Understand diverse loan products and how to sell them.
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Non-qualified or non-agency mortgages have doubled in volume since last year. That’s right – non-QM lending absolutely exploded in 2022. At the same time, qualified mortgages have declined sharply.
I know, I know – there are more agency loans out there. But let me ask you this: What’s your excuse for not diving headfirst into the non-QM space and becoming a non-QM expert? What’s stopping you from learning everything there is to know about non-QM lending and, most importantly, how to effectively market these products to borrowers?
Right here in my own neighborhood, within a half-mile radius, there are dozens of small business owners who would likely only qualify for a mortgage through a non-QM program. Have you heard this saying before?
“Good loan officers adjust their objectives to meet their goals. Unfortunately, most loan officers change their goals to meet their objectives.”
What this means is that 85% of loan officers are struggling because they shape their business around what’s easy and familiar rather than what their clients need. As a result, industry projections show that 40% of loan officers won’t even be in business six months from now.
Here’s a thought: What if you took all your agency referrals and ran them through a full doc non-QM lender like Oaktree? You’d probably get a lot more approvals. So why aren’t you running every referral through the non-QM channel?
Take a look at this graph showing non-agency mortgage volume from 2001 to today. The different colors represent the various risk factors that make a loan non-QM – blue is alternative documentation, green is DTIs above 43%, red is interest-only.
Back in 2001, 95% of non-QM loans were alt-doc, aka “subprime.” Today, however, the non-QM market is far more diverse – roughly equal thirds are IO, alt doc, and high DTI full doc loans. This wider variety of non-QM products means more opportunities to place borrowers in the right loan for their situation – often high net worth borrowers who can actually close in this market.
But as a loan officer, you need to thoroughly understand all the non-QM options to match each product with the right borrower. If you don’t take the time to learn non-QM inside and out, you do a disservice to yourself and your clients. The cardinal sin is turning down a qualified borrower simply because you only know the conventional space.
Not only that, but if a Realtor brings you a client who would qualify for non-QM and you don’t do the loan, that Realtor is going straight to your competition next time. You lose not just one commission, but a referral source.
Still need convincing? Get this – non-QM loans have an average credit score of 771, on par with agency loans and far higher than government loans. Their average DTI is 37%, right in line with your conventional referrals. And non-QMs have the lowest average LTV of any loan type, 76% – they are not “subprime.”
These are prime borrowers who simply need more flexible qualifying guidelines. I call non-QM products “inclusive loans” because they are designed to find reasonable ways to approve borrowers, not just reasons to say no.
If you want to become a non-QM expert – and you absolutely should – head over to nonqmexpert.com and let the learning begin! This is the future of mortgage lending. Don’t get left behind.
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