping with rates rising at a faster clip than the market has seen in decades.

“You got to pay the piper if you’re stuck with bad loans,” said Keith Lind, CEO of non-QM lender Acra Lending. “You have to sell at some point.”

What this rate crisis means for lenders in the non-QM space is that the loans they made at the start of the year at a lower coupon were worth less in the whole-loan or private label securitization market than the loans they funded a month or even a week later at a higher coupon rate.

“We haven’t seen rates move like this in 40 years,” Lind said. “The problem in the market right now is there’s all these distressed loan portfolios out there [composed of lower-rate loans].”

Thomas Yoon, president and CEO of Excelerate Capital, another non-QM lender, offered this anecdote to illustrate what his company and his fellow non-QM lenders are facing:

“On January 3 of this year, we put out a bulk loan offering of $150 million, and we found that that it was worth more than 50% less than what it was just a week or two earlier. …It was slightly above par [in early January] and just a few weeks earlier, I’m talking in the fourth quarter, we could have probably executed north of 103 [above par]. So, overnight, the bottom dropped out on us.”

Non-QM executives who agreed to answer questions from HousingWire about the current rate crisis stressed that the future remains uncertain. However, finally, well into April now, higher-rate loans are starting to find their way into the pipeline, some executives said, which should help lenders execute on loan trades and securitizations at better margins going forward.

Still, if rates keep rising at the same pace as during the first quarter of the year, the crisis will persist — meaning there will likely be consolidation in the non-QM space because some non-QM lenders likely will not survive the challenges.

Specifically, according to the executives who spoke with HousingWire, those most likely to drop out of the market if conditions don’t improve are the thinly capitalized smaller players or some of the larger agency lenders who only recently began to dabble in the non-QM space.

“It’s not that easy to originate [non-QM] loans, and now there’s this market risk,” said Tom Hutchens, executive vice president of production at Angel Oak Mortgage Solutions, part of non-QM-driven Angel Oak Cos. “The performance and the pricing are not guaranteed by anybody, and even hedging takes a different level of expertise.

“So, all those factors point to those two groups [the thinly capitalized and the lenders dipping their toes into the non-QM waters] that would be the most likely to maybe look in a different direction perhaps. But I do think those that can succeed during this time are going to have a leg up and be able to capture more market share.”

Like other mortgage executives interviewed, Yoon said it’s not possible to accurately predict the future course of interest rates, “so we’re kind of at this point where there is great uncertainty.” But he added that some of his sources in the market remain optimistic, even holding out the possibility that there might be a non-QM rally in the second half of the year if rate spreads stabilize.

Lind, on the other hand, though hoping for the best, is preparing for the worse, adding that his background on Wall Street has taught him that financial markets “tend to overcompensate.” That doesn’t bode well for an end to rate volatility during a time of rising inflation, a global economy under stress and a hawkish Federal Reserve with a quiver full of rate increases ready to be unleashed in the months ahead.

“That’s my fear,” Lind said. “And if that happens, it’s going to be very, very tough sledding. And you know, it’s going to make it very difficult to be to be in the space, whether you’re an agency or non-agency lender.”

Yoon added that regardless of what the future holds, one thing seems certain. We are now in a new normal.

“Financial markets are always working into the future,” he said. “And the new normal is that we’re not going to be as fat as we were last year.

“But so long as there’s price discovery and consistency [in the rate environment], as far as being able to originate non-QM and being able to run a profitable model, it’s still very viable. It’s just that we have to be OK with the fact that it’s no longer what it was before.”

***

HousingWire queried more than half a dozen non-QM lenders with a series of questions about the spiraling rate crisis now plaguing the housing market. Executives at six of the lenders replied, either by granting in-person interviews or via written responses. Following is a snapshot of their responses in relation to critical elements of the crisis in play. [Not all the executives responded to every question and declined comment in some cases.]

