Mega Capital Funding just became the latest company to re-enter the non-Qualified Mortgage space with the launch of several new product lines.
Its new “Mega Elite” non-QM and debt service coverage ratio product lineup includes alternative income documentation products such as its three- and 12-month bank statement products, CPA and borrower prepared P&L and asset utilization, and its investment properties debt service coverage ratio with 1:1 and no ratio options.
According to the rate sheets, through its “Elite Non-QM” product, Mega Capital has loans between $250,000 and $2 million, with a max debt-to-income ration of 50%. The max LTV is 70% for purchase and 65% for refi.
The offering team will be led by Mega Captial Funding CEO Brian Na as well as non-QM veterans Rikki Danganan and Will Fisher.
“With our initial proprietary product offering we’ve set out to focus on a specific segment of non-QM, that will allow our brokers to provide enhanced solutions and our capital partners to achieve their yield goals,” Na said.
HousingWire recently spoke with Mike Fierman, managing partner and co-CEO of Angel Oak, about the non-QM lending outlook for 2021 and how Angel Oak’s “originate to hold” model benefits originators.
Presented by: Angel Oak
Back in March, Mega Capital Funding became one of many mortgage lenders that ceased all non-QM operations.
The company sent out a message to brokers that stated: “Due to retractions in the financial markets as a response to the coronavirus pandemic, and the uncertainty in the non-QM space, MCDI will suspend funding on any and all of our non-QM and non-QM related products. This includes registering, locking or pre-locking loans. Any loan with docs signed, we will fund. Any loan without signed docs will be suspended for the foreseeable future or until market stability returns.”
Now, many investors are once again returning to the non-QM space. Mike Fierman, Angel Oak managing partner and co-CEO, recently told HousingWire he expects the non-QM market in 2021 to grow quickly as the economy recovers from the pandemic.
He noted that, in a normal year, a healthy non-QM market should report approximately $300 billion in originations per annum. In 2020, Fierman said, non-QM origination totaled around $18 billion, so there is plenty of room for growth.
And in addition to an apparent increase in appetite for non-QM on the investor front, there is also room for significantly more risk in the market overall.
The Housing Finance Policy Center’s latest credit availability index shows that mortgage credit availability was just under 5% in the third quarter of 2020, down from 5.1% in the second quarter of 2020 and the lowest it has been since the introduction of the index.
Overall, credit availability in the mortgage market continues to loosen. Mortgage credit availability increased in January, according to the Mortgage Credit Availability index from the Mortgage Bankers Association. The MCAI increased by 2% to 124.6 in January. A decline in the MCAI indicates that lending standards are tightening, while increases in the index are indicative of loosening credit. The index was benchmarked to 100 in March 2012.
“The growth in credit availability in January coincides with a housing market that is poised for a strong start to the year,” said Joel Kan, MBA associate vice president of economic and industry forecasting. “Improvements were driven by the conventional segment of the mortgage market, as lenders added ARM loans with lower credit score and higher LTV requirements. Despite ARM loans accounting for a very small share of loan applications in recent months, lenders are likely looking ahead to a strong home buying season by expanding their product offerings.”
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