Loan Officer Revives $4 Million Of Dead Deals With Non-QM
A loan officer I know recently called all of the Realtors in his network to tell them about “non-QM loans,” and he came away with $4 million of loans/transactions that would never have closed but for his phone calls.
The Realtors thought the deals were dead because traditional lenders had declared them so. But the expanding flexibility of Non-QM lending revived them all.
“Qualified Mortgage” is a regulatory term that refers to almost all standard mortgages – FHA, VA, Conforming, Jumbo. Qualified mortgages give lending institutions certain protections against buybacks and lawsuits.
Non-QM Is Not Subprime
Non-QM loans allow for alternative income documentation and far more flexibility, but they do not represent a return to the subprime lending glory days of pre-2008. Non-QM lenders require much larger down payments and much more concrete income documentation than yesterday’s subprime lenders did.
For income verification, non-QM borrowers can use average bank statement deposits (over 12 or 24 months) and asset depletion (using total assets to come up with estimated future income) along with or in lieu of traditional sources of income like tax returns, W2s, and social security income.
Examples Of Non-QM Transactions We Closed Recently
Here are some examples of recent transactions our mortgage bank has closed:
#1: W2 Only: $700,000 jumbo purchase loan using only W2s (because tax returns had too many “2106” expenses) for income verification. Down payment was only 15%. No traditional jumbo lender would touch this deal.
#2. Asset Depletion/Stacked Income: Retired borrower used $800,000 in assets (divided by 120 months) + $3,000 in social security income to qualify for a purchase.
#3. Large Down Payment/Acreage: $500,000 loan with no income or asset verification, but with 40% down (60% loan to value), to purchase a large acreage property. Much like hard money, but the rate was only 6.5%!
#4. Asset Depletion: $700,000 loan amount. Borrower has $2.5 million in assets, divided by 120 months = almost $21,000 of monthly income.
#5. Low Credit Score: Borrower had major credit problems two years ago but still has a 616 score. With a good explanation and substantial equity, borrower obtained an $825,000 jumbo 5/1 ARM at 6.625%. Again, no standard jumbo lender would go near that loan.
#6. Non-U.S. Citizen: Borrower lives in Switzerland and is not a U.S Citizen. He obtained a $900,000 5/1 ARM at 5.25% (again with substantial equity).
The point of all this is that Non-QM is more flexible than ever, and “dead deals” can now often be brought back to life.
Please feel free to send anything our way for a second look.
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