Mortgage professionals never know what the industry will throw at them, so staying on top of market shifts can help originators prepare for what’s to come. De-risking efforts by GSEs, migration shifts, demographic changes and more are pushing the market to adapt to meet the needs of today’s borrowers.
After a season of high refinance volume, what is next for the mortgage industry and how can originators stand out amongst the competition?
Changing Borrower Activity
As a result of COVID-19 and other factors, the market shifted to accommodate more borrowers than ever. An increase in moves from city centers out to more suburban areas occurred during this time as a result of the historically low-rate environment and a widespread adaptation of remote work.
Borrowers now have settled in homes that in many cases are growing in value, and may have a need to take on renovation costs or consolidate debt, which brings on a greater need for cash-out refinances. There has also been a shift in the way people work – more people than ever are self-employed and have taken advantage of the gig economy and entrepreneurship opportunities. These self-employed borrowers, who may need to use alternative qualification methods for mortgages, grew by over 1.4 million people in the past year to a total of 9.65 million self-employed Americans in April 2021.
The greater need for cash-out refinances drives originators to prepare with diverse product offerings, especially in Texas where cash-out refinances play by different rules. Additionally, originators will now need to have a way to qualify self-employed borrowers who may need to rely on bank statements to qualify for a mortgage.
Having an arsenal of products that serve these types of borrowers requires originators to have a partner, like FGMC, which has a proprietary product line (Maverick Solutions), for non-agency and non-QM products.
Recent Changes to Government Agencies
Government agencies provide the products that are the backbone of day-to-day selling, but what happens when borrowers do not fit into the guidelines? Recently the GSEs have limited the percentage of origination for second homes and investment properties and imposed additional restrictions on risk attributes on files in an effort to derisk.
This restriction of investment property volume has presented a growing problem, as second home volume was up 178% annually in April. The multiple risk factor restrictions may also impact borrowers who have student loans, credit card debt or have had financial setbacks from pandemic-related troubles.
Having non-agency products in an originator’s wheelhouse allows them to meet the growing need for alternative lending options. For example, with FGMC’s Maverick Solutions, originators can send second home loan volume to the firm without volume restrictions – even if it could qualify as an agency product. Maverick Solutions also offers higher DTI ratios, greater LTVs and larger loan amounts than the traditional agency products.
High-Priced Markets & Real Estate
Low inventory and high prices are causing home purchase volume to drop, and the purchase loan amounts that are closing are getting larger and larger. The average purchase price has risen for the past four straight months to reach $384,000 in May 2021 according to data from the Mortgage Bankers Association.
With that in mind, Jumbo products are essential in today’s market. It’s critical to have a lending partner who is able to provide higher loan amounts for the high-priced markets around the country. In order to meet that demand, FGMC’s Maverick Solutions offers AUS-eligible Jumbo products with loan amounts up to $3,500,000.
The Knowledge Advantage
In today’s market, offering non-agency lending options to originators gives top talent the resources to grow their business, save deals that may not meet agency guidelines and ultimately remain successful in the industry. For recruiters, make sure your firm is supporting originators with partners who help do the heavy lifting on trainings around non-QM and non-agency products.
For originators, attending learning sessions throughout the month is a great way to keep up to date on market trends. If originators aren’t taking steps to understand the growing alternative products market, they are missing out on business. Knowledge like this helps originators stand out among their competitors and enables them to provide borrowers with more options.
Interested in becoming an expert on alternative products and the market? FGMC is hosting a State of the Non-QM/Non-Agency Market Townhall this Thursday, July 22nd at noon CST. They also offer monthly webinars through Maverick Flight School. For more information about working with FGMC or their non-agency and non-QM product line Maverick Solutions, visit https://fgmc.com.
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