The Impact Of The Coronavirus Outbreak On Non-QM Lenders

BREAKING NEWS: The Impact Of The Coronavirus Outbreak On Non-QM Lender

The Impact Of The Coronavirus Outbreak On Non-QM Lenders hit the mortgage and housing industry hard: All non-QM mortgage companies have halted funding mortgages. Many have already gone out of business. Non-QM loans are alternative mortgages that have been becoming very popular. Many non-QM mortgage companies have enjoyed explosive growth since they hit the mortgage markets in 2012. Non-QM loans offered borrowers who could not qualify for traditional government and conventional loans an opportunity to qualify for a home loan. This holds especially true for self-employed borrowers and those who recently had bankruptcy and/or foreclosure. There is no waiting period after bankruptcy, foreclosure, deed in lieu of foreclosure, short sale to qualify for non-QM loans.

In this article, we will discuss and cover The Impact Of The Coronavirus Outbreak On Non-QM Lenders.

The Impact Of The Coronavirus Outbreak On Non-QM Lenders And Its Future

The impact of the coronavirus outbreak on non-QM lenders is beyond devastating:

  • This is not just a few lenders but the whole non-QM mortgage industry
  • Many borrowers, as well as loan officers, are asking whether or not if the non-QM mortgage market is disappearing as these lenders stopped taking on new loan applications two weeks ago
  • The financial crisis due to the coronavirus pandemic has affected the mortgage markets due to liquidity
  • The Non-QM lending market is a huge sector outside the Qualified Mortgage industry
  • Countless established non-QM lenders have closed their doors last week due to the market chaos and liquidity issues mortgage lenders will be facing
  • Many face potential bankruptcy while others suspended their operations for two to four weeks

As of today, the only non-QM lender that is originating, processing, and underwriting non-QM mortgages are Sprout Mortgage. However, Sprout is not funding any loans until further notice.

Is The Non-QM Lending Markets Gone?

Many are asking whether the non-QM lending markets have disappeared and/or will disappear like the 2008 subprime mortgage crash. The answer is “we do not know yet.”  Deephaven Mortgage, one of the first lenders in the non-Qualified mortgage market has announced they are laying off all workers and closing all operations as of last week. Many borrowers who have their files in processing and underwriting at Deephaven are now in limbo and cannot close their loans. Deephaven borrowers need to find another lender and start the process all over. However, we do not know of any other non-QM lenders that are operational.

Most have gone out of business and/or suspended their operations indefinitely. Another major player in the non-Qualified mortgage market is Angel Oak Mortgage Solutions. Angel Oak has laid off 90% of its workforce as of last Friday. The company has suspended all operations for at least two years. It may be longer. The company said that they still plan on being in the non-QM mortgage lending market but need to restructure their business model. This is dependent on how the financial markets will do during the coronavirus pandemic. Citadel Servicing is another non-QM lender that suspended its operations but said they plan on being in business. Angel Oak plans on adjusting mortgage rates and pricing and restructuring its guidelines if the company proceeds with operations after a two-week waiting period.

Statement From CEO Of Angel Oak Mortgage Solutions

Here is what a spokesperson from Angel Oak Mortgage Solutions said:

The pandemic has continued to cause turmoil in the worldwide economy. Due to the constant shifts and the inability to appropriately evaluate credit risk, we are pausing all loan activity for two weeks. This includes fundings and any new loan activity.

Citadel Servicing issued the following statement:

In light of the COVID-19 developments, the recent announcement of California’s Stay at Home Order, as well as rapidly changing conditions in the financial markets and to protect the health and safety of our employees, our customers, and to maintain Citadel Servicing Corporation’s position as the Non-QM market leader, we have decided to implement a 30-day stay-at-home policy for the employees of many of CSC’s departments, and we are temporarily pausing loan originations for the next thirty days. Citadel’s decision to pause its lending activities is not a reflection of the health of its business. Importantly, CSC is not terminating or shutting its operations. We have a strong balance sheet and are not experiencing credit or liquidity issues. Instead, we are making this business decision out of an abundance of caution, in order to comply with California Governor Newsom’s Executive Order, and recognizing the in-person interactions at loan closings and in the origination process. Current conditions require reconsidering these interactions.  In an effort to “limit the impact on consumers, Citadel plans to fund purchase money loans intended for primary occupancy transactions currently in our Funding Department with issued Closing Documents. The company also states that it plans to extend and honor Conditional Loan Approvals for applicants who continue to qualify under our guidelines upon resuming operations. Citadel’s servicing department will continue to operate throughout this 30-day lending pause. We value our relationships and regret that this may be a burden in this difficult time for all of us. CSC plans to fully resume normal operations after thirty days or as conditions permit. We will be back, and with your continued support, stronger and better than ever.

So Citadel Servicing statement seems more promising than Angel Oaks. Will non-QM loans still be here to say? Or will it disappear as subprime loans did after the 2008 financial crisis? This is a developing story. GCA Mortgage Group will keep our viewers with new developments in the coming days and weeks.

UPDATE ON This BREAKING NEWS ARTICLE ON The Impact Of The Coronavirus Outbreak On Non-QM Lenders was updated on November 5th, 2020. Gustan Cho Associates have reopened all of our non-QM loan programs. Gustan Cho Associates have even added new non-QM loan products. All the non-QM mortgage loan programs that were suspended and/or canceled have resumed. Gustan Cho Associates offers one day out of bankruptcy and/or foreclosure non-QM loans, 12-month bank statement loans, asset-depletion, and P and L only investment property loan programs. We will be writing about our newest non-QM loan products in the coming days and weeks.

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