Why lenders should think about non-QM now, not later

Non-QM originations are poised for growth this year. HousingWire recently spoke with Mike Fierman, Managing Partner and Co-CEO of Angel Oak Capital, about the capital markets perspective as well as investor demand and appetite for non-QM.

HousingWire: What is the 2022 market outlook for non-QM?


Mike Fierman: I believe 2022 is going to be the year that non-QM gives originators a chance to grow their business. Agency rates are on the rise and refinance volume is down.

Originators who had their best year in 2021 will have to utilize something else to make up for this loss in 2022 and non-QM can be the answer. In 2022, non-QM originations are likely to hit between $80 billion and $100 billion. There is more focus on non-QM now than ever before.

HW: What is the capital markets and investor perspective on non-QM?

MF: Non-QM securitizations had their biggest supply year on record in 2021 and we are confident in the growth for 2022. We expect investor demand will continue to be robust and will grow as the sector continues to increase in size.

New investors continue to come in and participate in these transactions as their confidence in the non-QM space increasingly builds. Funding costs are rising as the front end of the rate curve sells off. The result is that loan prices have normalized from lofty levels due to supply and funding costs. The perspective all around is positive.

HW: How does investor demand and appetite for non-QM origination affect originators’ business?

MF: The demand and appetite for non-QM among investors is strong. Overall, it is likely to be a robust origination year for non-QM and originators who utilize it will make a healthy margin.

Our investor partners have seen proof of the value in non-QM and how it has performed. Originators can feel confident that focusing on non-QM is a sound strategy to meet their volume goals as well.

Our product offerings are put in place to help underserved borrowers and fill a huge void in the market. We surpassed $10 billion in non-QM lifetime securitization issuance– a huge milestone. This serves as confirmation to the prevalence of non-QM lending and the investor appetite for it.

HW: How is Angel Oak poised to help originators take advantage of growing non-QM volume this year? 
Angel Oak has all channels, resources and technology available for originators. We invite originators to partner up with us and take advantage of all we offer to help increase their volume. We were the early adopter of non-QM back in 2014. Angel Oak has the capital, the experience and non-QM products to help you achieve your goals.

Having surpassed $10 billion in non-QM originations, we are experts at the process. Many lenders are just now jumping into non-QM because they see the demand and they have to be competitive to retain and recruit – not to mention stay in business. We committed to this space years ago and plan to be in it for the long haul.  

Our correspondent channel is another opportunity where we are growing this part of the business to play an even bigger role in working with originators. We help originators close a loan in their name and then provide a stable balance sheet to partner with. We expect our correspondent channel to contribute a significant portion of our overall business.  

The bottom line – non-QM is no longer a “wait until later” space to think about. The volume of 2021 won’t be readily available in 2022. Non-QM can fill that gap and Angel Oak is the leader in the space.

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