Non-QM Turns A Corner, But Is It A Resurgence?

Latest Securitizations Signal Recovery For The Market

By KATIE JENSEN, STAFF WRITER, SPECIAL TO MORTGAGE BANKER MAGAZINE

In a market downturn, there’s a constant piece of advice that gets thrown around to originators: diversify your portfolio. Much easier said than done, though, especially if you’re considering getting into Non-QM.

There’s always going to be demand from gig economy workers and the selfemployed to get a non-traditional loan for their homes, but this particular channel faces some ups and downs. Throughout most of 2022, the channel was struggling and Non-QM lenders were going out of business, but this year it could keep lenders and loan originators in business.

Last year, Non-QM got pummeled in the secondary market, mainly because interest rates rose faster than they have in the past 28 years. This triggered a liquidity squeeze, causing NonQM lenders nationwide to face market-to-market losses, layoffs, and even shutdowns in some cases. However, the latest securitizations from Angel Oak Mortgage and A&D Mortgage signal that the market is finally starting to recover.

“It’s been very tough with a lot of players that have completely left the market,” B. Riley analyst Matt Howlett says. “The liquidity crisis caught people by surprise and some of the weaker play ers have exited. But those people that have sur vived are in a very good position right now.”

NON-QM SQUEEZE

Toward the end of 2022, the mortgage rate topped 6% — its highest level since the 2008 global crisis — up from just 3% at the start of the year. This caused a liquidity squeeze in the secondary market, in which Non-QM loans are particularly vulnerable.

Because the GSEs don’t buy Non-QM loans

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