Redwood Trust has completed its first non-qualified mortgage (non-QM) securitization deal, marking a significant milestone for the company. The deal, which was facilitated through Redwood’s proprietary non-QM platform, highlights the growing demand for non-QM loans and the company’s efforts to expand its offerings in this space.
The non-QM market has gained traction in recent years, driven by the increasing demand for mortgage credit from borrowers who do not meet traditional qualified mortgage (QM) standards. Lenders such as Redwood Trust have been working to develop new products and platforms to cater to this growing market. The use of non-QM tools, such as those provided by FICO, has become more prevalent, allowing lenders to better assess the creditworthiness of borrowers.
The recent price increase of FICO scores has been a topic of discussion in the industry, with some lenders expressing concerns over the costs. However, as one industry veteran noted, FICO had held its prices steady for over 20 years, and the recent 1400% price increase came from a base of just 69 cents. This perspective highlights the need for lenders to consider alternative credit scoring models and to focus on lender choice, where the lender or loan officer chooses which score to use. The issue of lender choice is particularly important, as not all credit bureaus have the same data, which can lead to adverse selection, increased risk, and gaming, ultimately resulting in higher costs for consumers.
In response to these challenges, some lenders have been exploring alternative solutions, such as FICO’s Direct License Program. This program allows lenders to access FICO scores directly, potentially reducing costs and increasing efficiency. Additionally, companies like Symmetry Lending are offering innovative products, such as their Concurrent or Post-Close Piggyback Special, which provides borrowers with a smart solution to help them move forward with confidence.
| Product | Features | Benefits |
|---|---|---|
| Concurrent or Post-Close Piggyback Special | 5-year draw term, 10-year draw term available for a +0.25% margin add-on | Provides borrowers with a smart solution to help them move forward with confidence |
Looking ahead, the non-QM market is expected to continue growing, driven by the increasing demand for mortgage credit from non-traditional borrowers. As lenders like Redwood Trust expand their offerings in this space, the use of non-QM tools and alternative credit scoring models is likely to become more prevalent. This trend is expected to have significant implications for the mortgage industry, as lenders work to balance the need for credit access with the need for prudent risk management.
⚡ Why it matters: The growth of the non-QM market has significant implications for the mortgage industry, as lenders work to balance credit access with risk management. The use of non-QM tools and alternative credit scoring models is expected to become more prevalent, driving innovation and competition in the industry.
📊 By the numbers:
1400% price increase of FICO scores
69 cents base price of FICO scores
5-year draw term for Symmetry Lending’s Concurrent or Post-Close Piggyback Special
10-year draw term available for a +0.25% margin add-on
🔗 Source: [Original source]
