According to reports and data from industry experts such as HousingWire, BusinessInsider, Forbes, and the MBA (Mortgage Banking Association), NonQM production is the ONLY mortgage segment believed to be expanding through 2022 and passed 2023, while all other areas are seeing significant contraction in production.
Danny Flucke, National NonQM Sales Manager for KindLending, believes the market is dictating the shift to NonQM through rate normalization and product offerings.
Flucke said: “A decade or two ago we called these products AltA, and they were just that, an alternative to conventional borrower guidelines. Now we call them AltDoc since they still operate within traditional guidelines except when allowances are made for income documentation. These AltDoc fall into three main options: P&L Only, Bank Statements, and Asset Qualification.”
He continued to explain: “With Kind Lending’s unique P&L Only option, our borrowers work with CPA’s to generate the income statements supported by the strength of the file. The separate Bank Statement option allows deposits generated by the business to be calculated as income, and the Asset Qualification option runs an algorithm on verified (not pledged as in private banking) assets to determine income.”
According to the industry experts mentioned above, even the most conservative estimates have 2022 production numbers doubling the $25 billion funded in 2021. Flucke maintains it will be even higher and gives these reasons: “With conventional, Jumbo, and investment property rates in the 5-6% range, more and more borrowers are going to consider our 40yr Fixed with an Interest Only option. Bottom line, borrowers will choose the lowest payment over the lowest rate, especially when we combine that lowest payment with the long-term security of a 40yr fixed rate.”
And the “optics” of NonQM are also changing, since it was once considered the latest version of the old dated sub-prime sector. “Our average fico is over 720, the average LTV is under 75%. These programs are for very successful, well established, self-employed borrowers looking for alternatives to using their tax returns” Flucke said.
When asked about the current and future consumer markets within the mortgage industry, considering refinance applications are down 62% from this time last year, he replied: “Those of us who have been down this road before know we are already changing from a rate driven, to a cause driven environment. You can spend as much time, effort, and money trying to reach one client, as you will gaining the trust of one referral partner who talks with 100 potential borrowers each week.”
He continued: “Our goal is to keep expanding KindLending NonQM retail past $50M per month by year end. To do that we have already staffed up our processing, underwriting, and closing teams, and are focused on recruiting sales managers with teams and individual LO’s”.
When asked how he expected to recruit, Flucke replied: “In 2009 when the mortgage industry imploded, Credit Suisse eliminated thousands of warehouse lines. Except two. Quicken and Glenn Stearns, our founder and CEO. In the coming months you are going to see lenders panicking. Slashing margins and compensation to try and delay the inevitable. When their production drops enough the warehouse lines will be closed.”
“Unfortunately, with total mortgage originations moving from $4 trillion to $2 trillion there is going to be a condensing in the market. Companies not following Kind Lending’s lead by adding NonQM to their product mix, will be left to fight over those smaller markets”.
When asked how mortgage staff can prepare for the expected attrition, Flucke stated matter of factly: “The smart people are finding their seats in this game of musical chairs now BEFORE the music stops. KindLending offers the proven leadership to survive the coming storm, with continual improvements in efficiency through technology, and the correct vision at the perfect time.”
Kindlending offers the full spectrum of mortgage products including conventional, FHA, VA, and other government programs, Jumbo, and NonQM. As a lender they seem to be positioning itself correctly in these uncertain times, We finally asked Flucke what made him switch from Angel Oak to come on board with Kind Lending: “I enjoyed my time at AngelOak, however the opportunity to join KindLending and offer borrowers even more options was too good to ignore. And others are following me from both sides of the industry, both “A Paper” and NonQM. With our industry leading comp plans, very competitive pricing across all product lines, (check your Icon survey), industry leading technology, full compliment of automated marketing, and dedicated teams ensuring smooth, stress-free closings, its an easy choice to make for top performing sales teams and LO’s to make.”
And Flucke does not just talk the talk, he walks the walk with his own personal production pipeline and three five-star reviews in just the last two weeks. “In my military career I learned to lead by example. We have high performance expectations of all staff, and proving our marketing, products, and processes produce positive benefits and results in challenging times, is the proof others sometimes need to join our KindLending team.”
*The information contained herein is provided to mortgage lending professionals for recruiting purposes and is not an advertisement to extend credit directly to consumers. Equal Opportunity Employer.
By Danny Flucke
National NonQm Sales Manager at Kind Lending