RATE VOLATILITY

The Fed only raised rates once [so far]. The free market has driven rates to where they are. …My fear is that the market is going to overcompensate, and rates are going to keep moving up. That’s when things can get very volatile and be very painful for a lot of lenders. …Now we’re funding close to a mid-6 [percent] coupon rate, and the loans we’re locking are at 7.5 [percent], but we’re not going to fund those for another 30 days because there’s a lag from when a loan gets submitted to when it gets funded. We took the view to just take rates up really fast — Acra Lending’s Keith Lind

We do materially hedge our interest rate risk, but it is certainly difficult to hedge the combination of interest rates, mortgage extension [due to reduced refinancing] and spread-widening that originators and aggregators have had to contend with during 2022. — David Pelka, head of RMBS business and a principal at non-QM lender CarVal Investors

We see non-QM growing through the remainder of this year and into next. … Thenon-QM space has historically been a purchase-money heavy space, something we continue to see strong interest around even in a rising-rate environment. — John Keratsis, president and CEO of non-QM lender Deephaven Mortgage

“We’re not afraid to originate loans because [rates] might go up in the next month. That isn’t ourmindset at all. …I don’t I don’t think anybody’s thrown in the towel and said we’re just going to sit on the sidelines until the market settles down. This just might be the new market. — Angel Oak’s Tom Hutchens

We reacted immediately. We sold loans at par or even below because we had blocked pipelines. …The market was moving faster than you could actually change the rate in the first month and a half of this year. Our strategy was really simple. We shot our rates up a lot, anticipating where the bogey was, because we didn’t have the luxury of a parent company to carry us [and] let us ride this out. We had no idea what the market was doing at that time. No one did. It was free falling for a period of time. So that’s the strategy that we took. … Our core non-QM programs today are at a 6.5 % rate. — Excelerate Capital’s Thomas Yoon

We much prefer to focus our efforts on maximizing production during any changing rate environment. We’re confident that the non-QM sector — and Sprout in particular — will not only ride out the turbulence but outperform expected growth rates. — Shea Pallante, president of non-QM lender Sprout Mortgage

RATE LOCKS

So that everyone is clear, and our customers are clear, there was no way we were not honoring rate locks. …[There was some confusion over our policy that] started with us actually trying to get a handle on old loans in our pipeline because we had loans that had been locked for, let’s say 45 days, but had no activity. So, we were trying to fully understand how many more of these legacy locks there were that had no activity, where the loan was going nowhere. And all that just kind of happened very quickly, with a lot of moving parts. But I think it’s all clear now. As of today, we offer 30-day locks, and we’re good with that. And as soon as the market levels off, then we’ll be able to look at offering extensions on those locks. — Angel Oak’s Tom Hutchens

We didn’t adjust our rate-lock period. We did adjust our extension period. We have it at 15 days as a maximum. In a rising rate environment, we don’t want extensions to continue to extend month over month. …With a 30-day lock, you can extend it up to 15 days, so you get 45 days. In a normal market, you could pay to extend it [further], but not in this market. — Excelerate Capital’s Thomas Yoon

“It’s something we’re constantly looking at. We do a 45-day lock. If you can’t get it done in 45 days, there’s different fees that we’re asking people to pay. It’s something that we’re constantly looking at. But there’s no excuses, right? Here’s what we need, [so] get us the information we need, right? We’re not looking to extend locks. It would be great if we didn’t have to do any extensions at all, and just fund the loan in a normal timeframe. — Acra Lending’s Keith Lind

SECURITIZATION & LOAN SALES

I can’t speak broadly for the industry, but we’ve acquired in excess of $500 million between loan trades and forward commitments in the last two weeks. Given our recent launch of Mill City Loans [a REMIC], we don’t have legacy coupon exposure. The securitization market is functioning, but execution is still challenging. It seems like holders of loans are doing a mix of [loan] sales, expected securitizations and locking in forward flows [future contracts] to manage through this difficult time. — Ca rVal Investors’ David Pelka

At Deephaven, we are very focused on our pipeline risk management, especially the associated interest rate risk. We are not a portfolio lender; however, we have established multiple exit strategies which lead into both securitization as well as whole-loan outlets. This focus on development of multiple outlets has positioned us well to adapt to evolving market conditions and not tie ourselves to a single execution strategy. …Our view is that securitization volume in Q1 was likely front-loaded to a degree as issuers generally reacted quickly to the changing interest rate/spread environment.… Overall, while volumes may be lower than where they would have been without the selloff in rates, we expect new origination volume to remain strong and that will translate into PLS [private-label securities] issuance over the course of 2022 that matches or exceeds that of 2021. — Deephaven Mortgage’s John Keratsis

