More Room in the Deep End of a Shrinking Mortgage Pool

0 0

According to a recent forecast from Fannie Mae, the projections for mortgage loan originations for 2017 now stands at about $1.5 trillion. Don’t get too depressed, although down from the past few years, that’s still quite a bit of loan volume. And it could be more; especially if you’re open to change and a little more risk.

According to Jamie Billingham of Angel Oak who spoke on my panel at the recent Regional Conference of MBA’s in AC, Alt-A products have been about 10 to 15% of the loans made. Based on the Fannie forecast, we can see the potential for non-QM originations at about $1.5 billion. (Alt-A)

With companies like Angel Oak now securitizing Alt-A products, investors with pent up demand will find another vehicle for their investment dollars. There are plenty of potential homebuyers with low credit scores or other issues that might restrict them from the standard QM market.

However, that doesn’t necessarily mean these consumers can’t qualify for a loan under the ATR rules. All that is needed are the right products and a willingness to originate them.

Alt-A and non-agency type loans will open more doors to potential homebuyers which means more business for mortgage lenders. As long as the lenders are willing to offer the products and take on a little more risk.  In doing so, the rewards may be well worth it.

If you decide to step out and play in the Alt-A arena, I suggest you get the facts and deal with a reputable, experienced lender. Do your homework; walk before you run. Be sure you fully understand the products and the associated risks.

You may want to seriously consider expanding the pre and post close audit pool for these loans to ensure their quality and compliance. Also, identify any areas needing additional understanding and training. You can’t be too careful.

When done right, these loans will offer any lender more opportunities to service more Realtors and their buyers. That means more income and more referrals. That’s nice to have, in a down market.

Seek the alternatives, understand and protect against the risks.

About the Author

Michael Vitali

Michael L. Vitali – Independent Consultant to the Mortgage Industry Mike Vitali is an independent consultant to the mortgage industry on matters concerning compliance and mortgage lending. He most recently served as the Senior Vice President and Chief Compliance Officer for LoanLogics, monitoring regulatory developments and their practical implications for the mortgage lending industry. His duties included research, interpretation, and analysis of existing and proposed legislation related to the industry in support of recommendations for policy and/or procedure changes to maintain continued quality and compliance with all applicable laws, rules and regulations, investor requirements, and standard mortgage practices. In his more than 40 years in the mortgage industry, in senior level management, he has gained experience in all areas of mortgage lending, risk management, and compliance. Mike is a past President of the MBA of Greater Philadelphia, is a charter member and was the second Chairman of the MBA of Pennsylvania, and a past board member and Legislative Chair of both associations. He is a recipient of the 1998 Mortgage Banker of the Year Award from the MBA of Greater Philadelphia, and the 2003 Chairman's Award from the MBA of PA, and currently serves on several compliance related task forces for MBA.