QM mortgage, some home borrowers may have never even heard of it. In the world of mortgages, there is a product line defined by what it actually is not, meaning that it is a non-qualified mortgage which is what the QM stands for.
In some sectors, it can also be called a non-prime mortgage or a non-agency mortgage it has also sometimes been called an alternative documentation loan.
These are also often referred to as mortgages available on what is known as the secondary market. Non-QM loans are in high demand right now and are expected to continue to propel growth and demand for the year ahead. The issuance of non-QM loans for the year 2022 is expected to grow to over $40 billion.
Non-QM loans are so high in demand that it is expected that they could even outpace traditional conventional loans that are backed by the Fannie Mae and Freddie Mac entities.
Even if the non-QM private label market grows to the expected $40 billion next year, it is still just a fraction of the mortgage market loan origination potential. Currently, the non-QM market loans have added a percentage of around 10 to 12% in a normalized real estate environment. This was about the size of the non-QM loan market in the early 2000s prior to several well-known recent global financial crises.
So far this year non-QM loan companies have brought several loans to the market valued at nearly $2.5 billion according to bond rating reports. A datasheet that was prepared by the company Kroll Bond Rating Agency has included in their report that private label deal activity through mid-November 2021 shows a total of 68 non-QM securitization deals involving loan pools valued in aggregate at more than $21 billion. This is up from the numbers for 2020 which showed about 54 deals valued at around $18 billion.
The vast world of non-QM single-family mortgage products is very wide and sort of difficult to define into a box or just a few words. Yet this is a very crucial portion of the mortgage market as it represents borrowers that represent what is considered the heartbeat of the US economy. Most of the customers for non-QM loans include the self-employed and entrepreneurs who purchased single-family investment properties. Traditionally those who were not able to qualify for the standard Fannie Mae backed loan.
These borrowers need to use other means than traditional documentation such as payroll income and rely on including bank statements or assets or even statistics of rental properties to help them prove that they have a reliable financial means to pay a mortgage.
Over the last 15 to 20 years the self-employed portion of the workforce has been increasing every year. And according to recent numbers, the current pandemic has only accelerated the number of people opting for self-employed means of making money. This is what is driving the large demand for loans in the non-QM market.
Some non-QM mortgages have been allotted to borrowers that are facing credit score challenges, including those that have seen recent bankruptcy or slightly out of bounds credit scores. These loans can include interest only in 40-year terms or other creative financing features known to be reliable sources for lower monthly payments on the front end of a mortgage.
What exactly is a non-QM mortgage?
Non-QM mortgages include everything that cannot require a government or agency guarantee through the big Federal entities of Fannie Mae and Freddie Mac. They do not fall under the requirements that Fannie and Freddie have set in order for them to purchase/back a loan.
This is a very large and growing segment of the mortgage market and is expected to continue to grow as home prices continue to rise and job dynamics are changing across the country.
No matter your situation, there might be a mortgage option out there for you. Be it through traditional means of conventional loans or through a less traditional bank statement loan or even a jumbo loan as well as non-qualified mortgage products lent out through private sectors.
For those needing unique or creative financing strategies, contact my office at any time. I have experts in the Arizona real estate market that are proficient in this type of unique financing. For the most comprehensive real estate service in the Peoria real estate market, contact my office at any time.