Uncategorized

Look to the west – Look to NonQM

August 3, 2023

Share

Inclusive loan products – The remedy for your ailing production!

Know the products. Know how to sell them. And know how to close these deals.

Let the NonQM Experts help you blow-up your pipeline! Click HERE


Schedule a product overview & marketing strategy session with an expert today.


Look to the west

Mortgage loan originators (LOs) and agents face unique challenges due to the Federal Reserve’s policies and their impact on inflation. As housing prices continue to rise, the Fed has responded by implementing measures such as increasing the fund rate and reducing their balance sheet. These actions have led to a surge in inflation, making everything more expensive.

From May 2021 to 2022, the FHFA’s housing price index showed a staggering 19.9% increase in home values across the country, except for the Pacific and Mountain regions. This rapid appreciation of property values contributes significantly to inflationary pressures. Consequently, the Fed decided to tighten its monetary policy to curb inflation, resulting in a slowdown in home value appreciation.

Interestingly, despite the Fed’s efforts to bring down property values in regions outside the Pacific and Mountain areas, these regions have continued to witness a steady increase in property values. This pattern is not surprising, as historically, the West has always led the country in terms of changes in property values. It goes up first and highest but also goes down first and most significantly, acting as an indicator for the rest of the country.

Look for years out

The Fed’s current rate of 5.5% is the highest in over two decades, and the fact that the rate hike was unanimous suggests that further policy firming is likely. The Fed is determined to achieve 2% inflation over time, and its projections indicate that it may not happen until 2025.

Given the prolonged high rate environment projected by the Fed, the real estate market needs to adapt and find ways to thrive amidst these conditions. Here’s where Non-QM (Non-Qualified Mortgage) loans come into play.

In the West, which often sets the trend for the rest of the country, homes at the top end of the market seem impervious to the high rate environment. These high-value homes are still being listed and sold. On the contrary, cheaper homes are not getting listed, and those with 3% rates are struggling to find buyers.

Look to NonQM

A considerable number of high net borrowers and homeowners rely on non-traditional sources of income, rather than a W-2 base or hourly rate. These non-QM borrowers, who are more likely to engage in buying and selling high-value homes, have a significant impact on the non-QM loan market.

As LOs and agents, understanding non-QM products, learning how to effectively sell them, and knowing how to close these deals is critical for survival and success in this market. Embracing non-QM loans will provide a remedy for the professional challenges posed by the current high-rate environment and the Fed’s policies.

Listen to the Fed’s projections and understand that the high-rate course is here to stay for the foreseeable future. Instead of fighting against it, we have to adapt to this reality and seize the opportunity that non-QM loans present in meeting the needs of high net borrowers and homeowners. By embracing non-QM and becoming well-versed in these products, LOs and agents can enhance their production and find success even in challenging economic climates.

The Fed’s policies demand engagement with non-QM loans. The high rate environment, driven by the Fed’s actions to combat inflation, calls for innovative solutions in the real estate market. Non-QM loans offer a way for LOs and agents to thrive in this environment and cater to the needs of high net borrowers and homeowners with non-traditional income sources. So, if you want to stay ahead of the curve, it’s time to embrace non-QM and reap the benefits it can offer in navigating today’s real estate landscape.