Brent Houston is chief executive officer of ALTRA Mortgage
Capital LLC, an Orange County-based lender built to serve
third-party originators and provide access to nonagency
and hard money mortgage products with its online non-QM
pricing and eligibility engine plus turn-time guarantees for
certainty of close. Houston has 15 years of experience in the
underwriting, system integration, marketing and origination
of private-money real estate loans throughout the United
States. Learn more at altloan.com. Reach Houston at
automation can shorten turn times from 55 to 60 days
to under 30 days. This means non-QM loans are closing faster than agency products in many cases.
Getting to the closing table quickly could create
significant opportunity within this segment of the
market. Homebuyers and investors who have avoided
non-QM lending in the past due to complexity, uncertainty and long waits in underwriting will likely find the
new alternatives to agency loans much more appealing. Flexible products and common-sense underwriting mean investors can take on more projects and use
these products as an integral part of a wealth-building
In addition, digital delivery transfers information and documents securely and fully encrypted.
Common practices of accepting files and supporting
documentation via fax or e-mail attachments in the
non-QM space are noncompliant and unsafe for the
borrower. Technology providing the high-level security that meets or even exceeds the standards set in
agency financing adds legitimacy to non-QM lending
and builds confidence in both originators and clients
to consider these products.
Electronic submission and storage allow for huge
improvements in data integrity. That is crucial for both
compliance with state and federal regulations and
n n n
Use of technology to advance the non-QM space
is creating opportunities for mortgage originators,
homeowners, homebuyers and investors. Innovative
use of these products continues to move the industry
forward. For those reasons and more, it's important to
partner with a company that offers you the tools to be
successful within the non-QM space. n
Automation Has Changed
the Non-QM Game Board
Technology is creating more opportunities for originators
in this mortgage-lending space
By Brent Houston
Mortgage originators interested in meet- ing the robust consumer demand for non-qualified mortgages have histor- ically had tough choices to make when
offering these products. Non-QM products are mortgages, such as jumbo loans or interest-only loans, that
don't fit into the qualified mortgage (QM) box.
Uncertain pricing and qualification, paired with
inefficient processes, have normally forced originators to weigh the opportunities available for serving this non-QM market against concerns of slowing
down production and disappointing clients. Recent
advancements in technology in the non-QM niche,
however, have led to automation previously only
available for agency products.
This has changed the non-QM game board. It has
resulted in more pricing certainty, accurate qualification, shorter turn times, increased potential for originator profits and an improved borrower experience.
Time is a limited resource, and mortgage originators
need to get it right, from the initial call with a client
to funding. The originator’s job is to ask the right questions and then determine the best products and pricing
that fit a client’s needs.
In the past, the only tools available for quoting a
non-QM product were a stack of rate sheets. If a client
is shopping outside agency programs, it already
means that their situation is unique and complicated.
Combing through guidelines for several products from
various investors to see which options exist for a scenario can easily lead to errors. Missing a detail about a
late mortgage payment or a self-employment restriction could turn into embarrassment and frustration —
and often lost business during underwriting.
Pricing can be even more challenging. Dealing with
the complex calculations that stem from the numerous
variables that come into play in determining the cost of
non-QM loans is a daunting task to undertake manually. Originators tend to find that process stressful, time
consuming and prone to frequent errors. It’s no wonder many brokers choose to focus on other business,
despite the great potential in the non-QM space.
The increased complexity of non-QM qualification and
pricing has meant that traditionally these programs
were left out of industry-standard automated-pricing
engines. This is changing, and improved technology
has led to the creation of non-QM automation tools
that deliver the same standards mortgage originators
are used to finding for agency QM products.
This automation offers endless possibilities to a
whole new pool of buyers who didn’t qualify for agency
loans — for example, mortgages meeting the origi-
nation guidelines for later purchase by government-
sponsored enterprises Fannie Mae or Freddie Mac.
These new systems account for the many factors that
go into pricing a non-QM product, including credit and
occupancy information; housing and personal events,
such as foreclosures or bankruptcies; loan amount;
employment status; foreign national status and more.
Most, if not all, non-QM pricing engines walk the
user through a series of questions to ask borrowers
when collecting the data needed for effective pricing.
It’s typical that clients may not have all the necessary
information immediately available and will have to
source some figures and documents. The more sophisticated and reliable engines allow a file to be saved
and resumed later, without losing any work in progress.
A key difference between a non-QM engine and
its agency predecessors is the integration of credit
grading. The originator can receive accurate pricing
after putting in various data on the following: FICO
credit scores; mortgage late payments; major housing
events; foreclosures, deeds in lieu or bankruptcy status; and short sales.
The digital engine provides the same accuracy when
it comes to qualification. The cumbersome process
of manually pairing nuanced scenarios with a suite
of product options has been significantly upgraded.
There’s no guesswork when it comes to which options
to discuss with a client.
Once the data is entered, the pricing engine returns
the eligible products along with a full needs list by
documentation type. This allows for an easy presentation to the borrower and confidence that there will be
no surprises between application and closing.
The non-QM industry also is putting technology to
work to improve all aspects of the process. Applications and supporting documentation can be electronically submitted. This enables originators to submit a
clean and organized file directly to underwriting while
tracking its progress.
Greater efficiency means these complex files take
considerably less time to price, qualify, originate and
process. Originators can now have confidence entering the non-QM sphere knowing that their teams
won’t be bogged down working with these loans.
They can focus on building their pipelines and growing their businesses.
Faster and more secure
Process improvements also lead to faster underwriting and reduced turn times. Lenders report use of