AD Mortgage: Non-QM Volume Is Growing

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AD Mortgage, Fort Lauderdale, Fla., released a new survey finding rising demand across borrower segments for non-QM mortgages, with 74.5% of brokers reporting non-QM growth and 88.4% expecting continued growth.

A Debt Service Coverage Ratio mortgage was the most commonly cited non-QM product, brokers said, followed by bank statement loans.

Self-employed borrowers dominate the pipeline, at more than 86%, but real estate investors are also making up a large chunk of non-QM activity. Other relevant profiles include foreign nationals (21.9%), second liens (21.5%), asset-rich/income light (17.4%) and credit-recovering borrowers (11.9%).

Brokers report suggesting non-QM in scenarios where structure matters more than standard agency fit. Investor or DSCR cases are the most common scenario, at 36.1%. Loans that do not meet agency requirements are next at 35.6%. Brokers also cited as scenarios flexibility (11.4%), documentation complexity (10%) and faster or more predictable closings (5.9%).

The strongest trigger for moving a loan from agency execution to non-QM is documentation limitations, cited by 79.6% of brokers. Credit limitations were cited by 8% and property-related issues were listed by 5.3%.

AD noted a separate share of responses reflect brokers who do not work with agency loans, at 7.1%.

The survey also queried the non-QM experience, finding that 33.8% of brokers describe documentation in the sector as clear and well-organized. But, 26.7% report incomplete or missing documents, 21.8% say files often require heavy assistance or guidance and 17.8% describe the documents as inconsistent but ultimately complete.

And, brokers rate the current tech level of the non-QM process as 6.4 out of 10.