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Due to rising interest rates and inflation, non-QM loans struggled for several months and some lending companies were forced to close.
However, according to Acra Lending CEO Keith Lind, the outlook for the rest of 2022 excluding QM is relatively optimistic. “We’re pretty optimistic,” Lind said.
“You had this debt with lower coupon loans that were issued in the first two quarters when people were on fire and we had a kind of piggyback. And I think it came true. “
Lind said the market is starting to see fewer deals offered on the securitization market, and the securitization spreads are getting smaller.
Lind calls inflation the “elephant in the room” and notes that there are concerns that the front of the yield curve could widen, but believes the biggest interest rate risks are behind us.
He said there are now concerns about house prices, especially in parts of the country where they could double or triple. They’re watching this closely, Lind said, as the rest of the year looks promising.
Problems faced by non-QM lenders
But now the elephant has to work. How might inflation affect lenders with loans that have no QM on their books?
“It depends on what the coupons for these loans are and how many loans they have,” says Lind.
“I always say ‘deliver, don’t store’ and we sell credits every two weeks and we’ve been doing this since the beginning of the year. That’s why we try to avoid credit problems – not bad credit history, but bad prices.
However, he notes that this can make it difficult for lenders to borrow with lower coupons.
Regarding the rate hike, Lind said some lenders may already be struggling with interest rate fluctuations, which could lead to a reduction in credit. “In the first seven months of the year, we had 18 price swings – 14 highs and 4 lows. He says.
While Lind doesn’t believe all banks and lenders are following the trend of rate hikes like Acra, they are following market rates.
Others think they will make a big profit, and maybe reduce the interest rate, but I think the rate of increase is so fast that if you do, you will probably get more loans with lower interest rates than you have. on its balance sheet and may have trouble selling them. favorable.”
Lind said liquidity and costs are two other issues facing today’s non-QM lenders. “We’ve heard of some liquidity issues with some of our competitors and maybe people who bought their loans two or three months ago aren’t buying them today,” he said.
According to Lind, Accra’s output is down about 25%. The company has made appropriate adjustments since the beginning of the year. Concerns about working with non-QM
Due to the problems faced by non-CM environments, some lenders and Loss may not want to work with non-CM products. Lind said Acra is always open to tough questions about its business from potential partners.
“People can ask difficult questions when they are uncertain about certain things. Are you profitable? What strategic moves is Acra making? If you are a loan professional or broker, here are the key questions you should ask.
Reference Source: Housing Wire
