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COVER STORY
LESSONS LEARNED
Non-QM’s Year Living Dangero A little over a year ago, Covid slammed the window down on Non-QM lending. Here’s how lenders in that space coped, and how they’ve thrown the window open again. BY KEITH GRIFFIN | NATIONAL MORTGAGE PROFESSIONAL CONTRIBUTING EDITOR t’s just past a year since the bottom fell out of the Non-QM mortgage space, creating what industry insider call “The Pause,” as investors dropped out of that category and lending ground down for months. The biggest takeaway from what started in March 2020? It’s kind of twisted, but follow along: People need to be more important than profits. Yet … the reason profits plummeted and the NonQM market almost collapsed was the overwhelming necessity to protect people. With a year of hindsight, folks in the market space now know what they would do differently – from being less quick to cut to not being aggressive enough to grab even more market share. Granted, they’re primed with reasons they spout quickly for the actions they took, but many Non-QM insiders are candid and willing to admit missteps were made. Tom Hutchens is executive vice president of production for Angel Oak Mortgage Solutions. With over 18 years in the mortgage industry, he has seen all the economy can do to the business. He’s frank about how Angel Oak reacted initially when commerce came to a terrifying halt in midMarch 2020. In a phone interview not long before the first anniversary, he recalled the chaos everyone was facing. Who knew what the effects of a pandemic were going to be? But the economy was put on hold, and investors were scaling back sharply. “We had to make tough decisions quickly. We didn’t know the scale of what was happening.” 24
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“Business came back so quickly,” he acknowledges. “But we didn’t know” it would when everything went on pause. “We should have just kept entire company together,” Hutchens says in hindsight. “But we didn’t know that rates would drop to the lowest in history and the mortgage industry would do more volume. From an operations standpoint, we got pretty lean. We let go 80% of our ops team and 50% of the sales team. A lot came back but a lot of ops people were snapped up by agencies.” Then he adds, “Maybe we should have made different decisions.”
A DIFFERENT REACTION Robert Senko, president of ACC Mortgage, didn’t have to make those decisions. His claim to fame is that his company never stopped making Non-QM loans. His decision wasn’t made recklessly. He wasn’t a rebel questioning the scientists. “I was the guy during COVID in Costco with a full flatbed of toilet paper, cleaning supplies and dry goods. I stocked up.” He didn’t need to stock up at ACC because the coffers were already full, metaphorically speaking. “My philosophy has always been to be nimble enough to adjust.” Senko said he saw companies when he first started 30 years ago fly high and then plummet when a rate increase put them out of business. His desire when he started ACC in 1999 was to always be able to adjust. He saw the crash coming in 2007 and pivoted. With a right balance of assets, he was able to pivot when the pandemic struck. CONTINUED ON PAGE 26
