By Matt Joy, Princeton Mortgage Wholesale
Over the past week or so we’ve diverted our attention off the details of the mortgage industry to discuss more whimsical topics… like the Pittsburgh Marathon, Amazon and Apple’s breach into the housing market and why you should move to Charleston, SC… so I’d like to roll up our sleeves are dive back into the details.
First and foremost, the 10-yr Treasury is up over 3% and will probably stay that way until the end of the year. It’s time to get used to these numbers…4.5%, 4.625% & 4.75%... and if you don’t have a business model in place to prepare for those rates… it’s going to be a long hot summer. For my fearmonger’s out there, the gap between the 10-yr and 2-yr Treasury bill is about 49 basis points. Remember, a recession is eminent when that spread inverts… and that’s when we’ll begin to see some rate relief. Analysts say the next recession is due around 2020, but with the way we Americans like to take on debt… it could be sooner. We’ll have to wait and see.
As we’ve discussed in the past when rates go up and the market compresses, it’s time to find new loan programs to make up for the dry refi market… insert Non-QM lending (it’s freaking subprime… I don’t care what anyone says). Now, I’ve said my piece on Non-QM lending… however these next 2 years are going to be interesting, and if you don’t have these Non-QM products available or at the very least have an investor to deliver them to… you’re going to be missing out on what could potentially be a $100B market (this number is according to Tom Hutchens, SVP of Sales & Marketing for Angel Oak Mortgage Solutions). Okay, so we’ve been begging for more private capital in the secondary market and it’s finally here… the catch of course is, it’s in the form of Non-QM loans. Angel Oak Capital Advisors, a division of Angel Oak Companies, is looking to partner with both regional and national lenders to grow its correspondent channel by giving lenders a new investor in which to deliver Non-QM loans to. The team at Angel Oak is adamant that Non-QM is not the new subprime and that underwriting standards will not be loosened just because Fannie and Freddie aren’t buying the loans. I’ll be honest, and despite my fear about this whole process, I’m intrigued… why you ask? Well… I’m in the mortgage industry… I’m greedy. I do think that it’s worth companies exploring and if done correctly… (now that is a very BIG if as even Sean Marr, Angel Oak’s Director of Correspondent lending said, “We're not out there offering yesteryear's subprime and we hope nobody goes too far and takes a dangerous approach again”… he said “hope” haha… even he seems a little worried that this could drum up a storm like before 2008) it could be a nice option for borrowers and lenders alike.
The last topic I want to hit before we close out brings us back to Washington D.C. and our friends over at the CFPB. Mick Mulvaney is vowing to peel back the layers of the Qualified Mortgage rule and relieve some of the burdensome regulations around what makes a loan a Qualified Mortgage. National Mortgage News published a good article about this topic. You can check it out here. The details are muddled and there isn’t a ton about what specifically is going to take place, but their sights are set, and we will see some changes before the end of the year. What this means to me is that Angel Oak is on to something… and with the government changing their stance on what a Qualified Mortgage is… the Non-QM market could have a bright future. That’s of course unless ALL of this opens the door for another Countrywide Mortgage to emerge? I’ll leave you with that.
Talk to you soon!
The opinions expressed in this post are the sole view of the writer and do not reflect the opinion of Princeton Mortgage Corporation.