Non-Traditional Home Loan Market Share Increasing Rapidly

As of February of 2024, many American homeowners reported not being able to keep up with their mortgage rates amid the turbulent economy. While mortgage delinquency rates began sharply declining after the 2008 peak, they have started to trend upward since 2020.

Even more Americans are finding themselves unable to even qualify for a traditional mortgage as a result of high interest rates, non-traditional financial situations, and more. Thankfully, more non-traditional lenders and private credit investors have been stepping in to fill the gap over the past few years.

After a few years of this, the shift has given non-qualified residential mortgage and non-agency mortgage providers a bigger share of the residential mortgage-backed securities market. By the end of 2023, the non-QM sector made up a whopping 40% of the total $31 billion securitized balance. Based on these statistics, non-QM securitization volume is up 113% in March of 2024 than in March of 2023. Throughout 2024, market analysts expect this trend to not only continue but rapidly increase.

Why?

Non-agency residential mortgage-backed securities can help investors generate liquidity at scale, which isn’t an opportunity that comes along too often. Investors have been increasing their demand for non-agency products not only for economic reasons but also out of necessity.

Independent mortgage banks and private credit investors are stepping in to fill the demand because traditional lenders have been fleeing from these products since 2023. The main reason why traditional banks are avoiding these types of loans right now is because regulatory changes occurred recently, as updates to Basel III rules made it a little riskier and more difficult to support non-agency loans.

The Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and the Federal Reserve all came together in 2023 to release these new lending requirements for U.S. banks. Regulations require megabanks to use Basel III rules and a new bank-specific model before issuing a loan.

These regulations became effective on October 1, 2023, but they only apply to banks with assets totaling over $100 billion. Minor bank failures in 2023, which prompted these regulations, also scared many investors from these riskier loans in 2024.

Would You Qualify for a Non-QM Loan?

Are you currently looking to qualify for a home loan? If you’ve been struggling and you’re looking for a lender, then Non-QM Home Loans might be able to help.

Our team focuses on the individual seeking the loan rather than the qualifications behind the lender. We want to help you reach your homeownership goals by helping you work around your non-traditional financial situation, poor credit score, high debt levels, or another type of situation that’s preventing you from getting a traditional loan. We can help you even if you’re self-employed, a foreign national, lack documentation, have a stated income, want to invest in a property, or have high levels of debt.

If you’re interested in getting started or learning more about our services, then check out our loan requirements now. You can also call our office to speak one-on-one with a representative.