Investors bids [for whole loans] were going from 104 to 103 to 102 [with par at 100]. We sold $260 million [in loans that were at a 4.5% coupon] in early February, and we got 101 for it. So, we’ve been selling loans as fast as we can. We were probably breaking even, but for me that was good because it was a big chunk of loans. … It wasn’t a month later that all these [lenders] were hung with these loans they couldn’t sell, and the bid for the same loans that we had [sold at 101] was 97 to 98.… We’re in the moving business not the storage business. People in the storage business, or who thought they were, they’re the ones that are stuck with bad loans. …I do think more and more lenders are originating at the right coupon, now. We’re starting to see [non-QM rates] well into the sixes or sevens [6% to 7% range]. — Acra Lending’s Keith Lind

LAYOFFS

We did some tactical layoffs. …I think it’s deemed a layoff if it’s 10% of your employee count, and it was it was much less than that [with around 30 or 40 people let go]. …But we didn’t make a deep knife cut and have a major layoff. …I don’t feel comfortable just growing the business until we have stable price discovery. So, when the market stabilizes, and we’re able to execute with some consistency, then we’ll go back to our strategy and start to build out again. But until then, we’re in a holding pattern. I think we’re a little north of 400 employees now. — Excelerate Capital’s Thomas Yoon

We had our biggest month in non-QM in history in March. So, we’re not we’re not paring back our staff, and we’re still hiring. It’s still a volatile market, so it’s hard to really give you a projection for all of 2022, but we haven’t stopped our hiring that we had planned for the year at this point. [Angel Oak Cos. employs about 900 people, with its lending operations accounting for the bulk of that workforce, at 766 employees, according to company officials.] — Angel Oak’s Tom Hutchens

We took our headcount [down slightly]. We were at 450, and we’re at about 400 now. So, we’re down about 50, and we’re taking a pause for now [on expanding] just to see what happens. We’re still hiring strategically for certain areas if it’s an area that we’re looking to grow. We’re looking for salespeople and specific accounting and tech positions, so we’re still hiring, but overall we’re really taking a look at everything that’s going on and making sure that we have the best people in place to be successful. — Acra Lending’s Keith Lind

[CarVal, Deephaven and Sprout executives declined to address the layoff question.]

2022 GROWTH PROSPECTS

We did $2 billion last year [in non-QM originations]. We were targeting $3.5 billion this year. If I needed to haircut that just because of the volatility, I think we’ll do $3 billion comfortably, but we’re still shooting for the $3.5 billion. — Acra Lending’s Keith Lind

I believe that the self-employed market is underserved. And whether rates are high or rates are low, it’s still an underserved market. I think the opportunity is still great for non-QM. It’s hard to predict levels of origination, but I still think we’re in a really good space. …The interest in securitization and investing in this space is still very strong. The hiccup that we’ve seen isn’t a credit issue. No one’s concerned about the [underwriting quality of] non-QM loans. It’s just that the rate environment has been so crazy. [Angel Oak’s lending operations originated about $3.9 billion in non-QM loans in 2021 and, as of late February, had projected volume of $7.5 billion in 2022, according to the company.]— Angel Oak’s Tom Hutchens

We think it has been an extremely difficult start of the year for all mortgage originators, not just non-QM lenders. Higher coupons are significantly reducing refinance volumes, and we think mortgage volume will continue to fall with higher coupons. We think market coupons for traditional non-QM should be in the 6.25% to 7.00% range. The market is gradually getting rates toward these levels and, in meantime, is working for less gain on sale margin.

