Hello, and thank you for joining me. My name is Fernando Zoota and I am your host for the podcast and blog, Non-QM Insider, the show where we talk about regulations, guidelines, and anything having to do with non-qualified mortgages. Today we will continue with our discussions about the secondary market. Let’s get into it.
According to Kroll Bond Rating Agency (KBRA), a credit rating agency, Verus Mortgage Capital (Verus) is set to issue a non-agency mortgage-backed security, the first deal since the coronavirus economic disruption that started in March. Verus is a mortgage investor that acquires non-agency mortgages from a network of correspondent lending partners.
The $295.3 million MBS is primarily underwritten using the debt service coverage ratio (DSCR) program.
Since the loans are considered business purposes, they’re exempt from consumer-purpose regulations such as ATR and TRID. According to KBRA, approximately 6.7% of loans are in forbearance, though all are current as of May 1. The deal requires the servicer to provide 90 days of principal and interest payments for all delinquent loans. That’s far less than the typical 180 days. On the surface that seems like good news.
The top contributors to the deal are Athas Capital Group and Sprout Mortgage.
What does that mean for non-QM lending? It’s a mixed bag. Athas has failed to re-enter the non-QM market, so I suspect there happy to clear loans off their warehouse line and return to the sidelines. However, according to PR Newswire, Sprout recently released an expanded suite of non-QM loan programs including Asset Depletion and DSCR.
I choose to be optimistic. The fact that MBS are being issued primarily backed by non-agency means there’s an appetite from investors for non-QM. The desire for the margins offered by non-QM will grow (as always).
To support my claim, HomeXpress Mortgage, a non-QM lender, issued a statement on Linkedin.com notifying its customers they are now offering a Non-QM 2.0 product line.
As a leader in the space, HomeXpress will bring some much-needed confidence and stability to non-QM lending.
Stay tuned.