Originators and borrowers ‘getting creative’ as non-QM, ARMs gain share
Brennan O’Connell (pictured top), director of data solutions at Optimal Blue, said non-QM had been moving with the rest of the market for months, rising faster on the way up and falling slower on the way down.
“This last month is the first time we saw them diverge,” O’Connell told Mortgage Professional America. “You saw a pretty significant slowdown, at least on a year-over-year basis in September, and non-QM went up. And so I think it’s a really strong signal that people are, originators and borrowers, getting creative and figuring out different paths towards financing in an otherwise difficult environment.”
Borrowers find another way
Non-QM loans made up 12% of September production, up 478 basis points from a year earlier, according to the report. The question is whether this data shows that housing demand has been delayed by market conditions and is still out there.
“I think the short answer is yes,” he said. “I think there is some of that happening for sure. I think you see it too, as the ARMs would also be a really good example of that. I have a monthly payment that I’m comfortable with. I was expecting to buy a house this fall. Rates are at a point now where they’re not tenable for me to buy the house that I was expecting to buy.
“My monthly payment’s going to be too high. Well, I can take out a 5/1 ARM, and I’m comfortable taking the risk of the adjustment period after the five years. And I can still make the monthly payment at the level that I was expecting.”