We expect volume to be challenged at these rates as they will impact mortgage affordability, purchase and refinance decisions as well as compete against using cash for higher net worth borrowers. …Within non-QM specifically, we think lenders have increased rate hedging and likely are no longer originating loans at a loss. Margins are still tight for originators but won’t be anything like early 2022. Longer term, if volumes cannot be sustained, then margins will still be pressured. …We expect volumes to be materially challenged in most mortgage products this year due to higher rates, and it is difficult to see non-QM being a material exception to that. — CarVal Investor’s David Pelka

We see non-QM growing through the remainder of this year and into next. …No one has a crystal ball in terms of predicting when and at what level interest rates will normalize – but eventually they will. We are confident the non-QM market will be able to navigate this cycle for two primary reasons. 1.) There is true borrower demand, due to a significant number of self-employed borrowers, gig economy borrowers, and investment property borrowers. These are all borrowers who, despite strong credit profiles, struggle to find homeownership financing solutions through conventional offerings. And 2.) there is strong investor demand for the product via both PLS [the private label securities market] and in whole-loan form.

— Deephaven Mortgage’s John Keratsis

We expect non-QM volume to continue growing in the coming quarters as increasing rates hamper the growth of conventional-loan origination volume. …We much prefer to focus our efforts on maximizing production during any changing rate environment. We’re confident that the non-QM sector — and Sprout in particular — will not only ride out the turbulence but outperform expected growth rates. — Sprout Mortgage’s Shea Pallante

Do we think that we’re in a rising rate environment? The answer is yes. Do I think non-QM is going anywhere? Absolutely not. We didn’t hit the numbers that we wanted to hit in the first quarter of this year, but we still think really positively about this year in terms of what we can do. We have to recalibrate and re-assess that number, but I can assure you that it will be north of the $2.6 billion [in non-QM origination volume] that we did last year. We’re already on pace to eclipse that even with the gyrations we had in the first quarter. No one saw this stuff [the rate crisis] coming. It’s true. And I have to read the numbers, but I can safely say we’re probably going to be north of $4 billion for sure. — Excelerate Capital’s Thomas Yoon

Source: HousingWire

The post Non-QM lenders struggle to navigate volatile waters appeared first on Acra Lending.

How to use the 3 month bank statement program and new multifamily financing

cscadmin — Wed, 23 Mar 2022 18:54:45 +0000

Acra Lending’s new multifamily product offers financing for apartment buildings with up to 29 units and $7.5 million loan amounts qualifying solely off DSCR – with no tax returns needed.

In this webinar, learn more about this new multifamily product, as well as how to qualify in a 3-Month Bank Statement file. Find out how brokers can utilize this program to expand their offerings and capture more business leads.Watch now and gain insight into:

Why there is a rising demand for small business multifamily loans
How the 3-Month Bank Statement program differs from typical 12 and 24-Month Bank Statement programs
How to structure a 3-Month Bank Statement file for success

Source: MPA

The post How to use the 3 month bank statement program and new multifamily financing appeared first on Acra Lending.

3 questions lenders should ask before implementing non-QM

cscadmin — Fri, 25 Feb 2022 19:08:54 +0000

For agency lenders looking to expand, non-QM lending may be the way to go

February 25, 2022, 11:54 am By Content Solutions Team

With refinance volumes anticipated to decrease by 62% this year and many originators
experiencing layoffs, lenders are looking for a way to diversify their offerings with non-QM products and gain new business in order to maintain profits.

“I think non-QM could be another money-making product for all of these originators,” said Keith Lind, executive chairman and president at Acra Lending. “There’s wider margins in non-QM than agency loans, so you can make more money per loan than you would on the agency side.”

However, lenders should not jump into non-QM without preparation.

“You really have to know what you’re doing in non-QM,” Lind cautioned. “When you’re dealing
with investors, mistakes cannot happen.”

So, what do lenders need to know before adding non-QM to their product offerings?

How do non-QM loans differ from agency loans?

First, Lind said, lenders need to understand the difference between non-QM and agency loans. For one, they won’t be delivering loans to Fannie Mae or Freddie Mac. They’ll need to get comfortable with their capital partners – who are they partnering with and how well-capitalized are they?

Lenders should also understand that non-QM loans involve different processes than agency
loans.

“It’s a much more manual process on the underwriting side,” Lind said.

Loans need to conform to ATR, he added, and almost all non-QM loans need a third-party
review to make sure everything was done correctly.

