The big interview: Why a low non-QM rate can be too good to be true
That is the lesson one executive draws from the lenders that came in with aggressive pricing over the past six months and got caught when rates moved.
Tom Davis (pictured top), chief sales officer at Deephaven Mortgage, said brokers should look closely at how a non-QM lender has handled rate swings.
“I think in today’s environment, when you’re in the non-QM or equity space, non-agency, you want to work with an investor who has a proven track record, that’s disciplined, that’s been able to manage the volatility,” Davis told Mortgage Professional America.
How low rates go wrong
Sprout Mortgage, a non-QM lender, shut down abruptly in July 2022 after the rise in rates left it with loans it couldn’t sell at par. It was the second non-QM lender to close within weeks, following First Guaranty Mortgage Corporation.
“Rates took off, and some folks were sitting on loans, and they ingested loans that were at these lower note rates, and they had to sell at a loss,” Davis said. “Some guys went out of business.”
