In the month and a half since the GSEs were announced a 7% cap on the purchase of second home and investment property loans There is still confusion in the mortgage market. We have seen somewhat inconsistent policy enforcement between Fannie Mae and Freddie Mac, as well as mixed news about the timeframe of this limit and enforcement of these rules. It’s kind of a big picture limit Mortgage professionals are not used to coming to a time when many are looking at these under-owned channels to fill the pipeline volume when refinancing wears off. The answers remain unclear and few players have been able to overcome the confusion.
One of those players is Angel Oak Mortgage Solutions. A non-QM Angel Oak is a direct tied private equity lender and the industry player that FHFA Director Mark Calabria is looking to fill to fill the void the GSEs are leaving. Tom Hutchens (pictured), executive vice president of production at Angel Oak, explained some of the remaining sources of confusion in the marketplace about what mortgage professionals need to do now and how the move from government-backed loans to private capital is impacting their rock bottom line.
“There are many challenges in the mortgage sector as rates continue to rise and the refi boom subsides,” said Hutchens. “There is margin compression, and when you factor in those constraints for specific products, there is a lot to do in the origin world right now. We saw this firsthand when our broker partners viewed Angel Oak as an excellent way to manage their non-owner production. In the past 45 days, we’ve seen our unused volume nearly tripled. “
Hutchens explained this growth as a result of persistent questions among authors about how these limits should be measured and enforced. While the uncertainties persist, many non-QM lenders like Angel Oak are looking for solutions to stay ahead of the curve.
The decision to impose these limits, according to Hutchens and others, is the result of a philosophy by the FHFA that private capital, not the government, should finance mortgages on real estate that is not primary residence. As a non-QM lender directly tied to the capital markets, Angel Oak is able to fill that void with a set of products that can meet the needs of most borrowers.
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In moving from government-backed loans to private capital, Hutchens said the cost of those loans will increase. The level and nature of government support will keep prices down in ways that private actors cannot. However, he pointed out that private capital is able to obtain risk-based rates, and since these limits force low-risk lenders to seek private solutions, the rates on their loans should remain relatively low, especially as interest rates compare historically stay low.
Hutchens emphasized that while mortgage professionals and borrowers still struggle with these limits and face any confusion that comes with them, they can turn to Angel Oak for advice and answers as this is exactly what the not – QM Lender does.
“This goes back to the private capital we bring into the market,” said Hutchens. “We have been doing this for over eight years. We have the capital, we have the asset managers, we have the engine to drive securitization forward. We set up the whole process so that it is just a plug and play for any creator. ”