Ultimately, “in the non-QM space, you’ve got to make sure No. 1 it was underwritten correctly,
and two it fits a credit box of an investor that’s willing to buy it,” Lind said.

What non-QM products are available?

It’s crucial that lenders understand the non-QM products they’re offering. There are several non-QM products in existence, but three of the largest for Acra, Lind said, are bank statement loans, investor loans and loans for foreign nationals.

Bank statement loans are growing in popularity as the self-employed population increases each year. Entrepreneurs and those working as part of the gig economy may not have the W2s required for an agency loan, but non-QM lenders can work with bank statements to help them acquire financing for a home.

Investor loans are also growing in popularity as more people are looking to make investments in real estate.

“People feel comfortable that the years of 2008 and 2009 are well behind us, and the guardrails are much better today,” Lind said. “Forty-five percent of our production is investment loans. We are very confident that that’s going to continue to grow.”

And for those interested in acquiring investment property from outside the U.S., there are loans for foreign nationals.

“There’s a lot of people that are very bullish outside the U.S. on real estate, so that’s about 10%
of our production,” he said.

What technology is needed?

Finally, lenders should prepare to add non-QM products by understanding what tech they may need to implement.

As an example, Lind noted that underwriting is a much more manual process for bank statement loans, but there is technology out there that can help streamline the process.

“You upload homeowner bank statements, and these technologies spit out an income form.
They’re looking for fraud and they’re incredibly efficient,” Lind said. “You can spit out a bank
statement in 15 minutes as opposed to spending three to four hours manually doing an offer.”

Lenders should also carefully consider what LOS they’re using in order to drive efficiencies and provide a satisfying and transparent customer experience.

Partnering with Acra Lending

“There are a lot of wrinkles to understand” in non-QM, Lind said, but Acra Lending is prepared
to help lenders make the transition.

“I think the benefit of working with Acra is that we do a lot of that hand-holding for them, and
education from start to finish,” he said.

Acra Lending is looking to double its production this year, from $2 billion of originations in 2021 to close to $4 billion in 2022. The company also recently launched its fix and flip platform and a small-balance multifamily product and is continuing to invest in better technology across the platform.

“We do want to be at the forefront of that, because we know that leads to better customer
experience and improved margins,” Lind said.

Source: HousingWire

The post 3 questions lenders should ask before implementing non-QM appeared first on Acra Lending.

Refinancing Gears Down As Private Lending Revs Up

cscadmin — Wed, 23 Feb 2022 17:42:07 +0000

In a changing lending landscape, the mortgage industry is embracing non-QM lending solutions as the refinancing bubble deflates

IT WASN’T that long ago that brokers and lenders couldn’t keep up with the number of refinancing requests coming across their desks. It’s no secret that highly favorable interest rates fueled the race for many to change the conditions on their mortgages. That was then, and this is now. The number of refinances has fallen off the mortgage cliff as Federal Reserve announcements have edged interest rates northward. Although a possible setback for agency-based lenders, the air deflating out of the refinancing bubble has been a further boon for the already-burgeoning private lending sector.

While many lenders have been faced with additional COVID-19-related challenges during the pandemic, the past 18 months have been lucrative for non-QM lenders. Federal crackdowns on the borrowing criteria parameters for traditional loans, as well as the introduction of new financing rules, have also played squarely in favor of lenders in the private lending niche. “Freddie, Fannie, and the Treasury made changes to their guidelines,” says Keith Lind, executive chairman and president of Acra Lending. “They [the Treasury] said they were going to limit the number of investment properties that people can deliver to Fannie and Freddie, or the number of second homes, and they may tighten their belts again.” As the Treasury tightens its credit belt, the opportunities for Acra Lending and other big players in the private sector have continued to expand.

Continue reading here

Source: MPA (mpamag.com)

The post Refinancing Gears Down As Private Lending Revs Up appeared first on Acra Lending.

Non-QM lenders hunt for LOs as consumer-direct model falters

cscadmin — Tue, 18 Jan 2022 18:35:06 +0000

Non-QM lenders anticipate a boom in business and are bringing more employees on board in preparation

January 14, 2022, 10:00 am By Maria Volkova

While layoffs sweep the mortgage industry, particularly consumer-direct lenders, non-qualified mortgage (non-QM) lenders are going on a hiring spree.

