In late 2014, the Hartford Courant published a piece on the emergence of a new type of mortgage lender that catered specifically to nonqualified buyers. The piece described a burgeoning group of lenders that had begun to offer mortgages for those who were capable of making their monthly payments, but for one reason or another could not qualify for a standard mortgage. The Courant even specifically mentioned Impac Mortgage Holdings and the AltQM™ loans it offers to nonqualified buyers as examples of this growing trend.
It seems at the time this piece was written, nonqualified mortgage loans were a relatively foreign concept. Fast-forward 13 months to a recent article in the Institutional Investor, which posited that nonqualified loans may just be where the overall mortgage market is headed.
"Nonqualified loans may be where the mortgage market is headed"
Why the rising interest in non-QM loans?
According to the Institutional Investor, the U.S. housing market has more or less recovered from the wreckage of 2008-2009. It cited the Mortgage Bankers Association's National Delinquency Survey, which found that the U.S. is currently experiencing its lowest foreclosure rate since 2005. In addition, the survey reported that the mortgage delinquency rate has returned to where it was before the financial crisis.
This is great news for buyers and homeowners, of course, but Institutional Investor explained that mortgage investors can no longer capitalize on the recovery in the same manner. As a result, nontraditional mortgage lending could be the way to go.
The Courant explained that non-QM interest rates are higher than those that accompany more traditional loans. It offered a few examples of potential borrowers who could pose an acceptable level of risk but wouldn't necessarily qualify under standard terms. Someone who is self-employed, for example, could have enough income to qualify but may lack the proper paperwork or be considered too complicated to qualify for a standard loan. There are also what the Courant refers to as near-miss buyers, those who have most of their ducks in a row but have one thing throwing off their ability to qualify, such as high student debt or a history of bad credit that has recently improved.
Institutional Investor discussed the research of two Deutsche Bank analysts, Richard Mele and Ying Shen, who projected in a report last year that the U.S. nonqualified mortgage market has the potential to explode in growth. Demand is growing and the market is changing, and the AltQM™ product series offered by Impac Mortgage Corp. Wholesale might be exactly what the market needs.