The Impact of The Coronavirus Outbreak On Non-QM Lenders

The Impact of The Coronavirus Outbreak on Non-QM Lenders

Gustan Cho Associates are mortgage brokers licensed in 48 states

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 or foreclosure. There is no waiting period after bankruptcy, foreclosure, deed in lieu of foreclosure, short sale to qualify for non-QM loans. In times of economic uncertainty, lenders often tighten their credit standards to mitigate risks. Non-QM lenders may have become more cautious in approving loans, reducing the volume of non-QM mortgages originated. 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

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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 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 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

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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. Gustan Cho Associates will keep our viewers with new developments in the coming days and weeks.

UPDATE ON This BREAKING NEWS ARTICLE ON the Impact ov 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 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.

UPDATED December 31st, 2023: This news article on the impact of the coronavirus outbreak on non-QM lenders was updated with the latest market news on non-QM mortgages.

The impact of the coronavirus pandemic on non-qualified mortgage (Non-QM) lenders varied based on several factors, including the severity of the pandemic in different regions, government interventions, and the overall economic fallout. We will cover some potential ways the pandemic may have affected Non-QM mortgage lenders. The pandemic led to widespread economic disruptions, causing job losses and financial hardships for many individuals. This could have resulted in higher default rates on non-QM mortgages as borrowers struggled to meet payment obligations.

Market Volatility

Financial markets experienced significant volatility during the early stages of the pandemic. This could have affected the funding costs for non-QM lenders, potentially impacting their ability to lend or increasing the cost of borrowing. Government responses, such as stimulus packages and mortgage forbearance programs, may have influenced the ability of borrowers to make mortgage payments. For instance, if there were widespread mortgage forbearance, it might have alleviated some immediate pressures on borrowers. However, the long-term impact on non-QM lenders would depend on the duration of the forbearance and the ability of borrowers to resume payments afterward.

Market Demand

Consumer confidence and economic uncertainty could have affected the overall demand for non-QM mortgages. Borrowers may have been more inclined to seek traditional, government-backed mortgages with lower interest rates and more favorable terms during times of uncertainty.

  1. Regulatory Changes: Governments and regulatory bodies may have implemented changes to mortgage regulations or provided guidance to address the challenges posed by the pandemic. Non-QM lenders would need to adapt to any new rules or requirements.

The situation is dynamic, and the impact on non-QM lenders may have evolved since our last update. Additionally, specific factors could vary based on the lender’s size, geographic focus, and the composition of its mortgage portfolio. For the latest and most accurate information, it’s advisable to consult recent financial reports and industry analyses or speak directly with industry experts as of the current date in 2023.

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