Non-QM lenders Angel Oak Mortgage, Acra Lending and Newfi alone currently have at least 130 openings on jobs listings sites.

According to Evan Kidwell, chief operating officer at Griffin Funding, a consumer-direct lender that launched non-QM operations in November 2020, the company is willing to hire newbie LOs and processors and give them on-the-job training.

“If you have non-QM experience, we can throw you right in, you’re going to have a job right away,” he said. “If you’re willing to learn and you’re coachable and trainable, that works too.”

Kidwell said his company is looking for loan processors to identify fraud in non-QM loans, in addition to loan officers.

The hiring trend at non-QM lenders stands in sharp contrast to recent layoffs at some consumer-direct lenders, which specialize in conventional refinance loans. In recent months, Better.com, Intefirst Mortgage and Wyndham Capital Mortgage announced loan officer layoffs. With the three companies combined, over 1,000 employees have received pink slips.

Acra Lending, which rebranded from Citadel Servicing last year, more than doubled its headcount year-over-year from 200 employees to 420 in 2022. Keith Lind, president of Acra Lending, said that in a few months, the company will have over 500 employees.

“The area of focus for us right now is hiring LOs,” Lind said.

Riches in the niches

The Mortgage Bankers Association has forecasted that mortgage originations will grow by 9% to $1.73 trillion in 2022. Non-QM lenders are optimistic that loan originations outside the purview of the government-sponsored enterprises will propel that growth.

In a recent interview with HousingWire, HomeXpress, a non-QM lender, predicted the sector will double its market share in the coming year, from 5% in 2021 to nearly 10% in 2022.

One reason the non-QM sector is expected to take off, according to non-QM lender executives, is because self-employed borrowers and those who work in the gig economy need homes. Current GSE guidelines make it difficult to for borrowers who don’t have a traditional salary to qualify for agency-backed loans.

“I think there’s so many self-employed borrowers who have felt like they’ve kind of been pigeonholed into only being able to do one type of loan for so long and they’re just now finding out that non-QM could be an option for them,” said Kidwell. “I would say most of our clients didn’t even know non-QM was an option two years ago.”

Kidwell also said that real estate investing is another segment that is driving more business to non-QM. “I would say probably at least 30% to 40% of our clientele are real estate investors,” Kidwell said.

The Federal Housing Finance Agency recently announced new upfront fees for second-home loans which, much like the abrupt and now-suspended caps on such loans last year, are expected to give the private-label securities market a boost.

And as rising mortgage rates slow the flood of refinances, lenders are preparing for increased interest in non-QM. Alex Naumovych, an LO at Draper and Kramer Mortgage, said that his company’s upper management has urged LOs to give more thought to non-QM programs in 2022.

“In 2020 and 2021, there was so much refi volume that no one really had the time and patience to deal with these types of loans,” said Naumovych. “This year, everyone will have a little bit more time as well, they’ll be providing a little bit better service and paying more attention to those loans.”

Non-QM loans, Naumovych noted, are more time-intensive to originate, because they do not go through an automated underwriting approval process, as loans backed by the GSEs do.

Some market participants are also closely eyeing regulatory changes that could dampen the non-QM market by expanding the pool of loans able to get QM status.

The Consumer Financial Protection Bureau‘s new General QM Final Rule replaced the 43% debt-to-income ratio limit in favor of more flexible pricing guidelines, allowed jumbo loans to get QM status and provided additional ways to verify income or assets. The new rule is slated to be implemented on Oct. 1, 2022.

Redwood Trust, in a report published in April 2021, noted that if the rule is implemented, “the increased flexibility will likely result in loans that would previously be deemed as non-QM qualifying as QM going forward…a corresponding reduction in non-QM lending will follow.”

The regulatory uncertainty didn’t diminish Lind and Kidwell’s confidence in the non-QM sector, however.

“I learned a long time ago to not get too worried about those things,” said Kidwell. “The riches are in the niches.”

Source: HousingWire

The post Non-QM lenders hunt for LOs as consumer-direct model falters appeared first on Acra Lending.