Appetites grow for non-traditional loans

by Rachel.Norvell23 Sep 2014
Competitive pressures and the housing market’s slow recovery have opened the gate to a new path for wholesale lenders – providing brokers with the option to originate non-traditional loans.

These types of loans do not fit the typical agency criteria and typically involve a borrower who has experienced a recent credit event such as a foreclosure or short sale. Despite the potential risk that non-traditional loans carry, wholesale lenders, such as Atlanta-based Angel Oak Mortgage Solutions, are tapping into this underserved market.

“We can help brokers satisfy borrowers that they haven’t been able to reach in a long time because they fall outside of agency guidelines,” said Tom Hutchens, senior vice president of sales and marketing at Angel Oak Mortgage Solutions. “Agency has a square box that borrowers must fit in, where as we do more and evaluate a borrower’s ability to repay. It’s bringing common sense decision making back to the mortgage game.”

The trend to fund non-traditional loans comes as more lenders enter the marketplace and mortgage originations continue to drop.  New data from the Mortgage Bankers Association shows originations have consistently dropped for the last year.  During the second quarter of 2013, MBA reported $537 billion in originations compared to $267 billion in the second quarter of 2014 (MBA’s data excludes second mortgages and home equity loans).

Angel Oak Mortgage Solutions is one of a growing number of mortgage bankers looking to aggressively grow its non-traditional mortgage business.  The company, which currently originates in the Southeast region, California and Texas, was launched earlier this year and is seeking licensure across the country.

Angel Oak Mortgage Solutions’ non-agency production is purchased by multiple investors, including Angel Oak Capital Advisors, which has more than $3.5 billion in assets under management, said Hutchens.

“There is a high demand for non-agency loans in the private sector,” he said. “They want to create more return and they haven’t really had an avenue to participate in non-agency mortgages since the crash.”